The United States, primarily through Presidential action under the statutory authority of the International Emergency Economic Powers Act (“IEEPA”), has empowered the U.S. Department of the Treasury and its Office of Foreign Asset Control (“OFAC”), to impose embargos on certain governments, countries, companies and individuals (each, an “Embargo Target”). It is a U.S. Person’s obligation to understand and comply with all U.S. sanctions programs (“Sanctions” or “Sanction Laws,” as applicable). Most Sanction Laws prohibit U.S. Persons from transacting with Embargo Targets in U.S. products, technology or technical data, or the financing thereof. Additionally, a number of Sanctions have mechanisms designed to chill the ability of non-U.S. persons to transact with Embargo Targets by authorizing secondary Sanctions that in sum require the non-U.S. person to choose between the U.S. or the Embargo Target by blocking the non-U.S. person from accessing the U.S. monetary systems if they transact with an Embargo Target. U.S. Persons must comply with primary Sanctions as a matter of U.S. law or face potential criminal and civil penalties. Secondary Sanctions present non-U.S. persons with a choice: do business with the United States or with the Embargo Target, but not both.
Sanction Laws generally include (i) general licenses that, among other things, permit humanitarian aid and legal representation to defend against embargos, and (ii) specific licenses that permit specific transactions after OFAC review and approval. For instance, a bank may apply for specific license to permit the unwinding of a transaction that occurred with an Embargo Target prior to the U.S. placement of the Sanction or the addition of the Embargo Target to the Sanction’s list.
U.S. Sanctions and export controls have become an increasingly important U.S. regulatory device. Sanctions are rapidly evolving and being used to adjust markets and market participant behaviors. These changes make understanding Sanctions essential for banks and companies contemplating cross-border transactions or domestic transactions with foreign persons. Interested parties can search the U.S. Department of Commerce’s Consolidated Screening List to determine if a party is subject to certain U.S. Sanctions or embargos. The Consolidated Screening List includes:
In addition to U.S. Sanctions, certain situations may require consideration of sanctions and embargo programs implemented in other jurisdictions such as the United Kingdom, European Union, and United Nations Security Council.
Below we provide high-level summaries of current Sanctions with a link to the official OFAC sites for each. We also discuss potential new embargos regarding the Russian Federation. As this is an extremely fluid area, we plan to monitor and update this information as material changes occur.
1. Russian Harmful Foreign Activities Sanctions and Potential New Sanctions Related to Russian Election Interference and Aggression Against Ukraine
Political stresses surrounding claims of Russian election tampering, Russia’s support of cyber-crime, including cyber-ransom, and Russia’s recent aggression and possible military incursion into Ukraine are evolving daily. A number of Russian companies and individuals have been added to Sanctions lists for their claimed participation in election interference and cyber-crime. More recently, U.S. government officials have made public statements warning Russia of unprecedented massive economic consequences should they invade Ukraine. Those issues may drive potential new Sanctions by the U.S. and its allies against the Russian Federation and its trading partners such as Belarus and China.
We note that at the 2022 Winter Olympics in Beijing (February 2022), Russian President Vladimir Putin was seen in close communication with the President of the People’s Republic of China, Xi Jinping, which raised speculation of collaboration between the two countries regarding Ukraine, and importantly for our consideration, potential secondary sanctions against China if it continues to trade with Russia and new U.S. Sanctions are enacted against the Russian Federation.
Except as set forth herein, few details have been released as to what other Sanctions the U.S. government might impose or what Russian actions would trigger such measures – President Biden has stated only that the level of U.S. Sanctions and counter-measures will be driven by the level of Russian aggression. Even if Russia does not invade Ukraine, there is still the possibility of measures the U.S. may take against Russia in connection with the present crisis. No matter what type of response the U.S. implements, it is likely to be met with a Russian counter-response.
President Biden has stated that if Russia invades Ukraine, the U.S. will implement Sanctions against Russia and potentially other Russian Federation participants such as Belarus, intended to demolish the Russian financial system. Based on prior precedent and the current political climate, the following is a summary of economic Sanctions that the U.S. government has used in the past and might deploy in this situation.
Potential New Russian Sanctions
Banks and Financial Institutions. The U.S. could embargo Russia’s banks and financial institutions, as well as the government’s Russian Direct Investment Fund, to freeze U.S. dollar accounts and cut off Russia’s access to U.S. dollars. Such Sanctions could mirror similar Sanctions targeting Iranian banks. If OFAC designates Russian banks on the SDN list, U.S. and non-U.S. entities globally would be required to cease conducting business with such sanctioned banks, which would create significant impacts on companies globally complying with such Sanctions. The U.S. could also combine with other NATO allies to coordinate Sanctions to restrict Russia’s access to Euro and GBP accounts and currencies. Since the Dollar is the standard unit of trade for many commodities, limiting access to U.S. dollars could have a severe impact on Russia’s access to necessary commodities.
A bill recently introduced by Democratic members of Congress identifies a dozen of Russian state-owned and private banks as potential targets of OFAC Sanctions. The bill calls for Sanctions on at least three Russian banks, including Sberbank and VTB. The Republican members of Congress have also introduce their own bill that would target Russia. Both the Republican members of Congress and President Biden have targeted termination of the Nord Stream 2 pipeline. The U.S. Senate has introduced a bill that includes measures against the Russian banking sector and personal Sanctions against top officials.
Other possible options would be for the U.S. to impose Sanctions only on lesser Russian state-owned banks or limit penalties against Sberbank and BTN to their investment arms, as well as imposing Sanctions against Russian banks that would not put them on the SDN list but rather only restricting the banks from conducting any transactions involving dollars (such as clearing). Banks could have assets frozen, limits on certain transactions, borrowing and access to capital. Penalties could also be applied to some mostly domestic-facing banks that have been used to circumvent previous Sanctions.
Russian Federation Debt. Another possible measure the U.S. and its allies may take is to cut off foreign lending and sales of sovereign bonds in both the primary and secondary markets. This includes Sanctions to cut lending to Russia by foreign creditors by potentially hundreds of billions of dollars or more. Such measure could also include further restrictions on Russia refinancing its sovereign debt.
