United States of America

Global sanctions guide

United Kingdom
Venezuela
  1. Does The USA have a sanctions regime in place? 

Yes. The US uses both comprehensive and targeted economic sanctions against terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, human rights abuses, and other threats to US national security, its foreign policy or its economy. US sanctions can be directed at:

  • countries and jurisdictions
  • individuals
  • entities
  • sectors
  • governments

The sanctions programs are based on US foreign policy and national security goals and can be either comprehensive (in that they prohibit transactions with an entire country or region) or targeted towards certain individuals, government officials or industries within those countries.

The US’s utilization of sanctions has had a significant impact on the global financial regulatory environment, particularly in the wake of the passage of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, also known as the USA Patriot Act, enacted following the 9/11 terrorist attacks against the US Due to the need for the US to limit the financing of terrorist cells, this Act granted, among other things, the Financial Crimes Enforcement Network (“FinCEN”) powers under Section 311 of the Act to designate foreign jurisdictions and financial institutions of “primary money laundering concern,” and subjecting them to “special measures,” effectively cutting them off from the US financial system

  1. Does The USA implement UN sanctions? 

Yes. If the UNSC mandates a sanction against an entity, the US President will issue an Executive Order implementing the sanction domestically.

  1. Does The USA implement an autonomous sanctions regime? 

Yes. The US prevents US persons, US businesses, and their foreign branches from transacting with any entity listed.

In addition to the foreign branches of US based businesses, foreign entities who are in possession of US-origin goods must also comply (in the case of certain regimes), which covers financial institutions that make USD transactions (such as European based banks). These extraterritorial sanctions are considered controversial.

  1. What is the nature of the sanctions regime in The USA? 

Sanctions can originate through either the executive branch via Executive Orders issued by the President or the legislative branch through the enactment of specific statutes. Executive Orders, however, are subject to the underlying congressionally enacted statutory authority; most often, Executive Orders are based on the authority granted to the President by the International Emergency Economic Powers Act, which grants the President powers to govern a “national emergency” in response to an “unusual or extraordinary threat.”

  1. Does The USA maintain a list of sanctioned individuals and entities? 

Yes, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) maintains and amends a number of lists, which will often overlap with respect to certain individuals and entities, including the following:

  • The Specially Delegated Nationals and Blocked Persons (“SDN”) List: a consolidated list of individuals and entities owned or controlled by, or acting for or on behalf of, targeted countries. The SDN List also identifies individuals, groups, and entities designated as terrorists, narcotics traffickers, and others under various sanctions programs
  • Sectoral Sanctions Identifications List: details persons in sectors of the Russian economy that should not be dealt with under certain circumstances;
  • Foreign Sanctions Evaders (“FSE”) List: details foreign individuals and entities who have been deemed to have violated, attempted to violate, conspired to violate, or caused a violation of the US sanctions regime over Syria or Iran. The FSE List also includes foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to US sanctions
  • Non-SDN Palestinian Legislative Council List: details individuals who are elected members of the Palestinian Legislative Council, which is deemed to be supported by Hamas and other foreign terrorist organizations, and prevents US financial institutions from transacting with them
  • Non-SDN Iranian Sanctions Act List: details individuals who have contributed certain investments to Iran’s energy sector or who have engaged in certain activities relating to Iran’s refined petroleum sector and prevents US financial institutions from transacting with them
  • The List of Foreign Financial Institutions Subject to Part 561 (the “Part 561 List”): foreign financial institutions are listed if they carry out one or more of the activities described in s561.201 and s561.203 of the Iranian Financial Sanctions Regulations, (31 CFR Part 561). In brief, this prevents US financial institutions from opening and maintaining correspondent and payable-through accounts for those institutions detailed on the list

These entities can be found and searched on OFAC’s website at: https://sdnsearch.ofac.treas.gov/

In addition to the lists maintained by OFAC, various US regulators also maintain lists of sanctioned individuals and entities, including, but not limited to, the following:

  • The Bureau of Industry and Security (“BIS”), within the US Department of Commerce, maintains the Entity List, which identifies foreign persons, businesses, research institutions, government and private organizations that are subject to specific license requirements for the export, re-export, and/or transfer of specified items
  • FinCEN maintains a listing known as “Section 311 Special Measures,” which, pursuant to the USA Patriot Act, identifies jurisdictions and entities which are of “primary money laundering concern”
  1. Are there any other lists related to sanctions? 

No.

  1. Does The USA have a licensing or authorization system in place? 

Yes, both OFAC and BIS maintain a system through which individuals and entities can apply for a license and request authorization to transact with sanctioned entities.

There are various sanctions programs, each with potentially differing application triggers. The issuing of a license only occurs under certain limited circumstances and applications for a license are assessed on a case-by-case basis and, depending on the sanctions program or interest, can be subject to a policy of denial.

  1. What are the consequences for a breach of sanctions in The USA? 

Violations of US sanctions can incur civil and/or criminal penalties, depending on the sanctions program implicated. In 2016, OFAC, BIS, and the US Department of State’s Directorate of Defence Trade Controls announced increases in the maximum civil monetary penalties that may be imposed for various sanctions programs for violations that occurred after 2 November 2015. Civil  penalties for violations of sanctions enacted pursuant to the Trading with the Enemy Act (“TWEA”) have a maximum civil penalty of $85,236. Criminal penalties for wilful violations of TWEA are a fine of up to US$1,000,000 or imprisonment for up to 10 years. Civil penalties for violations of sanctions programs enacted pursuant to the International Emergency Economic Powers Act (“IEEPA”) (the majority of US sanctions programs) are the greater of US$284,582 or twice the amount of the underlying transaction. Criminal penalties for wilful violations of IEEPA are up to
US$1,000,000 per violation and, for natural persons, imprisonment of up to 20 years, potentially in addition to the monetary penalty.

Enforcement actions and corresponding penalties are on the rise, as are enforcement actions involving multiple enforcement agencies. Most significantly, BNP Paribas was fined $8.9 billion in 2014 by multiple US federal and state agencies for processing billions of dollars for sanctioned countries. Voluntary self-disclosure of a violation is considered a mitigating factor in deciding a civil penalty amount.

  1. Who are the relevant regulators in The USA and what are their contact details?

The US Treasury Department 
Office of Foreign Assets Control
Treasury Annex
1500 Pennsylvania Avenue, NW
Washington DC 20220

T: (+1) 800 540 6322
www.treasury.gov/Pages/default.aspx


Financial Crimes Enforcement Network
1500 Pennsylvania Avenue, NW
Washington DC 20220

T: (+1) 800 767 2825
www.fincen.gov/


The Bureau of Industry and Security
(Export Control)
Outreach and Educational Services Division (located in Washington, DC)

T: (+1) 202 482 4811


Western Regional Office
(located in Newport Beach, CA)
T: (+1) 949 660 0144


Northern California branch
(located in San Jose, CA)
T: (+1) 408 998 8806
www.bis.doc.gov/


US Department of Justice
950 Pennsylvania Avenue, NW
Washington DC 20530-0001

T: (+1) 202 514 2000
www.justice.gov


Federal Reserve
T:  (+1) 888 851 1920
www.federalreserve.gov/branches.htm (12 branches)


New York Department of Financial Services
1 State Street
New York
NY 10004

T: (+1) 518 474 2994
www.dfs.ny.gov/

 

Contributor law firm

Olga Geenberg, Eversheds Sutherland (US) LLP, 999 Peachtree St NW #2300, Atlanta, GA 30309