Executive Order 13,224 specifically includes a list of designated entities and individuals with whom companies or individuals are prohibited from conducting certain transactions. The Executive Order as well as the Code of Federal Regulations appear to be aimed primarily at money laundering and financial support through donations. The Act casts a broad net and specifically includes the sale or leasing of property as a blocked transaction.

The Office of Foreign Asset Control (OFAC) of the Department of Treasury administers and oversees not only the terrorism regulation but also a series of laws that impose economic sanctions against hostile targets to further United States foreign policy and national security objectives. These include prohibitive transactions with the Balkans, Burma, diamond trading, Iran, Iraq, Liberia (prohibiting the importation of rough diamonds from Liberia, and Libya, non-proliferation of weapons of mass destruction, and North Korea.

The regulations place specific reporting requirements upon U.S. individuals and corporations to not only report prohibited transactions, but also to verify that those with whom certain business is being transacted are not on the prohibited list issued by OFAC.

Why do you need to know about this information? Several companies are seeing clauses in management agreements that state that the management companies shall be in compliance with the regulations of OFAC.

As a part of that compliance, the management agreement requires that the management company conduct periodic screening ("OFAC Screening") to verify that each on-site employee, tenant or service provider is not a Prohibited Person. (Please note that the laws are not clear as to the depth of screening we are to provide – i.e. officers, directors, owners, etc. and how often is reasonable to document the screening.)

The management agreement defines a Prohibited Person as a person or entity with whom US persons or entities are restricted from doing business under OFAC regulations (including persons named on the OFAC's Specially Designated and Blocked Persons List) or under any statute or executive order (including the 9/24/01 Executive Order Blocking Property and Prohibiting Transactions with Persons).

Below are some recommendations in order to comply with these regulations. It is recommended that the following procedures be put into place in order to show a good faith effort until further clarification for the depth of screening becomes more clear.

• A letter should be sent to each of your vendors explaining to them that the clauses in our service agreements are inclusive of all laws and regulations including OFAC and the Patriot Act.
• Request vendors to send a letter within a 30 day time period stating that they have met all laws, regulations including OFAC and the Patriot Act showing documentation if requested that any person in their employ on site has been screened through the OFAC list.
• The same would apply to new leases – a clause should be inserted that the tenant is responsible for all documentation relating to any laws, regulations including but not limited to OFAC and the Patriot Act for their employees, invitees, clients, etc.
• For existing leases, the management company would be responsible for checking the entity that entered into the lease and the designated individual(s) signing the lease. The tenant would then receive a letter from the management company with similar statements that they are responsible for all documentation relating to any laws, regulations including but not limited to OFAC and The Patriot Act for their employees, invitees, clients etc.

It is recommended that for any screening, the documented form be printed out and placed into the tenant/vendor/employee’s file showing compliance to OFAC regulations. A policy and procedure should be put in place by your organization for all of its current employees, new hires, and the process for regular screening. Also a form should be created to send to each of your clients, tenants, etc. stating that screening took place (to the best or our knowledge on a certain date) and sent to the client.