On July 22, 2024, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) issued guidance addressing the April 2024 extension of the statute of limitations for sanctions violations from five years to 10 years. The statute of limitations extension was enacted through the 21st Century Peace through Strength Act (Pub. L. No. 118-50) and applies to both civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), the authorizing statutes for most OFAC sanctions programs. 

OFAC now has 10 years from the latest date of a violation to commence an enforcement action, provided that the violation was not time-barred at the time of the law’s enactment on April 24, 2024. The law is not retroactive, meaning that OFAC cannot commence enforcement actions for sanctions violations that were outside of the applicable statute of limitations at the time of the law’s enactment. Accordingly, OFAC may commence an enforcement action for violations of IEEPA or TWEA sanctions occurring after April 24, 2019, and the lookback period will gradually increase until it reaches its full 10-year scope on April 24, 2029. 

In line with the update, OFAC intends to publish an interim final rule extending the recordkeeping requirements at 31 C.F.R. § 501.601 from five years to 10 years, which would go into effect six months after publication.

Companies may consider updating their compliance programs and record retention policies to reflect this change, as they can now expect subpoena responses for suspected violations of sanctions for activity that occurred dating back to April 24, 2019, and may consider submitting voluntary self-disclosures for past conduct in the same window. 

This extension will have a significant impact in the investment and mergers and acquisitions space. Acquirers and investors should require an April 24, 2019, lookback period for sanctions compliance in purchase agreements and other documents—and conduct diligence in the same timeframe. 

This revised statute of limitations does not impact the lookback period for violations of U.S. export controls under the Export Control Reform Act of 2018 or the Arms Export Control Act, which remains at five years. 

The 10-year period is another indicator of enhanced sanctions enforcement risk for companies. Not only are sanctions rules growing more complex and being applied to broader ranges of conduct and commerce, but companies will also face enforcement actions for an extended period—up to 10 years after a violation occurs. 

For more information on the updated statute of limitations, see the May 2024 Fenwick client alert.