Energy and Metal. While some U.S. government officials say there is no current consideration of any Sanctions on Russia’s oil and gas exports (other than termination of Nord Stream 2 mentioned above), oil and gas is the foundation of Russia’s economy and many European allies are dependent thereon. To prevent any adverse impact to Europe, certain energy-related transactions could be exempt, in whole or in part, from any Sanctions that target Russia’s energy sector. This could include carve-outs and wind-down provisions. Sanctions may include embargo of Russian access to U.S. technology and equipment used in exploration, extraction and refineries in a manner similar to the U.S. embargo of Huawei’s access to U.S. products and technology. Sanctions that limit Russia’s ability to export oil and gas would be by far the most powerful weapon against the Russian economy and perhaps the most effective economic deterrent against a Russian invasion of Ukraine (but it would cause some impact in Europe and the U.S.). See also Sanctions against Venezuela that could be adopted for use against Russian oil and gas exports.
The U.S. could implement Sanctions limiting the import of select Russian metals, such as steel, aluminum, iron, and chemicals. However, the U.S. would have to determine the impact any such Russian Sanctions may have on the U.S. economy. For example, in April 2018, OFAC put oligarch Oleg Deripaska, Russian President Putin’s close friend, on the SDN list. Mr. Deripaska owned Rusal, the world’s second-largest aluminum producer, and the Sanctions caused a surge in global aluminum prices. OFAC lifted Sanctions on his main companies that December.
Russian Companies. The U.S. might consider denying access to U.S. equities markets for Russian companies in a manner similar to those imposed against Chinese Military companies. Dozens of Russian domiciled businesses list securities (primarily ADRs) on U.S. and London stock exchanges. Cutting off access to U.S. capital, along with secondary Sanctions on potential trading partners, could have a significant, detrimental impact on Russian cross-border business and access to liquidity.
Individuals. If warranted, the U.S. could choose to impose Sanctions targeting the assets of oligarchs close to Russian President Putin. Such measures could ban travel and trade, and freeze assets owned by Russian oligarchs and state-owned enterprises that facilitate aggression against Ukraine. The U.S. has taken similar steps against CNOOC, a Chinese energy exploration company, that the U.S. claims “acts as bully for the People's Liberation Army to intimidate China's neighbors.”
Technology, Defense, Aviation, Maritime and Automobiles. U.S. measures against Russia could include targeting Russia’s technology, defense, aviation, maritime and automobile sector through economic Sanctions and export controls. These measures have the ability to prevent Russia from importing consumer electronics, and key aircraft and automobile components to U.S. allies and others who depend on U.S. technology and finance. Part of the potential export control measures that could be taken would be to restrict chips and products with integrated circuits from being exported to Russia. The U.S. has authority over items made outside the U.S. if they are designed with U.S. software or technology or produced using U.S. equipment or parts. White House National Security Council officials have recently informed executives from the Semiconductor Industry Association, a chip lobbying group, of potential severe actions against Russia that may impact their members.
It is still unclear whether these actions could have the same devastating effect on Russia as it has had on Huawei. The Sanctions imposed on Huawei by the Trump administration could also be imposed on Russia. Initially, Huawei, the telecommunications equipment maker was placed on an export blacklist (i.e., the “entity list”) in 2019. This affected U.S.-made goods and some limited items made abroad with U.S. technology, but did not block overseas shipments to Huawei from companies. Since the listing did not stop the global flow of chips to Huawei, the U.S. government in 2020 added the Foreign Direct Product Rule (“FDPR”) to expand its authority to stop shipments of foreign produced items to Huawei. The FDPR restricts both U.S. and non-U.S. companies from shipping items to Huawei that are the direct product of U.S. technology or software. Such shipments can only be made with a U.S. license. U.S. and non-U.S. chipmakers that use U.S. chip making equipment are now required to obtain U.S. licenses before supplying Huawei and license for sophisticated chips are generally denied. Similar Sanctions would involve the U.S. Department of Commerce invoking the foreign direct product rule, which bars American companies from providing technology to companies under sanction and demolishing the supply chain needed to produce advanced technologies. This could hamper the growth of strategic industries in Russia, including its oil and gas sector as well as its defense industry.
In addition to new Sanctions, the U.S. and its allies could bolster or augment existing Sanctions programs that impact the Russian Federation and its partners.
Current U.S. Sanctions Regarding the Russian Federation include, but are not limited to the following:
Preparing For Possible Russian Sanctions
U.S. persons and non-U.S. persons should prepare to act due to the potential for primary and secondary Sanctions, including cessation of business activities with individuals or entities identified on the SDN list, as companies are not warned ahead of time of the names designated on the SDN list.
Balkans-related Sanctions were first issued by President George W. Bush on June 27, 2001 pursuant to Executive Order 13219. On January 5, 2022, President Biden issued EO 14033, “Blocking Property and Suspending Entry Into the United States of Certain Persons Contributing to the Destabilizing Situation in the Western Balkans,” which expands the Sanctions regime that blocks the property of persons who (i) are engaged in violence in the former Yugoslav Republic of Macedonia, in southern Serbia, the Federal Republic of Yugoslavia, and elsewhere in the Western Balkans region, or (ii) commit acts that (a) obstruct the implementation of the Dayton Accords in Bosnia or United Nations Security Council Resolution 1244 of June 10, 1999 in Kosovo, (b) threaten the peace in or diminish the security and stability of those areas and the wider region, and (c) undermine the authority, efforts, and objectives of the United Nations, the North Atlantic Treaty Organization (“NATO”), and other international organizations and entities present in those areas and the wider region, and endanger the safety of persons participating in or providing support to the activities of those organizations and entities, including United States military forces and government officials.
