Recovery of blocked payments due to Iraq sanctions – resolved in just two weeks

Dentons Lee successfully represented a Korean trading company that had been unable to recover outstanding payments from its Indian counterparty due to U.S. sanctions related to Iraq (OFAC), ultimately enabling the recovery of the blocked funds.

This matter was resolved swiftly through Dentons Lee's leadership and close collaboration with Dentons US, which has extensive experience in obtaining OFAC licenses.

Background of the matter

• The Korean trading company had been engaged in legitimate commercial transactions with an Indian company.
• However, it was later discovered that the Indian company had conducted business with an Iraqi entity subject to U.S. sanctions.
• As a result, the Indian company was designated under OFAC sanctions (including SDN-related restrictions).
• Consequently, banks suspended all international remittances by the sanctioned Indian company.
• Despite having already delivered the goods, the Korean trading company was unable to receive any payment.

OFAC sanctions and the need for a specific license

• International remittances routed through the U.S. financial system cannot be processed if a sanctioned party is involved, unless an OFAC Specific License is obtained.
• In practice, the issuance of a Specific License is widely known to take six to twelve months or longer.

Dentons' approach and results

• Dentons Lee promptly coordinated with Dentons US, leveraging its deep experience in OFAC licensing matters.
• As a result, the OFAC Specific License was successfully obtained in just two weeks from the date of application.
• This enabled the Korean trading company to swiftly proceed with the recovery of the previously blocked payment. Dentons also advised on the release of funds under the letter of credit (L/C) and the repatriation of the funds to Korea.

Significance and impact

• As an increasing number of Korean companies face challenges arising from U.S. sanctions programs involving countries such as Russia, Iran, and Iraq, this case demonstrates a practical and effective path to resolution.
• Dentons Lee remains committed to providing specialized support to companies navigating sanctions-related risks and compliance challenges.

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