6/10/2018

Economic Sanctions and

Trade Embargoes

Copyright© 2010 WeComply, Inc. All rights reserved.

 6/10/2018

Economic Sanctions and

Trade Embargoes

Copyright© 2010 WeComply, Inc. All rights reserved.

Overview
The U.S. Government has used economic sanctions and
trade embargoes to further foreign-policy, national-security
and safety objectives
•Sanctions may be unilateral or multilateral

Sanctions programs are created by Executive Orders and

federal legislation
• Office of Foreign Assets Control (OFAC) develops regulations to implement
sanctions programs

We intend to comply fully with all U.S. sanctions programs, and we expect you to
assist in this effort

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Overview (cont’d)
The U.S. Government has used economic sanctions and
trade embargoes to further foreign-policy, national-security
and safety objectives
•Sanctions may be unilateral or multilateral

Sanctions programs are created by Executive Orders and

federal legislation
• Office of Foreign Assets Control (OFAC) develops regulations to implement
sanctions programs

We intend to comply fully with all U.S. sanctions programs, and we expect you to
assist in this effort

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Who Must Comply
All "persons subject to the jurisdiction of the United States" must
comply with OFAC regulations
•U.S. citizens and permanent residents, wherever they are located
•People, companies and other entities located in the U.S.
•All U.S. companies (including their foreign branches)

People/companies subject to OFAC regulations may not facilitate or assist foreign

companies with transactions in which they themselves could not participate

U.S. person employed by foreign company may not engage in transactions on

behalf of employer that would be prohibited if employer were U.S. company

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Pop Quiz!
Loren, who is a U.S. citizen, is on an assignment in Morocco, where she is
temporarily employed by a Moroccan company. Must Loren comply with OFAC
regulations while on this assignment?
A.Yes, both Loren and her employer must comply.
B.Yes, but only Loren must comply.
C.No, because she is not on U.S. soil.
D.No, because her employer is Moroccan.

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Key Terms
Foreign policy objectives of each sanctions program are different

No two programs require exactly the same actions to comply

Definitions common to all OFAC programs:

•Property: Anything of value, including tangible and intangible
property and present or future interests
• Property Interest: Any interest whatsoever, direct or indirect
• Blocking and Freezing: Way of controlling another person’s/entity’s assets

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Key Terms (cont’d)
Foreign-policy objectives of each sanctions program are different

No two programs require exactly the same actions to comply

Definitions common to all OFAC programs:

•Property: Anything of value, including tangible and intangible
property and present or future interests
• Property Interest: Any interest whatsoever, direct or indirect
• Blocking and Freezing: Way of controlling another person’s/entity’s assets

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Key Terms (cont’d)
Definitions common to all OFAC programs:
•Reject: Where blocking of property is not required,
sanctions may require company to reject a transaction – e.g.,
financial institutions must reject funds transfers that would
violate OFAC sanction
•General License: Authorizes certain listed transactions
without special application to OFAC

• Specific License: Allows specific person or company to perform transaction that

would otherwise be prohibited

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Targets
OFAC administers sanctions programs against various
targets:
•Certain foreign countries
•Political organizations
•Particular foreign individuals and entities
• Certain foreign governments in cases of financial transactions
• Certain countries relating to trade in munitions and weapons proliferation and
trade in certain commodities

You should be on alert whenever you are involved in dealings with non-U.S.
parties

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Targets (cont’d)
OFAC administers sanctions programs against various
targets:
•Certain foreign countries
•Political organizations
•Particular foreign individuals and entities
• Certain foreign governments in cases of financial transactions
• Certain countries relating to trade in munitions and weapons proliferation and
trade in certain commodities

You should be on alert whenever you are involved in dealings with non-U.S.
parties

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Specially Designated Nationals
OFAC sanctions also cover certain representatives of
target countries:
•Front organizations – Specially Designated Nationals
(SDNs) – individuals, companies, vessels and banks located
all over the world
• Terrorists, drug dealers, indicted war criminals and certain political figures
dealing in weapons of mass destruction
• Specially Designated Narcotics Traffickers (SDNTs), Specially Designated
Narcotics Traffickers/Kingpins (SDNTKs), Specially Designated Terrorists (SDTs),
Specially Designated Global Terrorists (SDGTs) and Foreign Terrorist
Organizations (FTOs)

OFAC publishes a list of SDNs and Other Blocked Persons

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Specially Designated Nationals (cont’d)
OFAC sanctions also certain representatives of target
countries:
•Front organizations – Specially Designated Nationals
(SDNs) – individuals, companies, vessels and banks located
all over the world
• Terrorists, drug dealers, indicted war criminals and certain political figures
dealing in weapons of mass destruction
• Specially Designated Narcotics Traffickers (SDNTs), Specially Designated
Narcotics Traffickers/Kingpins (SDNTKs), Specially Designated Terrorists (SDTs),
Specially Designated Global Terrorists (SDGTs) and Foreign Terrorist
Organizations (FTOs)

OFAC publishes a list of SDNs and Other Blocked Persons

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Reporting and Recordkeeping
We must submit a report to OFAC within 10 days if –
•We take a blocking action
•We become involved in litigation or arbitration regarding
blocked property

Holders of blocked property must file annual report

regarding property held as of September 30 of each year

Nongovernmental organizations involved in humanitarian or religious activities in

areas subject to economic sanctions must register with OFAC

Records of every transaction subject to OFAC should be kept for at least five years
from the date of the transaction

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In the news…

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Penalties for Noncompliance
Civil penalties can be steep:
•Even less serious cases may garner penalty of up to
$250,000 per violation if not voluntarily disclosed
•Voluntary disclosure generally halves the penalty amounts

Criminal penalties are even more severe:

•Intentional violations may lead to millions of dollars in fines against an
organization
•Individuals may be fined thousands of dollars and imprisoned

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Practically Speaking
We must avoid any transaction that would facilitate:
•Imports or exports of goods/services to or from
countries subject to sanctions
•Commercial activity in certain countries subject to
sanctions
•Imports of uncertified diamonds

• Imports of goods, technology or services produced or provided by WMD Entities

We must ensure that all international initiatives are tailored to comply with OFAC
regulations

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Pop Quiz!
While researching an investment opportunity that involves international assets,
Dora noticed that one of the assets was located in a country that was not subject
to OFAC sanctions, but the owner had ties to a country that was. Should this raise
concerns?
A.No.
B.Maybe.
C.Definitely.

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Practically Speaking (cont’d)
We may not engage in transactions (unless they are licensed
by OFAC) that involve–
•Individuals, entities or vessels on OFAC's Specially
Designated Nationals and Blocked Persons List
•Governmental entities and officials of countries subject to
U.S. sanctions
• Property of Government of Russian Federation related to disposition of highly
enriched uranium from nuclear weapons
• Companies located in, organized in or controlled from Cuba, individuals residing
in Cuba, and Cuban citizens (except those legally residing in the U.S.)

Any property in which a party on this list has a direct or indirect interest is
considered blocked or frozen

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 6/10/2018

Final Quiz

Copyright© 2010 WeComply, Inc. All rights reserved.

 6/10/2018

Questions?

Copyright© 2010 WeComply, Inc. All rights reserved.

 6/10/2018

Thank you for participating!

This course and the related materials were developed by
WeComply, Inc. and the Association of Corporate Counsel.

Copyright© 2010 WeComply, Inc. All rights reserved.