Originally issued by President George Bush by EO 13405, effective June, 19, 2006, the Belarus Sanctions block property of certain persons who (i) have been identified as undermining the democratic processes or institutions in Belarus; (ii) are responsible for, or to have participated in, human rights abuses related to political repression in Belarus; (iii) are senior-level officials, a family member of such an official, or a person closely linked to such an official who is responsible for or has engaged in public corruption related to Belarus; (iv) have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the above activities, or any person so designated as a Specially Designated National (“SDN”); or (v) owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly, any person listed in or designated pursuant to this order.
Following OFAC’s termination of the previous Burma Sanctions program on October 7, 2016, through the issuance of Executive Order 13742, President Biden, in response to the 2021 military coup in Burma against the democratically elected civilian government, issued Executive Order 14014 “Blocking Property with Respect to the Situation in Burma” (“EO 14014”) on February 10, 2021. EO 14014 imposes Sanctions on certain Burmese parties responsible for the coup, which includes prohibiting transactions, freezing of assets, blocked property and interests, and designation as a SDN of such designated parties. Following the issuance of EO 14014, OFAC designated several parties on the SDN list that had ties to the Burmese military responsible for the coup. On June 1, 2021, OFAC published the Burma Sanctions Regulations (“BSR”) to implement EO 14014. The BSR does not expand upon Sanctions previously imposed under EO 14014, but does introduce new general licenses authorizes the provision of certain legal services to SDNs designated pursuant to EO 14014, and payment for such services from certain funds originating outside the U.S., the provision and receipt of non-scheduled emergency medical services, deductions from blocked accounts for certain service charges owed to U.S. financial institutions; and transfers of funds or credits between blocked accounts held by U.S. financial institutions in their branches and offices, provided that no transfers are made from accounts held within the United States to accounts held outside the United States, and also provided that a transfer from a blocked account may be made only to another blocked account held in the same name. The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) separately imposed restrictions on exports and sensitive items to the Burmese military and other entities and individuals associated with the coup.
In addition to economic Sanctions, the BIS has imposed restrictions on exports and reexports to Burma, and transfers (in-country) within Burma, of sensitive items subject to the Export Administration Regulations (“EAR”) in response to the military coup and escalating violence against Burma’s peaceful protesters. BIS has also added to the Entity List four entities - two Burmese military and security services entities responsible for the coup and two commercial entities that are owned and operated by one of those entities. BIS moved Burma from Country Group B to Country Group D:1, which results in a more restrictive review of license applications for exports and reexports involving items subject to the EAR to any end user in Burma. It further renders end users in Burma ineligible for or subject to further restriction with regard to use of certain license exceptions for exports, reexports, and transfers (in-country).
On May 12, 2014, President Obama signed Executive Order 13667 “Blocking Property of Certain Persons Contributing to the Conflict in the Central African Republic” (“EO 13667”), ordering economic Sanctions against specific transactions carried out with parties associated to the ongoing conflict in the Central African Republic. EO 13667 targeted only certain persons and their supporters, including armed groups, and not the country’s institutions in general. As a result, EO 13667 blocked transactions made between U.S. persons and parties determined to be detrimental to the stability and security of the Central African republic, as well as blocked all property and interests in property of those designated individuals.
In November 12, 2020, President Trump issued Executive Order 13959 “Addressing the Threat From Securities Investments that Finance Communist Chinese Military Companies” (“EO 13959”) which prohibited U.S. persons from transacting in securities of designated “Communist Chinese Military Companies.” Then on June 3, 2021 President Biden signed Executive order 14032 entitled “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China” (“EO 14032”). EO 14032 essentially replaced EO 13959, expanding the overall scope of the prohibition on transactions in securities of certain Chinese defense or surveillance technology companies identified as “Chinese Military-Industrial Complex” (“CMIC”) companies. EO 14032 prohibits any U.S. person from engaging in “the purchase or sale of any publicly traded securities, or any publicly traded securities that are derivative of such securities or are designed to provide investment exposure to such securities” of any entity identified as a CMIC.
Through the Narcotics Trafficking Sanctions Regulations, The Foreign Narcotics Kingpin Designation Act and Regulations, and Executive Order 12978 (“EO 12978”), OFAC has imposed economic and trade Sanctions against drug kingpins and international drug traffickers around the world, which includes prohibiting trade and other financial transactions with those involved in drug trafficking. To build on EO 12978, President Biden on December 15, 2021, issued Executive Order 14059, “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade” (“EO 14059”) aimed at sanctioning foreign persons who directly or indirectly contribute to the trafficking of illicit drugs, including the illicit product, global sales and widespread distribution of drugs. EO 14059 prohibits U.S. persons from directly or indirectly dealing with or facilitating any transactions with such designated sanctioned parties. As a result, all property, and interests in property of the designated individuals or entities that are in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked.
Counter terrorism Sanctions block property and prohibit transactions with persons who commit, threaten to commit, or support terrorism. All property and interests in property of the foreign persons designated by executive orders or by OFAC that are in the U.S. or that hereafter come within possession or control of U.S. persons are blocked. US counterterrorism policy primarily focuses on state sponsorship of international terrorism. State sponsors of terrorism are countries designated by the Secretary of State under Section 6 (j) of the Export Administration Act of 1979 are countries that have “repeatedly provided state support for acts of international terrorism.” Currently, the Secretary of State’s list of state sponsors includes Cuba, Iran, North Korea, and Syria.
The U.S. Department of State also targets terrorist groups such as the Taliban, ISIS, al-Qa’ida, and Hizballah and others, who to plot attacks against the United States and our allies and partners. The U.S. Department of State works to build global consensus to degrade and defeat these adversaries through a combination of diplomatic engagement and foreign assistance. The Department of State also works closely with the U.S. Departments of Defense, Homeland Security, Justice, Treasury, and the Intelligence Community to lead an integrated whole-of-government approach to international counterterrorism.
