US Treasury issues foreign assets guidelines for hedge funds

All investments and transactions in the United States or involving US. persons anywhere in the world fall under US jurisdiction and need to comply with OFAC regulations.

Because of their loosely regulated nature and the ability to handle transactions through offshore locations, US-managed hedge funds and other alternative investment vehicles may be attractive investments for sanctions targets.

Hostile governments as well as persons, businesses and organisations linked to terrorism and narcotics trafficking have the potential to use such investments to gain access to the US financial system or to launder money.

US investment companies, managers and investors must be vigilant
in dealing with these instruments, which include hedge funds,
futures, (see http://www.treas.gov/offices/enforcement/ofac/derivatives) and fund of funds.  Hedge funds and their investment instruments are often once or twice removed from originating investments.

US managers and investors must be aware of all the underlying investments making up their portfolios.  Funds may contain illegal investment vehicles such as sovereign bonds of the Republic of Cuba or those  of other sanctioned foreign governments such as Iran, Iraq, Libya,  and Sudan.

Without proper authorisation, it is unlawful for US persons to invest in oil futures contracts involving Iraqi, Iranian, Libyan or Sudanese crude oil.  All investment instruments should be scrutinised to assure that they do not represent obligations of, or ownership interests in, entities owned or controlled by sanctions  targets.

US companies and their offshore offices are responsible for
maintaining  identifying information concerning all clients,
investors, and beneficiaries as well as for knowing the source of
investment funds.

 It is recommended  that identities be checked against the US Treasury Department’s Office of Foreign Assets Control’s list of Specially Designated Nationals  (listed at www.treas.gov/offices/enforcement/ofac) and reported if  they appear to be authentic matches.