United States of America

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1. Does the US have a sanctions regime in place?

;Yes. The US uses comprehensive, targeted, and sectoral 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. The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) is the primary US government agency responsible for implementing and enforcing the various US sanctions programs. US sanctions can be directed at:

  • countries and jurisdictions
  • individuals
  • entities
  • industries
  • governments

Comprehensive sanctions prohibit transactions and dealings with an entire country or region. Targeted and sectoral sanctions are more limited, prohibiting transactions and certain activities with specific individuals and sectors within a country or jurisdiction.

The US’s increasing use of sanctions as a tool of foreign policy has had a significant impact on the global financial regulatory environment. Recent US sanctions laws and enforcement policies are characterized by expansion of US sanctions jurisdiction and very high penalties against foreign financial institutions, 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 (the “USA Patriot Act”). The USA Patriot Act was enacted following the 9/11 terrorist attacks against the US and was intended to restrict the financing of terrorist cells. The USA Patriot Act granted, among other things, the Financial Crimes Enforcement Network (“FinCEN”) powers under Section 311 to designate foreign jurisdictions and financial institutions of “primary money laundering concern,” subjecting them to “special measures” and effectively cutting them off from the US financial system.

2. Does the US implement UN sanctions?

Yes. If the United Nations Security Council mandates a sanction against an entity, the US President will issue an Executive Order implementing the sanction domestically.

3. Does the US implement an autonomous sanctions regime?

Yes. The US prohibits “US persons” (i.e., US citizens and residents, and US businesses, and their foreign branches) from engaging in a transaction or activity that is prohibited under a US sanctions program. (See question 1 above). The definition of US persons, however, can vary depending on the program and, under certain sanctions programs, the restrictions applicable to US persons may also cover foreign companies owned or controlled by US persons.

In addition, foreign financial institutions and persons that engage in USD transactions (such as European-based banks) or deal in US-origin goods must also comply with US sanctions (or risk being subject to sanctions penalties).

Some US sanctions programs impose “secondary sanctions” on foreign financial institutions and persons. Secondary sanctions are measures that penalize non-US persons for doing business with or otherwise supporting regimes and sectors that are subject to US sanctions (such as the Iranian oil sector) even when there is no US nexus at all. These extraterritorial sanctions are considered controversial.

4. What is the nature of the sanctions regime in the US?

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 statutory authority granted by the legislative branch. Executive Orders usually are based on the authority granted to the President by the International Emergency Economic Powers Act (“IEEPA”), which allows the President to govern a “national emergency” in response to an “unusual or extraordinary threat.” OFAC issues regulations in the US Code of Federal Regulations implementing the Executive Orders and legislation.

5. Does the US maintain a list of sanctioned individuals and entities?

Yes, OFAC maintains a number of lists (subject to revision), and certain individuals and entities may appear on more than one list. These lists currently include:

  • The Specially Designated Nationals and Blocked Persons (“SDN”) List: details 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 Identification (“SSI”) List: details individuals and entities 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 regimes with respect to 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 (“NS-PLC”) 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 (subject to some authorizations).
  • Non-SDN Iranian Sanctions Act (“NS-ISA”) List: details individuals and entities 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 Correspondent Account or Payable-Through Account Sanctions (“CAPTA List”): details foreign financial institutions (subject to the specific prohibition or restriction described) pursuant to the Ukraine Freedom Support Act of 2014 (as amended by the Countering America's Adversaries Through Sanctions Act (“CAATSA”)); the North Korea Sanctions Regulations, 31 C.F.R. part 510; the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”); the Iranian Financial Sanctions Regulations, 31 C.F.R. Part 561; the Hizballah Financial Sanctions Regulations, 31 C.F.R. Part 566; and Executive Order 13846. This generally prevents US financial institutions from opening and maintaining correspondent and payable-through accounts for those institutions detailed on the list.

Entities on the above sanctions lists can be found and searched on OFAC’s website at https://sanctionssearch.ofac.treas.gov.

In addition to the lists maintained by OFAC, various US regulators also maintain lists of sanctioned individuals and entities. For example:

  • The Bureau of Industry and Security (“BIS”), within the US Department of Commerce, maintains: (i) the Entity List, which identifies foreign persons, businesses, research institutions, and government and private organizations subject to specific license requirements for the export, re-export, and/or transfer of specified items; (ii) the Denied Persons List, which includes individuals and entities that have been denied export privileges; and (iii) the Unverified List, which includes persons that BIS has due diligence concerns about due to the party’s bona fides (such as whether they are a legitimate company) and therefore requires certain documents to be filed before exporting to them.
  • FinCEN maintains a list known as “Section 311 Special Measures,” which, pursuant to the USA Patriot Act, identifies jurisdictions and entities which are of “primary money laundering concern.”

6. Are there any other lists related to sanctions?

The US Department of State also has legal authority to sanction foreign individuals, private entities, and governments that engage in nuclear proliferation activities and prohibited trade of defense articles. To that end, it maintains sanctions lists, including the Non-proliferation Sanctions list and the AECA Debarred List.

7. Does the US have a licensing or authorization system in place?

Yes, OFAC issues General Licenses to authorize certain categories of transaction. In addition, both OFAC and BIS maintain a system through which individuals and entities can apply for a specific license or export license (respectively) and request authorization to transact with sanctioned entities that would otherwise be prohibited.

OFAC and BIS have different restrictions and requirements for requesting a license. OFAC and BIS only will issue a specific license or export license in certain circumstances. They generally assess applications for a license on a case-by-case basis and, depending on the sanctions program or person/interest, can be subject to a policy of denial.

8. What are the consequences for a breach of sanctions in the US?

Violations of US sanctions can result in civil and/or criminal penalties, that vary based on the sanctions program implicated. Civil penalties for violations of sanctions programs implemented under the IEEPA (the majority of US sanctions programs) carry a maximum civil penalty of US$307,922 per violation. Civil penalties for violations of sanctions implemented under the Trading with the Enemy Act (“TWEA”) carry a maximum civil penalty of $90,743 per violation. The criminal penalty for wilful violations of the IEEPA or the TWEA is a fine of up to US$1,000,000 per violation and/or imprisonment for up to 20 years.

Enforcement actions and corresponding penalties are on the rise, as are enforcement actions involving multiple enforcement agencies. Voluntary self-disclosure of a potential violation is considered a mitigating factor in determining the appropriate amount of a civil penalty.

9. Who are the relevant regulators in the US and what are their contacts?

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

The Bureau of Industry and Security

(Export Control) Outreach and Educational Services Division (located in Washington, DC) T: (+1) 202 482 4811

Northern California branch

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

Federal Reserve

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

Financial Crimes Enforcement Network

1500 Pennsylvania Avenue, NW Washington DC 20220 T: (+1) 800 767 2825 www.fincen.gov/.

Western Regional Office

(located in Irvine, CA) T: (+1) 949 660 0144

US Department of Justice

950 Pennsylvania Avenue, NW Washington DC 20530-0001 T: (+1) 202 514 2000 www.justice.gov

New York Department of Financial Services

1 State Street New York NY 10004 T: (+1) 800 342 3736 www.dfs.ny.gov/

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Olga Geenberg

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Sarah Paul

Partner, US Head of Corporate Crime and Investigations

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Mark Herlach

Partner

Andrea Gordon

Associate

Emily Rosenblum

Associate

Eversheds Sutherland (US) LLP,

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