Taliban and Haqqani Network. The Taliban is designated as a Specially Designated Global Terrorist (“SDGTs”) under Executive Order 13224 (“EO 13224”). The Haqqani Network is designated as an SDGT under EO 13224 and a Foreign Terrorist Organization (“FTO”) under section 219 of the Immigration and Nationality Act (“INA”). These Sanctions do not prohibit U.S. persons from exporting or reexporting goods or services to Afghanistan, provided that the transactions do not involve sanctioned individuals or entities, or property in which a blocked person has an interest unless exempt from regulation or authorized by OFAC. In furtherance of the foregoing and to facilitate humanitarian efforts, on February 11, 2022, President Biden issued an Executive Order to “Protect Certain Property of Da Afghanistan Bank for the People of Afghanistan.” This order, in summary, transfers all embargoed assets of Da Afghanistan Bank (“DAB” or the Central Bank of Afghanistan) held in accounts at United States financial institutions to the Federal Bank of New York and gives OFAC the authority to issue regulations for the release of embargoed asset to assist in the welfare of the Afghani people.
The United States maintains a broad embargo against Cuba. The embargo is generally implemented through the Cuban Assets Control Regulations originally issued pursuant to the Trade With the Enemy Act. Subsequent legislation has revised and amended the Cuban embargo, but it remains one of the most comprehensive Sanctions regime currently maintained by the U.S. against a foreign country. The Cuban Assets Control Regulations prohibit almost all direct or indirect commercial, investment, trade and other business activity involving Cuba, Cuban property or Cuban nationals. Subject to narrow exceptions, goods or services of Cuban origin are prohibited from being imported into the U.S., either directly or through third countries. This also includes the prohibition of products, technology or services being exported from the U.S. to Cuba, either directly or through third countries. The Trade Sanctions and Export Enhancement Act of 2000 allowed certain sales of U.S.-origin foods and agricultural commodities to Cuba under a process called “License Exception AGR,” which is governed by the BIS. In late 2014, President Obama initiated a policy shift away from Sanctions and toward engagement and the normalization of relations. Changes included the rescission of Cuba’s designation as a state sponsor of international terrorism and the easing of restrictions on travel remittances, trade, telecommunications, and banking and financial services. However, in 2017, President Trump changed course and introduced new Sanctions, including restrictions on transactions with companies controlled by the Cuban military. Not long after, in 2019, President Trump increased Sanctions, particularly on travel and remittances to pressure Cuba on human rights and its support of the Venezuelan government. Currently, President Biden has not made any changes to the Cuban Sanctions program.
U.S. businesses with European operations should be particularly careful because the EU does not prohibit trade with Cuba and accounts for about 20% of Cuba’s imports and exports.
In response to President Obama’s Executive Order 13694, which declared a national emergency to address the unusual and extraordinary threat to the national security, foreign policy, and the economy of the United States caused by the increasing prevalence and severity of malicious cyber-enabled activities originating from, or directed by, entities located, in whole or in substantial part, outside the United States, OFAC implemented the Cyber-Related Sanctions Program on April 1, 2015. As part of the Cyber-Related Sanctions Program, OFAC has issued Sanctions against persons and entities who are responsible for, are complicit in, or that have engaged in, certain malicious cyber-enabled activities, including by providing material and technological support to malicious cyber actors that target the U.S. U.S. persons are generally prohibited from engaging in transactions with sanctioned entities and all property and interests in property of sanctioned entities subject to U.S. jurisdiction are blocked. Sanctions targeting malicious cyber-related activities are also authorized under other statutory and executive branch Sanctions authorities, including the Countering America’s Adversaries Through Sanctions Act, as well as Executive Order 14023, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation.”
On July 8, 2014, President Obama issued Executive Order 13671, which amended Executive Order 13413 and blocked the property of certain persons contributing to the conflict in the Democratic Republic of Congo. Such property is prohibited from being transferred, paid, exported, withdrawn or otherwise dealt in. The prohibitions include the making of any contribution or provision of funds, goods or services by, to, or for the benefit of any person in the SDN list, or receiving the same from those in the list. The Sanctions do not target all persons and entities within the Republic of Congo, but only those involved in exacerbating the conflict.
On September 17, 2021, President Biden issued Executive Order 14046, “Imposing Sanctions on Certain Persons With Respect to the Humanitarian and Human Rights Crisis in Ethiopia” (“EO 14046”), giving OFAC the authority to issue regulations and designate parties that are involved in actions that threaten the peace, security or stability of Ethiopia, corruption or human rights abuses in northern Ethiopia, obstruction of delivery of humanitarian assistance, targeting of northern Ethiopian individuals, actions that threaten the democratic process or territorial integrity of Ethiopia, or activities that have obstructed the cease fire in northern Ethiopia. In response to EO 14046, OFAC sanctioned certain individuals and entities, as well as Eritrea’s only political party and the country’s military. Through OFAC guidance, OFAC confirmed that its 50% Rule does not apply to the Ethiopia Sanctions Program. Instead, the Ethiopian Sanctions Program applies only to the specific parties designated by OFAC.
On September 12, 2018, President Trump issued Executive Order 13848 “Imposing Certain Sanctions in the Event of Foreign Interference in a United States Election” (“EO 13848”), which declared the threat of foreign interferences in U.S. elections a national emergency and authorizes Sanctions on various non-U.S. actors to address the threat of future election meddling. EO 13848 introduces broad Sanctions with respect to targeted foreign persons determined to have interfered with a U.S. election directly or indirectly, introduces a specific analysis and reporting process to identify foreign interference with U.S. elections as well as the foreign persons responsible for it, and requests recommendations for the President, including remedial measures and whether additional Sanctions against targeted foreign persons may be appropriate. Sanctions under EO 13848 targets foreign persons anywhere globally through the imposition of secondary Sanctions, which are measures that are used to punish non-U.S. persons with no-U.S. nexus for violating Sanctions.
