What Is a 1799 Financial Hold and How Do You Resolve It?

A financial hold indicates a temporary restriction placed on assets or transactions within the financial system. These measures are implemented to safeguard against illicit activities, ensure adherence to regulatory frameworks, or secure assets under specific legal directives. They pause financial movements until further review or compliance verification can occur.

Defining a 1799 Hold

The term “1799 financial hold” refers to a financial or administrative freeze imposed by the U.S. Department of the Treasury, specifically under the authority of the Office of Foreign Assets Control (OFAC). OFAC administers and enforces economic and trade sanctions programs to protect U.S. national security and foreign policy objectives. These programs target foreign countries, regimes, terrorists, narcotics traffickers, and other entities deemed a threat, involving blocking assets and imposing trade restrictions.

A financial hold imposed by OFAC means that funds, property, or financial transactions are temporarily blocked. This action is taken when there is a potential connection to individuals, entities, or activities subject to U.S. sanctions programs. The purpose is to prevent transactions with, or the transfer of assets to, parties on OFAC’s various sanctions lists, most notably the Specially Designated Nationals and Blocked Persons (SDN) List.

The authority for these actions stems from various U.S. laws, including the International Emergency Economic Powers Act (IEEPA), which grants the U.S. President the power to block foreign assets under U.S. jurisdiction during declared national emergencies. OFAC implements these mandates through specific regulations outlined within Title 31 CFR. While “31 CFR Part 1799” has been associated with certain provisions, OFAC’s broader authority for financial holds comes from its comprehensive sanctions programs and other relevant sections of Title 31 CFR.

Initiating a 1799 Hold

Financial institutions play a central role in initiating these holds. They are obligated to screen all financial transactions to prevent illicit activities and ensure adherence to OFAC regulations. This screening applies to various financial activities, including international wire transfers, cross-border payments, and domestic transactions, encompassing all parties involved.

A hold is initiated when a transaction or an involved party triggers an alert during the screening process. This occurs if an individual or entity involved in a transaction, such as the sender, recipient, or any intermediary, appears on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List. Financial institutions compare identifying information, including names, addresses, and tax identification numbers, against these regularly updated sanctions lists. Transactions linked to sanctioned countries or regions also trigger scrutiny.

Automated OFAC screening systems flag potential matches or suspicious activities that indicate a possible violation of U.S. sanctions laws. These systems identify transactions that might involve sanctioned parties or attempts to evade detection, such as structuring payments to bypass scrutiny. The 50% rule means that entities owned 50% or more by blocked individuals are themselves considered blocked, which can trigger a hold on associated transactions.

When such an alert occurs, the financial institution places a hold on the transaction as a precautionary measure. This temporary freeze allows the institution to conduct additional due diligence and gather more information to determine if the transaction is legitimate or violates sanctions. If a U.S. financial institution believes a transaction involves the interest of a person sanctioned by an OFAC program requiring asset blocking, the bank is mandated to block the funds. Failure to implement proper OFAC screening can result in penalties for financial institutions, including substantial civil fines and potential criminal prosecution.

Resolving a 1799 Hold

Resolving a financial hold requires a structured approach. Individuals or entities experiencing a hold should promptly collect all relevant documentation related to the transaction. This includes:
Proof of identity for all parties involved.
Details of the transaction’s purpose.
Identities of all senders and recipients.
Source and destination of the funds.
Supporting documents like contracts, invoices, or agreements that clarify the transaction or parties’ identities.

Once the necessary information is compiled, resolution involves communicating directly with the financial institution that initiated the hold. Cooperate fully with the bank’s inquiries and provide all requested details, as they seek to determine if the activity involves a sanctioned person or place. If the financial institution determines the funds are blocked due to sanctions, they are mandated to hold them, and formal authorization from OFAC, in the form of a specific license, is required for release.

To apply for the release of blocked funds, individuals can submit a license application directly to OFAC through their online portal. This application should include the specific OFAC sanctions program under which the funds were blocked, information obtainable from the financial institution. Confirm that the bank has already submitted its required report to OFAC regarding the blocked transaction within 10 business days of the block.

After submitting the application, OFAC will review the case and may request additional details. Processing timelines can vary, but clear and comprehensive submissions facilitate a more efficient review. If a license is granted, OFAC will authorize the release of funds, and the financial institution that blocked the funds will also receive a copy of this authorization. Communication with OFAC can occur via their:
Compliance Hotline for general guidance.
Licensing Hotline for specific application inquiries.