Secondary Sanctions Lawyers

Quick Answer: Secondary sanctions are U.S. restrictions that target non-U.S. persons and companies for conducting business with sanctioned countries, entities, or sectors — even when the transaction has no direct U.S. connection. If your company deals with Russia, Iran, North Korea, or certain Chinese entities, you may face secondary sanctions exposure regardless of your nationality or where the transaction takes place. Our secondary sanctions lawyers assess your risk and build defense strategies before OFAC acts.

What Are Secondary Sanctions?

Secondary sanctions represent one of the most powerful — and most misunderstood — tools in U.S. foreign policy. While primary OFAC sanctions target U.S. persons, U.S.-origin goods, and transactions with a U.S. nexus, secondary sanctions extend U.S. enforcement reach to entirely foreign transactions between non-U.S. parties.

The core mechanism is economic coercion: the U.S. government threatens foreign companies with exclusion from the U.S. financial system — effectively cutting them off from dollar-clearing and U.S. correspondent banking — if they continue dealing with sanctioned parties. This threat is often powerful enough to change behavior without a single formal designation.

The statutory basis varies by program. The International Emergency Economic Powers Act (IEEPA, 50 U.S.C. §§ 1701–1706) provides the President’s general authority, while program-specific secondary sanctions derive from laws such as the Iran Freedom and Counter-Proliferation Act (IFCA, Pub. L. 112-239), the Countering America’s Adversaries Through Sanctions Act (CAATSA, Pub. L. 115-44), and the Countering Illegal Financing Act provisions targeting China’s military-industrial companies.

Primary vs. Secondary Sanctions: Key Differences

Who Is at Risk from Secondary Sanctions?

Secondary sanctions exposure is not limited to companies in “rogue” industries. Any business with international operations that touches sanctioned countries or sectors may face risk. The highest-risk categories include:

International Banks and Financial Institutions

Non-U.S. banks that process payments for sanctioned parties, maintain correspondent accounts for sanctioned financial institutions, or facilitate significant transactions in sanctioned sectors face the most severe secondary sanctions risk. The threat of losing U.S. correspondent banking relationships — and thus access to dollar-clearing — is existential for most international banks. European, Gulf, Asian, and Turkish banks have all faced U.S. pressure to exit Russia- and Iran-related business under secondary sanctions threats.

Energy Companies and Commodity Traders

Companies purchasing, transporting, insuring, or financing sanctioned oil — particularly Iranian or Russian crude — face secondary sanctions under IFCA Section 1245 and various Executive Orders. The U.S. “shadow fleet” enforcement campaign in 2024–2026 has dramatically expanded the risk for shipping companies, flag registries, port operators, and insurers handling sanctioned petroleum.

Defense and Dual-Use Goods Suppliers

Under CAATSA Section 231, foreign companies that conduct “significant transactions” with Russia’s defense or intelligence sectors are subject to mandatory secondary sanctions. Since Russia’s 2022 invasion of Ukraine, the U.S. has extended this reach to foreign companies supplying dual-use goods — electronics, semiconductors, machine tools — that support Russia’s military-industrial base.

Professional Services Firms

Accountants, lawyers, consultants, and corporate service providers that assist sanctioned parties in obscuring assets or evading restrictions face heightened scrutiny under 2025–2026 enforcement priorities. OFAC has explicitly identified “gatekeepers” as a focus area, warning that inadequate due diligence on beneficial ownership constitutes a sanctions compliance failure.

Shipping, Logistics, and Insurance

Ship owners, port operators, flag registries, P&I clubs, and cargo insurers that service vessels carrying sanctioned goods — particularly Russian or Iranian oil — face designation risk under the shadow fleet enforcement framework. Over 200 vessels were designated in 2024–2025 for carrying Russian crude above the G7 price cap.

Key U.S. Secondary Sanctions Programs in 2026

Russia: CAATSA and Executive Order 14024

The Countering America’s Adversaries Through Sanctions Act (CAATSA, Pub. L. 115-44, enacted August 2017) created the most sweeping Russia-related secondary sanctions regime. Section 231 mandates secondary sanctions on foreign persons conducting significant transactions with Russian defense or intelligence sectors. Section 232 targets Russia’s energy export pipelines. Section 233 targets privatization proceeds.

Executive Order 14024 (April 2021) and subsequent amendments, particularly E.O. 14114 (December 2023), dramatically expanded the Russia secondary sanctions architecture to cover financial institutions that facilitate significant transactions for Russia’s military-industrial base — including companies in third countries supplying items that support Russian battlefield operations. By 2026, OFAC has used these authorities to designate entities in China, India, Turkey, UAE, and Central Asia for Russia-related secondary sanctions violations.

