The Foreign Sanctions Evaders Sanctions a/k/a “The President and OFAC Are Not Messing Around” Sanctions
May 3, 2012 Leave a comment
I didn’t see this coming at all, but yesterday President Obama signed an executive order which will prohibit certain activities with, and entry into the United States of any individuals found to have engaged in violations of U.S. economic sanctions targeting either Iran or Syria. These sanctions will have a huge impact in further blocking parties engaged in sanctionable activity, by sanctioning those who are merely engaged in violating sanctions. Whereas before, someone would have to be engaged in any number of nefarious activities to find themselves on the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List; now just the simple act of transacting with parties on the OFAC SDN List will be enough to be placed on the list.
In essence, this new executive order targets foreign individuals and entities who violate or attempt to violate U.S. economic sanctions targeting Iran or Syria or who have facilitated deceptive practices on behalf of those parties already targeted for sanctioning by U.S. economic sanctions against Iran or Syria. In sum, this means that those foreign parties who have violated U.S. sanctions against Syria or Iran can be placed on the OFAC SDN List, even if those parties are not traditionally subject to U.S. jurisdiction. This is akin to what the U.S. government has already engaged in when they prohibited the maintenance of correspondent or payable through accounts by U.S. depository institutions for foreign financial institutions engaged in significant transactions with designated Iranian banks. The difference now is that it doesn’t just cover financial institutions but any dealings with those parties designated under these new sanctions.
This new executive order, if implemented aggressively, could be devastating. For example, if Treasury uses this new authority to designate and cut off transactions with those parties facilitating funds transfers on relating to dealings with Iran or Syria it could lead to large scale designations of foreign financial institutions, money exchange services, and those trading with Iran and Syria on a barter basis. Again, depending on how aggressively these new sanctions are utilized, such measures could have a chilling effect on the willingness of foreign parties to transact with Iran and that could go a long way in cutting off both unlawful and lawful dealings with Iran and Syria.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.