The Global Magnitsky Sanctions program represents the implementation of multiple legal authorities. Some of these authorities are in the form of an executive order issued by the President of the United States. Other authorities are public laws. These authorities are further codified by OFAC in its regulations. The Global Magnitsky Human Rights Accountability Act authorizes the President to impose economic Sanctions and deny entry into the United States any foreign person identified as engaging in human rights abuse or corruption. On December 20, 2017, President Trump issued Executive Order 13818 “Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption” (“EO 13818”) which broadens the standard of behavior for potentially sanctionable targets from those responsible for statutorily defined “gross violations of intentionally recognized human rights” against certain individuals, to those determined “to be responsible for or complicit in, or to have directly or indirectly engaged in, serious human rights abuse.” EO 13818 specifies additional categories of persons as potential sanction targets, including, for example, any person determined “to be or have been a leader or official of” an entity “that has engaged in, or whose members have engaged in” serious human rights abuse or corruption. OFAC has publically designated individuals under EO 13818.
As a result of the passage of the “Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Administrative Region” (the “Hong Kong National Security Law”) the United States took a number of actions, specifically Executive Order 13936 “The President’s Executive Order on Hong Kong Normalization” (“EO 13936”) issued by President Trump on July 14, 2020, and declared a national emergency. EO 13936 stated that Hong Kong was no longer sufficiently autonomous to justify special treatment under U.S. law and it directed OFAC to implement Sanctions on persons who undermine democracy in Hong Kong. In response, OFAC implemented regulations that formally blocked transactions prohibited by EO 13936, and established the process by which persons and entities are added to OFAC’s SDN list. This included all property and interests in property of 50% or greater belonging to these persons – which are in the U.S. or held by U.S. persons being blocked or reported to OFAC.
16. Iran Sanctions
The United States has imposed restrictions on interactions with Iran under various legal authorities since 1979, following the seizure of the U.S. Embassy in Tehran. The Department of State’s Office of Economic Sanctions Policy and Implementation is responsible for enforcing and implementing a number of U.S. Sanctions programs that restrict access to the U.S. for companies that engage in certain commercial activities in Iran.
On February 4, 2022, however, President Biden restored certain Sanctions waivers to allow international nuclear cooperation projects as indirect American-Iranian talks on reviving the 2015 international nuclear deal with Tehran enter the final stretch. The waivers allow certain foreign companies to carry out non-proliferation work to make it harder for Iranian nuclear sites to be used for weapons development. The waivers were rescinded by the United States in 2019 and 2020 under President Donald Trump, who pulled out of the nuclear agreement.
Often overlooked, and the subject of much illegal trade by currency brokers is the exemption from Sanctions for personal and family banking. In cases in which the transfer involves a noncommercial, personal remittance, the transfer of funds to or from Iran or for or on behalf of an individual ordinarily resident in Iran, other than an individual whose property and interests in property are blocked pursuant to § 560.211, is authorized, provided that the transfer is processed by a United States depository institution or a United States registered broker or dealer in securities and not by any other U.S. person. Due to significant misunderstandings in this area, many U.S. banks are reluctant to undertake such approved transactions for U.S. customers.
In response to Iraq’s invasion of Kuwait in 1990, the U.S. imposed comprehensive Sanctions, including a trade embargo against Iraq and a freeze on the assets of the then-Iraqi government. Over the years, a series of Executive Orders adjusted the Sanctions in response to events in Iraq. In 2010, OFAC published final rules removing the Iraqi Sanctions Regulations and adding the Iraq Stabilization and Insurgency Sanctions Regulations, in implementation of Executive Order 13303, Executive Order 13315, Executive Order 13350, Executive Order 13364, and Executive Order 13738. There currently are no broad-based Sanctions in place against Iraq, but there are certain prohibitions and asset freezes against specific individuals and entities associated with the former Saddam Hussein regime, as well as parties determined to have committed, or posed a significant risk of committing, and act of violence that has the purpose or effect or threatening the peace of stability in Iraq or the Government of Iraq or undermining efforts to promote economic reconstruction and political reform in Iraq or to provide humanitarian assistance to the Iraqi people. Unless a transaction involves a party designated on the SDN list, no OFAC authorization is needed for exports to Iraq and financial transactions with Iraq are permitted, including the opening of correspondent accounts for Iraqi financial institutions. There may, however, be certain restrictions and licensing requirements administered by U.S. agencies, such as the Department of Commerce.
On August 1, 2007, President Bush issued Executive Order 13441 “Blocking Property of Persons Undermining the Sovereignty of, Lebanon or Its Democratic Process and Institutions” (“EO 13441”), pursuant to, inter alia, the International Emergency Economic Powers Act, and the National Emergencies Act. Under EO 13441, President Bush determined that actions of certain persons to undermine Lebanon’s legitimate and democratically elected government or democratic institutions, to contribute to the deliberate breakdown in the rule of law in Lebanon, including through politically motivated violations and intimidation, to reassert Syrian control or contribute to Syrian interference in Lebanon, or to infringe upon or undermine Lebanese sovereignty contribute to political and economic instability in that country and the region and constitute an unusual and extraordinary threat to U.S. national security and foreign policy. On July 30, 2010, OFAC issued Lebanon Sanctions Regulations, implementing EO 13441. EO 13441 served to block property and interests in property of persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, to have participated in such activities.
Unless otherwise authorized or exempt, transaction by U.S. persons or in or involving the United States are prohibited if they involve transferring, paying, exporting, withdrawing, or otherwise dealing in the property or interests in property of an entity or individual listed on the SDN list. The property and interest in property of an entity that is 50% or more owned, whether individually or in the aggregate, directly or indirectly, by a person on the SDN list are also blocked, regardless of whether the entity itself is listed.
19. Libya Sanctions
On February 25, 2011, President Obama issued Executive Order 13566 “Blocking Property and Prohibiting Certain Transactions Related to Libya” (“EO 13566”). Pursuant to EO 13556, all transactions involving the Government of Libya, its agencies, instrumentalities, and controlled entities, and the Central Bank of Libya are authorized subject to the following limitations: (i) all funds, including cash, securities, bank accounts and investment accounts, and precious metals blocked pursuant to EO 13566 or OFAC issued Libyan Sanctions Regulations remain blocked, except as provided in General Licenses; and (ii) the transactions do not involve any person designated by OFAC or EO 13566. In 2016, President Obama expanded the scope of the national emergency declared in EO 13566 by issuing Executive Order 13726 “Blocking Property and Suspending Entry Into the United States of Persons Contributing to the Situation in Libya” (“EO 13726”). In addition, the U.S. issued an arms embargo which denies licenses or other approvals for exports of defense articles and defense services destined for or originating in Libya, except that a license or other approval may be issued, on a case-by-case basis, in certain circumstances.
