OFAC Sanctions Programs

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury  implements and enforces the economic and trade sanctions. These sanctions are created for the different purposes:

• Diplomatic;
• Criminal Enforcement;
• Economic;
• Humanitarian; 
• National Security.

Initially, economic sanctions were adopted pursuant to the 1917 Trading with the Enemy Act (TWEA). This act provided the President with the authority to regulate trade with countries hostile to the United States during times of war. However, the landscape of economic sanctions evolved significantly with the enactment of the International Emergency Economic Powers Act (IEEPA) in 1977.

The IEEPA grants the President broad authority to impose economic sanctions in response to any unusual and extraordinary threat that originates, in whole or substantial part, outside the United States. This statutory authority is invoked when the President declares a national emergency with respect to such a threat. The IEEPA states:

“To deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”

Types of Economic Sanctions

Country-Based Sanctions

Country-based sanctions are comprehensive measures that target entire nations, regulating nearly all transactions with specific countries. Currently, major country-based sanctions programs are in effect for:

• Iran
• Central African Republic
• Syria
• Turkey
• Cuba
• North Korea

Previously, Burma (Myanmar) was also subject to such sanctions. However, due to significant democratic reforms, the U.S. government largely lifted these sanctions in 2011.

These sanctions operate by prohibiting defined transactions and sometimes travel within the country’s territory, with persons who ordinarily reside there, and with the targeted governmental regime. Each sanctions program has its own regulatory framework, but they generally restrict:

• Trade in goods
• Trade in services
• Trade in technology
• Financial transactions

In some instances, these sanctions also include prohibitions on the vesting of property, which can create complications, for example, when a U.S. person inherits property from a family member residing in one of the sanctioned nations.

The sanctions program against Cuba is the oldest and one of the most extensive. It prohibits transactions with Cuban individuals and non-governmental organizations even in third countries. U.S. persons are typically required to block the property of every Cuban national in their possession, making the Cuba sanctions program unique among country-based sanctions.

Despite their broad scope, country-based sanctions often include general licenses that permit certain activities. These may encompass the provision of legal services, the exchange of information and informational materials, personal communications, humanitarian aid, and journalistic projects. While many sanctions programs share similar exemptions, the specifics of these general licenses can vary widely.

Smart Sanctions

Smart sanctions, also known as targeted sanctions, are measures designed to specifically target individuals, entities, and organizations that pose a threat to national security, foreign policy, or economic stability, without imposing broad, indiscriminate harm on the general population of a country. These sanctions emerged as a response to the humanitarian and economic devastation caused by comprehensive sanctions, such as those imposed on Iraq in the 1990s. 

OFAC restricts transactions between U.S. persons and those listed on the Specially Designated Nationals and Blocked Persons List (SDN list). This list, updated as necessary, includes individuals and entities involved in:

• Terrorism
• Narcotics trafficking
• Weapons proliferation, especially weapons of mass destruction (WMDs)
• Human rights abuses
• Genocide
• Transnational organized crime

Due to their adaptability and precision, smart sanctions have become the standard approach in OFAC’s sanctions programs. They are now the norm for law enforcement-related economic sanctions and are used to enforce UN Security Council resolutions. These characteristics likely influenced President Barack Obama’s decision to employ list-based sanctions in the Ukraine-Related Sanctions Program.

Secondary Sanctions

Secondary sanctions are a relatively recent tool that has gained prominence in the last few years, particularly in relation to Iran. These sanctions are designed to supplement existing sanctions programs by targeting non-U.S. persons, primarily foreign financial institutions and foreign sanctions evaders, who engage in business with sanctioned individuals, countries, regimes, and organizations.

Secondary sanctions have been prominently used in U.S. sanctions programs against countries like Iran, North Korea, and Russia. For instance, the U.S. has imposed secondary sanctions on foreign financial institutions that facilitate transactions for entities involved in Iran’s nuclear program or Russia’s military-industrial complex. These measures are intended to exert maximum pressure on sanctioned regimes by discouraging foreign entities from engaging in prohibited activities, thereby amplifying the impact of primary sanctions

Sectoral Sanctions

Sectoral sanctions are targeted measures that focus on specific industries within a sanctioned country to limit their ability to operate effectively without imposing broad, comprehensive sanctions that affect the entire economy.

For example, the Ukraine-related sanctions program was the first to implement sectoral sanctions, specifically targeting Russia’s financial and energy sectors. The Office of Foreign Assets Control (OFAC) maintains a Sectoral Sanctions Identifications (SSI) List, which includes entities operating in these targeted sectors. The SSI List is distinct from the Specially Designated Nationals (SDN) List, although some entities may appear on both.

Contact OFAC Lawyer

Due to different and selective sanctions programs, U.S. individuals and businesses may inadvertently find themselves in violation of OFAC regulations. Compliance with these sanctions is crucial to avoid significant legal and financial repercussions. Whether you are dealing with country-based sanctions, list-based sanctions, secondary sanctions, or sectoral sanctions, consulting with an experienced OFAC lawyer can provide invaluable guidance and support.

Engaging with an OFAC lawyer is a proactive step to ensure that your business activities remain compliant with complex sanctions regulations. With Sanctions Lawyers you can navigate the complexities of OFAC sanctions with confidence and reduce the risk of costly violations. Whether you are dealing with potential compliance issues or planning future ventures, an OFAC lawyer can provide the guidance and support you need.

Don’t wait until it’s too late. Contact an OFAC lawyer today to safeguard your business and ensure compliance with all relevant sanctions programs.