U.S. companies must comply with sanctions laws that prohibit certain transactions or dealings with targeted countries, industries, entities, or individuals. While sanctions programs vary widely in the types of activities they prohibit, the penalties for violating sanctions laws can be severe.

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A company’s in-house lawyers should monitor transactions and dealings to make sure they do not run afoul of the various sanctions-related programs. Sometimes the links to sanctioned entities or individuals can be subtle, such as through customers, suppliers, employees, or other entities the company may interact with during business dealings, so in-house counsel must be detail-oriented in their analysis. In-house counsel should also stay informed about new sanctions programs being implemented.

Non-Country Based Sanctions Programs

The U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) has been granted the authority to administer economic and trade sanctions programs. Although OFAC’s regulatory authority depends on the particular sanctions program involved, OFAC may prohibit:

• Sale, leases, or exports of goods or technology to targets
• Purchases, leases, or imports of goods or technology from targets
• Investments in property owned or controlled by targets
• Providing of services to targets
• Receipt of services from targets
• Travel to targeted countries
• Facilitating dealings with targets
• Financing dealings involving targets

Sanctions programs are intended to advance U.S. economic policy, foreign policy, and national security initiatives. Under U.S. federal laws, OFAC administers a number of sanctions-related programs including:

• The International Emergency Economic Powers Act (IEEPA)
• The Trading with the Enemy Act (TWEA)
• The Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA)
• The Trade Sanctions Reform and Export Enhancement Act of 200 (TSRA)
• The Iran Threat Reduction and Syria Human Rights Act of 2012
• The North Korea Sanctions and Policy Enhancement Act of 2016
• The Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA)

Comprehensive Sanctions

Comprehensive sanctions programs prohibit engaging with the target in virtually any capacity. The countries subject to comprehensive sanctions include Iran, Cuba, North Korea, and Syria.

Regime-Based Sanctions

Regime-based sanctions programs significantly limit activities with certain entities, government regimes, regime members, and other blocked persons related to jurisdictions including:

• Belarus
• The Democratic Republic of Congo
• Ethiopia
• Iraq
• Libya
• Somalia
• South Sudan
• Venezuela
• Zimbabwe

List-Based Sanctions

OFAC maintains a Specially Designated Nationals and Blocked Persons List (SDN). Entities or individuals on the SDN list generally have their assets blocked or frozen. U.S. persons are likewise banned from dealing with entities or individuals on the SDN list. In addition to the SDN list, OFAC maintains other sanctions lists.

OFAC’s 50% Ownership Rule

OFAC prohibits U.S. companies from conducting business with entities that are 50% or more owned in the aggregate by individuals or entities considered blocked. As an in-house lawyer at a company, you should make sure the company vigilantly screens entities to understand their beneficial ownership interests prior to engaging in any business transactions. Non-blocked entities could be owned or significantly controlled by a blocked entity.

Licenses and OFAC Exemptions

Some business transactions are exempt from sanctions measures or qualify for a license issued by OFAC. OFAC exemptions apply to certain activities that fall within the authorizing legislation such as:

• Humanitarian donations
• Official business of federal government employees
• Transactions that are tangential to authorized travel

OFAC issues general licenses to allow certain categories of activities. General licenses are frequently modified, so the company’s counsel should regularly check OFAC’s website to make sure a general license can be relied on before conducting an otherwise prohibited activity.

Specific licenses enable particular persons or entities to conduct specifically approved transactions. Companies would need to submit an application for a specific license. The company’s counsel should make sure the company satisfies all the applicable conditions before using the specific license.

Penalties and Violations

OFAC will launch enforcement responses to alleged violations of sanctions programs. OFAC published the Economic Sanctions Enforcement Guidelines, which outlines the criteria that OFAC uses to evaluate potential violations of sanctions.

Penalties for violating sanctions depend on the nature of the violation. For example, under the Foreign Narcotics Kingpin Designation Act, civil penalties can range up to $1,644,396. The penalties also depend on whether there is evidence that the violation was willful or reckless. Cooperation with OFAC in a sanctions investigation can mitigate the penalties.