OFAC issues general licenses in order to authorize activities that would otherwise be prohibited with regard to the Libya Sanctions. General licenses allow all U.S. persons to engage in the activity described in the general license without needing to apply for a specific license. Libya General License permit, among other things, transactions with Libya or its persons (i) with respect to transactions related to certain oil, gas, or petroleum products exported from Libya, and (ii) for humanitarian efforts.
On July 26, 2019, President Trump issued Executive Order 13882 “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Mali” (“EO 13882”). EO 13882 authorizes the U.S. Department of the Treasury, in consultation with the Department of State, to sanction individuals who are responsible for or complicit in actions that exacerbate the deteriorating situation in Mali. EO 13882 was issued in response to the ongoing violations of the agreed-to-ceasefire in 2015, the expansion of terrorist activities in the southern and central region of Mali, the intensification of drug trafficking and human trafficking, and the intensification of attacks against civilians, the Malian defense and security forces and United Nations peacekeepers. Any property or interests in property of individuals or entities designated pursuant to EO 13882 that come within the U.S. jurisdiction or possession of a U.S. person must be blocked and reported to OFAC. Unless otherwise permitted, U.S. persons are prohibited from transacting with any individual or entity designated pursuant to EO 13882. The property and interest in property of an entity that is 50% or more owned, whether individually or in the aggregate, directly or indirectly, by a person on the SDN list pursuant to EO 13882 are also blocked, regardless of whether the entity itself is listed.
On November 27, 2018, President Trump issued Executive Order 13851 “Blocking Property of Certain Persons Contributing to the Situation in Nicaragua” (“EO 13851”). EO 13851 targets the government of Nicaragua and certain individuals and entities engaged in human rights abuses, threatening the peace, security, or stability of Nicaragua or deceptive practices or corruption. At the same time, OFAC imposed Sanctions under EO 13851 against the Vice President and First Lady of Nicaragua, as well as the National Security Advisor to the Nicaraguan President and Vice President. U.S. Persons may not engage in transactions with individuals, entities, or governments designated under EO 13851 and are required to block any property or interests of such designated individuals, entities or governments within their possession. These Nicaragua-related Sanctions do not impose a comprehensive embargo on Nicaragua, but they do target certain current and former Nicaraguan government officials, in particular, and the entities they own or control.
There are several measures that the U.S. has taken to combat the proliferation of weapons of mass destruction. Through Executive Order 12938 “Proliferation of Weapons of Mass Destruction” (“EO 12938”), President Clinton in 1994, declared a national emergency with respect to the proliferation of nuclear, biological and chemical weapons, and the means of delivering them. EO 12938 prohibits the importation of goods, technology, or services produced or provided by foreign persons that the Secretary of State has determined ban because of their weapons of mass destruction proliferation activities. In 2011, President Obama extended the order that established the spread of chemical, nuclear and biological weapons as a national emergency through Executive Order 13382 “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters” (“EO 13382”). EO 13382, blocks the property of persons engaged in proliferation activities and their support networks. Weapons of Mass Destruction Trade Control Regulations implement a ban on imports into the United States, pursuant to EO 12938. In 2019, President Trump issued Executive Order 13883 “Administration of Proliferation Sanctions and Amendment of Executive Order 12851,” which delegates implementation of certain Sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 to the Secretary of the Treasury.
The U.S. has imposed unilateral Sanctions on North Korea that restrict economic activities and target a list of individuals and entities. OFAC’s current North Korea Sanctions program began in 2008 when President Bush issued Executive Order 13466 “Continuing Certain Restrictions With Respect to North Korea and North Korea Nationals.” In EO 13466, President Bush declared a national emergency to deal with the threat to the national security and foreign policy of the United States constituted by the existence and risk of the proliferation of weapons-usable fissile material on the Korean Peninsula, and continued certain restrictions with respect to North Korea that previously has been imposed under the authority of the Trading With the Enemy Act (“TWEA”). At the same time, President Bush signed Proclamation 8271, terminating the application of TWEA authorities with respect to North Korea. Since 2008, U.S. Presidents have signed executive orders expanding the 2008 national emergency and taking additional steps with respect to that emergency, including blocking the property of certain persons (individuals and entities) and prohibiting certain types of transactions.
As a result of the illicit trade in diamonds in West Africa and in line with UN Sanctions Resolution 1306, President Bush in 2001 declared a national emergency in Executive Order 13194 “Prohibiting the Importation of Rough Diamonds from Sierra Leone” (“EO 13194”) which prohibited the importation of rough diamond to the United States from Sierra Leone, unless otherwise permitted with a certificate. It was further expanded by Executive Order 13213 “Additional Measures with Respect to Prohibiting the Importation of Rough Diamonds From Sierra Leone” (“EO 13213”) to include certain rough diamonds from Liberia as well. Later in 2003, and following the passage of the Clean Diamond Trade Act, the U.S. President issued Executive Order 13312 “Implementing the Clean Diamond Trade Act,” which prohibited, subject to certain waiver authorities, the importation into, and exportation from, the United States of any rough diamonds, from whatever source, not controlled through the Kimberely Process Certification Scheme for rough diamonds.
