OFAC Civil Monetary Penalties — 2020 Catch-Up Inflation Adjustment for Recordkeeping and Reporting

Mechanism

Under the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), as strengthened by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74 § 701), all federal agencies are required to make an initial catch-up adjustment and thereafter publish annual inflation-adjusted civil monetary penalty ceilings. OFAC's August 1, 2016 initial catch-up adjustment applied the full inflation multiplier back to the last statutory adjustment for most CMPs — but inadvertently excluded the recordkeeping and reporting CMPs set out in 31 CFR Part 501 (OFAC's Reporting, Procedures and Penalties Regulations). This interim final rule corrects that omission, applying the cumulative CPI-U inflation factor from the date of the original statutory enactment to align the recordkeeping CMPs with the same baseline as OFAC's other penalty categories.

The adjusted amounts apply to CMPs assessed after October 5, 2020, for violations occurring after November 2, 2015 (the date of enactment of the FCPIA Improvements Act). Older violations remain subject to the pre-2016 statutory figures.

The statutory authority for these recordkeeping/reporting CMPs is 31 CFR § 501.701, which implements penalty authority under IEEPA (50 U.S.C. 1705) and TWEA (50 U.S.C. 5) for the specific sub-category of compliance obligations: transaction reporting, blocked-asset reporting, and record retention.

Penalty table — adjusted amounts effective October 5, 2020

These three penalty categories are distinct from the per-transaction violation ceilings (IEEPA/TWEA/FNKDA) that are adjusted in OFAC's annual CMP adjustment rulemakings.

Relationship to the broader OFAC CMP adjustment series

This action is structurally separate from OFAC's annual CMP inflation adjustments, which adjust the per-transaction violation ceilings under IEEPA, TWEA, and FNKDA:

• Annual IEEPA/TWEA/FNKDA adjustments — updated each year (see

2021-03-17-us-ofac-civil-monetary-penalties-inflation-adjustment-2021 and successors); govern the penalty ceiling for sanctions-program violations (prohibited transactions, dealings with blocked persons, etc.).

• This recordkeeping catch-up — corrects a procedural omission from the 2016 initial

adjustment for the narrower category of compliance-procedure violations: late reports, blocked-asset reports, and record retention failures.

The two series are governed by the same parent statute (FCPIA / FCPIA Improvements Act of 2015) but apply to different violation categories under 31 CFR Part 501.

Downstream implications

• Compliance teams at U.S. financial institutions, fintech platforms, investment advisers,

and payments processors calibrate their reserve provisions and sanctions-compliance penalty exposure to these recordkeeping ceilings in addition to the per-transaction IEEPA ceilings; this catch-up brings the recordkeeping exposure into parity with the 2015 statutory baseline.

• The blocked-asset late-filing recurring penalty ($1,189/30 days, up to 5 years) can

compound to approximately $71,340 for a single unreported blocked asset held for five years — a meaningful deterrent for custodial institutions failing to identify and report OFAC-blocked property.

• The correction is effective from October 5, 2020; compliance programs should audit

reportable transactions or blocked assets from November 2, 2015 onward to ensure all reporting/recordkeeping obligations were met under the revised ceiling structure.

Open questions

• Whether OFAC will integrate the recordkeeping/reporting CMP series into its standard

annual CMP adjustment rulemaking (combining all four categories) or continue publishing the catch-up as a separate instrument. Subsequent annual adjustments (2021–2024) appear to cover only IEEPA/TWEA/FNKDA — the recordkeeping series may require a separate follow-on annual adjustment cycle.