What are U.S. Economic Sanctions?
U.S. economic sanctions are laws and regulations imposed by the U.S. government, related to specified foreign policy, national security, or other policy grounds, that restrict U.S. persons' ability to engage in activities involving designated countries or regions or specified parties.
Restricted activities may include, but are not limited to, imports, exports, financial transactions, donations, and technology transfers. The scope of the restrictions varies depending upon the sanctions program under which a restriction is enacted, or a party is designated as subject to sanction. Evasion or "facilitation" of sanctions evasion (e.g., a U.S. person assisting or approving a transaction with a sanctioned party or redirecting a transaction from a U.S. person to a nonU.S. person to avoid sanctions) may also be prohibited.
To the extent sanctions provide for "blocking" of a sanctioned party's assets (which can include almost anything of value, tangible or intangible), any such assets that come within the jurisdiction of the U.S. (such as items within the U.S. banking system or within the customs territory of the U.S.) or come into possession or control of a U.S. person, must be "blocked" or "frozen."
Who Regulates and Enforces U.S. Economic Sanctions?
U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) – Regulatory agency responsible for publication and interpretation of sanctions regulations, issuance of licenses authorizing activities with parties subject to sanctions, and civil and administrative enforcement of penalties for violations of sanctions regulations.
U.S. Department of Justice (DOJ) – Authorized to prosecute criminal cases involving knowing or willful violations of sanctions laws.
U.S. Department of Commerce, Bureau of Industry and Security (BIS) – May have parallel jurisdiction over U.S.-origin exports to countries subject to comprehensive sanctions (as described below).
U.S. Securities and Exchange Commission (SEC) – Requires certain disclosures regarding business with sanctioned regions, countries, or targeted parties.
U.S. Department of State (DOS) – Sets policy and may be involved in regulatory designations of parties under certain sanctions programs (e.g., Cuba sanctions, Countering American Adversaries Sanctions Act (CAATSA)).
Who Must Comply with U.S. Economic Sanctions and Embargoes?
U.S. sanctions apply to any U.S. citizen (including dual nationals), permanent resident ("green card" holder), any entity formed under U.S. law, any person located in the U.S. or any person engaged in an activity within the U.S. This includes any employee, officer, or director of any organization who is a U.S. citizen or permanent resident, regardless of their physical location.
In some cases (e.g., Cuba and Iran sanctions), non-U.S. subsidiaries or entities majority-owned or controlled by U.S. persons are also subject to U.S. sanctions and embargoes. U.S. sanctions may also apply to non-U.S. persons where there is a sufficient U.S. nexus – for example, where transactions involve U.S.-origin goods or services, or financial transactions that are denominated in U.S. dollars. Under some sanctions programs, non-U.S. persons may also be subject to "secondary sanctions" (as described below) for engaging in certain activities with sanctioned parties.
What Are Comprehensive Sanctions?
The U.S. maintains some sanctions programs that broadly restrict U.S. persons from engaging in any business activities involving regions or countries. At the time of publication of this guide, the Crimea region, Cuba, Iran, North Korea and Syria are all subject to so-called "comprehensive sanctions" regulations, promulgated by OFAC. These sanctions programs may still vary with respect to the scope of application and availability of general licenses or specific licenses (see below), but are common in that the application of sanctions are based on a specific geographic region or country.
As noted above, comprehensive sanctions may extend restrictions to non-U.S. entities that are owned or controlled by U.S. persons and may restrict any "facilitation" by U.S. persons (which can include any approval, financing, or support) of transactions by non-U.S. persons with sanctioned parties.
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