In April 2010, President Obama issued Executive Order 13536 “Blocking Property of Certain Persons Contributing to the Conflict in Somalia” (“EO 13536”) to address the deterioration of the security situation and the persistence of violence in Somalia. EO 13536 blocks the property and interests in property of specific individuals and entities determined by OFAC to have engaged in acts that threaten the peace, security and stability of Somalia, to have obstructed the delivery of humanitarian assistance to or within Somalia, to have supplied arms or related material in violation of the United Nations arms embargo on Somalia, or to have provided support for any of such activities. In 2012, President Obama issued Executive Order 13620 (“EO 13620”) taking additional steps to deal with the national emergency declared in EO 13536, and to address exports of charcoal from Somalia, which generate significant revenue for the terrorist organization al-Shabaab; the misappropriation of Somali public assets; and certain acts of violence committed against civilians in Somalia, all of which contribute to the deterioration of the security situation and the persistence of violence in Somalia. EO 13620 amends certain criteria in EO 13536 under which people may be targeted for Sanctions and prohibits the importation of charcoal from Somalia.
In 2020, the determination regarding Sudan as a State Sponsor of Terrorism was rescinded. Accordingly, the prohibitions of the Terrorism List Governments Sanctions Regulations and section 906(a)(1) of the Trade Sanctions Reform and export Enhancement Act no longer apply to Sudan. As of October 12, 2017, certain Sanctions with respect to Sudan and the Government of Sudan – namely sections 1 and 2 of Executive order 13067 and all of Executive Order 13412 – were revoked, pursuant to Executive Order 13761, as amended by Executive Order 13804. OFAC’s guidance confirmed the removal of comprehensive Sanctions on Sudan, permitting transactions by U.S. persons. However, targeted Sanctions in Sudan continue. The revocation of certain Sanctions does not affect OFAC Sanctions related to the conflict in Darfur, which were imposed pursuant to Executive order 13400 and pursuant to the national security declared in Executive order 13067, which remains in effect; and does not affect OFAC’s imposition of Sanctions on any Sudanese persons pursuant to Sanctions authorities other than Executive Orders 13067 and 13412.
The South Sudan Sanctions program implemented by OFAC began on April 3, 2014, when President Obama issued Executive Order 13664 “Blocking Property of Certain persons with Respect to South Sudan” (“EO 13664”). EO 13664 addresses the situation in and in relation to South Sudan, which has been marked by activities that threaten the peace, security, or stability of South Sudan and the surrounding region. Current South Sudan Sanctions block the property and interests in property of persons that are determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be responsible for or complicit in, or to have engaged in, directly or indirectly, any of the following in or in relation to South Sudan: (i) actions or policies that threaten the peace, security, or stability of South Sudan; (ii) actions or policies that threaten transitional agreements or undermine democratic processes or institutions in South Sudan; (iii) actions or policies that have the purpose or effect of expanding or extending the conflict in South Sudan or obstructing reconciliation or peace talks or processes; (iv) the commission of human rights abuses against persons in South Sudan; (v) the targeting of women, children, or any civilians through the commission of acts of violence (including killing, maiming, torture, or rape or other sexual violence), abduction, forced displacement, or attacks on schools, hospitals, religious sites, or locations where civilians are seeking refuge, or through conduct that would constitute a serious abuse or violation of human rights or a violation of international humanitarian law; (vi) the use or recruitment of children by armed groups or armed forces in the context of the conflict in South Sudan; (vii) the obstruction of the activities of international peacekeeping, diplomatic, or humanitarian missions in South Sudan, or of the delivery or distribution of, or access to, humanitarian assistance; or (viii) attacks against United Nations missions, international security presences, or other peacekeeping operations. EO 13664 also blocks the property and interests in property of persons that are determined: (i) to be a leader of an entity, including any government, rebel militia, or other group, that has, or whose members have, engaged in any of the activities described above or of an entity whose property and interests in property are blocked pursuant to EO 13664; (ii) to have materially assisted, sponsored, or provided financial, material, logistical, or technological support for, or goods or services in support of any of the activities described above or of any person whose property and interests in property are blocked pursuant to EO 13664; or (iii) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to EO 13664. An entity in South Sudan that is commanded or controlled by an individual designated under EO 13664 is not considered blocked by operation of law. Payments made to non-designated individuals or entities under the command or control of an individual designated under EO 13664 do not, in and of themselves, constitute prohibited activity. OFAC suggests that U.S. persons should employ due diligence, however, to ensure that an SDN is not, for example, profiting from such transactions.
28. Syria Sanctions
Syria has been designated a State Sponsor of Terrorism since December 1979. Additional Sanctions and restrictions were added in May 2004 by President Bush with the issuance of Executive order 13338 “Blocking Property of Certain Persons and Prohibiting the Export of Certain Goods to Syria” (“EO 13338”), which declared a national emergency to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States posed by the actions of the government of Syria in supporting terrorism, continuing its occupation of Lebanon, pursuing weapons of mass destruction and missile programs and undermining United States and international efforts with respect to the stabilization and reconstruction of Iraq. EO 13338 implemented the Syrian Accountability and Lebanese Sovereignty Restoration Act of 2003 and imposed additional measures pursuant to the International Emergency Economic Powers Act. Additional executive orders (e.g., Executive Orders 13399, 13460, 13572, 13582, 13606, and 13608) have since been imposed with respect to the national emergency declared in EO 13338. Since the civil war began in March 2011, the U.S. government has intensely pursued calibrated Sanctions to deprive the Syrian regime of the resources it needs to continue violence against civilians and to pressure the Syrian regime to allow for a democratic transition. The first step was taken in April 2011 with Executive Order 13572 “Blocking of Property of Certain Persons with Respect to Human Rights Abuses in Syria,” which blocks property of Syrian officials and others responsible for the commission of human rights abuses, including those related to repression. Current Syria Sanctions: (i) block the property and interests in property of the government of Syria pursuant to Executive Order 13582); (ii) block the property and interests in property of persons listed in an Annex to, or that are determined by the Secretary of the Treasury in consultation with the Secretary of State, to meet the criteria described in Executive Orders 13338, 13399, 13460, 13573, 13582, or 13606; (iii) prohibit transactions or dealings with foreign persons that are determined by the Secretary of the Treasury, in consultation with the Secretary of State, to meet the criteria described in Executive Order 13608; and (iv) prohibit certain transactions with respect to Syria pursuant to Executive Order 13582. Under Executive Order 13582, all property and interests in property of the government of Syria, which includes its agencies, instrumentalities, and controlled entities, which are in the United States or within the possession or control of U.S. persons, are blocked. Executive Order 13582 also prohibits: (i) new investment in Syria by a U.S. person, wherever located; (ii) the direct or indirect exportation, re-exportation, sale, or supply of any services to Syria from the United States or by a U.S. person, wherever located; (iii) the importation into the United States of petroleum or petroleum products of Syrian origin; (iv) any transaction or dealing by a U.S. person, wherever located, in or related to petroleum or petroleum products of Syrian origin; and (v) any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a U.S. person or within the United States.