U.S. companies must comply with sanctions laws that prohibit certain transactions or dealings with targeted countries, industries, entities, or individuals. While sanctions programs vary widely in the types of activities they prohibit, the penalties for violating sanctions laws can be severe.

A company’s in-house lawyers should monitor transactions and dealings to make sure they do not run afoul of the various sanctions-related programs. Sometimes the links to sanctioned entities or individuals can be subtle, such as through customers, suppliers, employees, or other entities the company may interact with during business dealings, so in-house counsel must be detail-oriented in their analysis. In-house counsel should also stay informed about new sanctions programs being implemented.

Non-Country Based Sanctions Programs

The U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) has been granted the authority to administer economic and trade sanctions programs. Although OFAC’s regulatory authority depends on the particular sanctions program involved, OFAC may prohibit:

• Sale, leases, or exports of goods or technology to targets
• Purchases, leases, or imports of goods or technology from targets
• Investments in property owned or controlled by targets
• Providing of services to targets
• Receipt of services from targets
• Travel to targeted countries
• Facilitating dealings with targets
• Financing dealings involving targets

Sanctions programs are intended to advance U.S. economic policy, foreign policy, and national security initiatives. Under U.S. federal laws, OFAC administers a number of sanctions-related programs including:

• The International Emergency Economic Powers Act (IEEPA)
• The Trading with the Enemy Act (TWEA)
• The Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA)
• The Trade Sanctions Reform and Export Enhancement Act of 200 (TSRA)
• The Iran Threat Reduction and Syria Human Rights Act of 2012
• The North Korea Sanctions and Policy Enhancement Act of 2016
• The Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA)

Comprehensive Sanctions

Comprehensive sanctions programs prohibit engaging with the target in virtually any capacity. The countries subject to comprehensive sanctions include Iran, Cuba, North Korea, and Syria.

Regime-Based Sanctions

Regime-based sanctions programs significantly limit activities with certain entities, government regimes, regime members, and other blocked persons related to jurisdictions including:

• Belarus
• The Democratic Republic of Congo
• Ethiopia
• Iraq
• Libya
• Somalia
• South Sudan
• Venezuela
• Zimbabwe

List-Based Sanctions

OFAC maintains a Specially Designated Nationals and Blocked Persons List (SDN). Entities or individuals on the SDN list generally have their assets blocked or frozen. U.S. persons are likewise banned from dealing with entities or individuals on the SDN list. In addition to the SDN list, OFAC maintains other sanctions lists.

OFAC’s 50% Ownership Rule

OFAC prohibits U.S. companies from conducting business with entities that are 50% or more owned in the aggregate by individuals or entities considered blocked. As an in-house lawyer at a company, you should make sure the company vigilantly screens entities to understand their beneficial ownership interests prior to engaging in any business transactions. Non-blocked entities could be owned or significantly controlled by a blocked entity.

Licenses and OFAC Exemptions

Some business transactions are exempt from sanctions measures or qualify for a license issued by OFAC. OFAC exemptions apply to certain activities that fall within the authorizing legislation such as:

• Humanitarian donations
• Official business of federal government employees
• Transactions that are tangential to authorized travel

OFAC issues general licenses to allow certain categories of activities. General licenses are frequently modified, so the company’s counsel should regularly check OFAC’s website to make sure a general license can be relied on before conducting an otherwise prohibited activity.

Specific licenses enable particular persons or entities to conduct specifically approved transactions. Companies would need to submit an application for a specific license. The company’s counsel should make sure the company satisfies all the applicable conditions before using the specific license.

Penalties and Violations

OFAC will launch enforcement responses to alleged violations of sanctions programs. OFAC published the Economic Sanctions Enforcement Guidelines, which outlines the criteria that OFAC uses to evaluate potential violations of sanctions.

Penalties for violating sanctions depend on the nature of the violation. For example, under the Foreign Narcotics Kingpin Designation Act, civil penalties can range up to $1,644,396. The penalties also depend on whether there is evidence that the violation was willful or reckless. Cooperation with OFAC in a sanctions investigation can mitigate the penalties.