FR 2025-04864

The document in question is a final rule issued by the Office of Foreign Assets Control (OFAC), part of the U.S. Department of the Treasury. This rule extends the recordkeeping requirements for certain transactions from five years to ten years. This extension aligns these requirements with the statute of limitations for certain sanctions violations. OFAC issued this rule without changes from an interim version that solicited public comments. Despite receiving feedback, the rule will be implemented as planned, becoming effective on March 21, 2025.

General Summary

OFAC's purpose in extending the recordkeeping period is to harmonize with the 10-year statute of limitations introduced by the 21st Century Peace through Strength Act. This act adjusts legal frameworks for civil and criminal violations tied to economic sanctions, making the recordkeeping requirement consistent with potential prosecutorial timelines.

Significant Issues and Concerns

There are several notable concerns regarding this final rule:

• Financial Impact: The document does not address the potential financial implications for entities affected by the extension, which could be considerable, especially for larger organizations with substantial transaction volumes.

• Regulatory Conflict: As noted in the third comment, there could be conflicts between this U.S. regulation and existing EU data protection laws, specifically Article 40 of EU Directive 2015/849. This European regulation mandates the deletion of transaction records after five years, potentially conflicting with OFAC's new 10-year mandate.

• Clarity and Accessibility: The language of the document includes several legal and regulatory references that may not be easily understood by those without specialized legal or financial knowledge.

• Lack of Alternative Measures: The rule does not explore alternative strategies or measures that could mitigate the burden of the new requirements, such as phased implementation or technological solutions to enhance storage efficiency.

• Public Comment Feedback: Though the document does reference three pieces of feedback from the public comment period, it doesn’t elaborate on the broader sentiment or other possible concerns stakeholders might have raised.

Impact on the Public

For the general public, this rule has a limited direct impact unless individuals or small businesses are involved in activities subject to OFAC regulations. However, the rule’s implications could trickle down in the form of increased compliance costs for affected entities, potentially being passed on to consumers or clients.

Impact on Specific Stakeholders

• Financial Institutions: Banks and other financial institutions are likely the most affected by the change in recordkeeping requirements. Compliance necessitates additional resources and potential adjustments to current practices, which may involve significant costs.

• Entities Trading with Sanctioned Countries: Businesses engaged in transactions subject to OFAC regulations will need to realign their compliance practices. This might include investing in additional storage solutions or revising record retention policies.

• International Entities: Companies operating internationally must navigate potential conflicts between U.S. and foreign data retention laws, which could lead to complex legal challenges or penalties if not properly managed.

In conclusion, while OFAC's final rule aims to streamline and strengthen recordkeeping practices in line with legal amendments, it raises several challenges that stakeholders must navigate. Further guidance from OFAC on resolving conflicts with international regulations and mitigating compliance costs would be beneficial.