In May 2011, in response to the Syrian regime’s exercise of violence and repression in the region, President Obama issued Executive Order 13894 “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria” (“EO 13894”), which blocks the property of the Government of Syria, provides additional authority for designating individuals and entities, prohibits new investments in Syria by U.S. persons, prohibits the exportation or sale of services to Syria by U.S. persons, prohibits the importation of petroleum or petroleum products of Syrian origin, and prohibits U.S. persons from involvement in transactions involving Syrian petroleum or petroleum products.
The Transnational Criminal Organizations Sanctions program implemented by OFAC began in 2011, when President Obama issued Executive Order 13581 “Blocking Property of Transnational Criminal Organizations” (“EO 13581”), declaring a national emergency to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by the growing threat of significant transnational criminal organizations. In January 2012, OFAC issued an abbreviated set of regulations to implement EO 13581, which block the property and interests in property of persons listed in the Annex to EO 13581, or that are determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State: (i) to be a foreign person that constitutes a significant transnational criminal organization; (ii) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to EO 13581; or (iii) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to EO 13581. EO 13581 was amended by Executive order 13863 “Taking Additional Steps to Address the National Emergency With Respect to Significant Transnational Criminal Organizations,” specifically expanding the scope of the meaning of “significant transnational criminal organization.”
In response to the increasing repression in Venezuela, Congress enacted the Venezuela Defense of Human Rights and Civil Society Act of 2014. Among its provisions, the law required the President to impose Sanctions against those whom the President identified as responsible for significant acts of violence, serious human rights abuses, or anti-democratic actions. In March 2015, President Obama issued Executive Order 13692 “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela,” which targets, with asset blocking and visa restrictions, those involved in actions or policies undermining the democratic process or institutions; serious human rights abuses, prohibiting, limiting, or penalizing freedom of expression or peaceful assembly; and public corruption. It includes any person who is a current or former leader of any entity engaged in any of such activities, as well as current or former government officials. In August 2017, President Trump issued Executive Order 13808 “Imposing Additional Sanctions with Respect to the Situation in Venezuela,” which prohibited access to U.S. financial markets by the Venezuelan government, including PdVSA, with certain exceptions to minimize the impact on the Venezuelan people and U.S. interests. In March 2018, President Trump issued Executive Order 13827 “Taking Additional Steps to Address the Situation in Venezuela” to prohibit transactions involving the Venezuelan government’s issuance of digital currency, coin, or token. Then in May 2018, President Trump issued Executive Order 13835 “Prohibiting Certain Additional Transactions with Respect to Venezuela,” which prohibited transactions related to purchasing Venezuelan debt, including accounts receivable, and any debt owed to Venezuela pledged as collateral. On November 1, 2018, President Trump issued Executive Order 13850 “Blocking Property of Additional persons Contributing to the Situation in Venezuela” (“EO 13850”), which sets forth a framework to block the assets of, and prohibit certain transactions with, any person determined by the Secretary of the Treasury to operate in sectors of the economy or to engage in corrupt transactions with the Maduro government. On January 28, 2019, pursuant to EO 13850, OFAC designated PdVSA as operating in the oil sector of the Venezuelan economy and OFAC determined the company was subject to U.S. Sanctions. As a result, all property and interests in property of PdVSA subject to U.S. jurisdiction were blocked, and U.S. persons are generally prohibited from engaging in transactions with the company. OFAC issued general licenses to allow certain transactions and activities related to PdVSA and its U.S. subsidiaries. In August 2019, President Trump issued Executive Order 13884 “Blocking Property of the Government of Venezuela” (“EO 13884”), blocking the property and interests of the Maduro government in the United States and within the control of U.S. persons. EO 13884 prohibits U.S. persons from engaging in transactions with the Maduro government unless authorized by OFAC, as well as authorized financial Sanctions and visa restrictions on non-U.S. persons that assist or support the Maduro government, including foreign energy companies working with PdVSA. To allow assistance to the Venezuelan people, OFAC issued licenses authorizing transactions involving the delivery of food, agricultural commodities, and medicine; remittances; international organizations; and communications services.
On May 16, 2012, President Obama issued Executive Order 13611 “Blocking Property of Persons Threatening the Peace, Security, or Stability of Yemen” (“EO 13611”), which targeted all property and interests of those individuals and entities that engage in activities that threaten the peace, security and stability of the state. The aim of EO 13611 is to block any transactions with and donations to certain members of the Government of Yemen, political leaders and others who obstruct the implementation of the November 23, 2011 agreement between the Yemeni government and those in opposition to it.
On March 7, 2003, President Bush issued Executive Order 13288 “Blocking Property of Persons Undermining Democratic Processes or Institutions in Zimbabwe” (“EO 13288”), which imposed Sanctions against specifically identified individuals and entities in Zimbabwe as a result of actions and policies of certain members of the Government of Zimbabwe and others persons undermining democratic institutions or processes in Zimbabwe. Following EO 13288, in response to the continued undermining of democratic institutions, the President issued two subsequent executive orders, Executive Order 13391 and Executive Order 13469, which expanded the list of Sanctions targets to include immediate family members of any persons whose property and interests in property are blocked as well as those persons providing assistance to any such individual.
As we have in the past, we will continue to monitor these issues and will provide future client updates. This information is for guidance only and is not intended to be a substitute for specific legal advice.
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