Iran: IFCA and NDAA Provisions

The Iran Freedom and Counter-Proliferation Act (IFCA, enacted as part of NDAA FY2013, Pub. L. 112-239, Sections 1241–1255) established broad secondary sanctions on foreign persons conducting significant transactions with Iran’s energy, shipping, shipbuilding, port, automotive, and financial sectors. The Iran Sanctions Act of 1996 (ISA, Pub. L. 104-172) originally established secondary sanctions on energy investments in Iran and has been repeatedly renewed and expanded.

The U.S. “maximum pressure” policy against Iran, reinstated and intensified from 2025, has made Iran secondary sanctions among the most aggressively enforced in the OFAC portfolio. Shadow fleet enforcement — targeting vessels that transport Iranian crude using ship-to-ship transfers, flag-hopping, and AIS manipulation — is a particular 2025–2026 priority.

China: CIPA and Military-Industrial Complex Designations

While China-specific secondary sanctions are less developed than Russia or Iran programs, U.S. authorities have expanded secondary risks for companies dealing with Chinese entities designated under the Chinese Military-Industrial Complex (CMIC) framework (E.O. 13959, as amended). Companies on the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List) cannot receive U.S. investment, and dealing with them creates compliance risk for foreign financial institutions.

Additionally, China-related secondary sanctions risk arises from Chinese companies that supply Russia’s military-industrial base. OFAC has designated numerous Chinese companies under E.O. 14024 for providing Russia with dual-use goods, creating secondary sanctions exposure for any third-country business dealing with those designated Chinese entities.

North Korea: NDAA and Executive Orders

North Korea secondary sanctions are among the most comprehensive: Section 104 of the North Korea Sanctions and Policy Enhancement Act (NKSPA, Pub. L. 114-122) and various NDAA provisions mandate secondary sanctions on any person who knowingly engages in “significant” trade in goods, services, or technology with North Korea. Unlike Iran and Russia programs that focus on specific sectors, North Korea secondary sanctions effectively cover any substantial trade. Recent 2025–2026 enforcement has focused on North Korean IT workers operating globally and entities facilitating DPRK arms transfers to Russia.

Recent Secondary Sanctions Enforcement: 2025–2026

Note: Secondary sanctions enforcement in 2025–2026 has accelerated significantly, with OFAC coordinating designations with the Departments of State, Commerce, and Justice. Companies that previously believed their distance from the U.S. market provided protection are increasingly finding themselves designated.

How to Assess Your Secondary Sanctions Risk

Secondary sanctions risk assessment requires more than screening your counterparties against the OFAC SDN List. Use this checklist to identify exposure areas:

• Counterparty geography: Do any customers, suppliers, or business partners operate in or have significant ties to Russia, Iran, North Korea, or sanctioned sectors in China?
• Sector exposure: Does your business touch energy (oil/gas/petrochemicals), defense, financial services, shipping, or technology sectors that are subject to sector-based secondary sanctions?
• Transaction significance: Secondary sanctions typically apply to “significant” transactions — assess whether the volume, frequency, or strategic importance of your dealings would meet OFAC’s significance thresholds.
• Beneficial ownership: Are any of your investors, partners, or clients potentially connected to SDN-listed parties through complex ownership structures?
• Dollar clearing dependency: Do you rely on U.S. correspondent banking or dollar-clearing for business operations? If yes, your secondary sanctions risk tolerance must be extremely low.
• Dual-use goods: Does your company manufacture, export, or trade items that appear on U.S. export control lists (EAR/CCL) and that could be diverted to Russia’s military-industrial base?
• Professional services: Does your firm provide legal, accounting, consulting, or corporate formation services to clients in sanctioned jurisdictions?
• Existing compliance program: Does your sanctions compliance program address secondary sanctions risks specifically, or only primary/SDN screening?

If you answered “yes” to two or more of these questions, you should consult with a secondary sanctions lawyer to conduct a formal risk assessment before OFAC identifies your exposure first.

How Our Secondary Sanctions Lawyers Help

Our international sanctions practice represents non-U.S. companies, banks, and individuals facing secondary sanctions risk — from proactive compliance planning to emergency response when OFAC threatens designation. We provide:

Secondary Sanctions Risk Assessment

We conduct comprehensive secondary sanctions risk assessments, mapping your business relationships against active U.S. secondary sanctions programs and identifying exposure areas before they become enforcement actions. Our assessment covers all major programs: Russia (CAATSA/E.O. 14024), Iran (IFCA/ISA), North Korea (NKSPA), and China-related secondary risks.

Compliance Program Development

We build secondary sanctions compliance programs tailored to your industry and risk profile. Unlike generic SDN-screening programs, our secondary sanctions compliance frameworks address the unique challenge of monitoring sector exposure, transaction significance thresholds, and evolving policy guidance across multiple U.S. secondary sanctions programs. See our OFAC compliance services for more detail.

OFAC Licensing and General License Analysis

We advise on whether specific license exemptions or general licenses cover your intended activities, and prepare specific license applications where needed. Secondary sanctions programs often have different licensing structures than primary sanctions, and navigating these differences requires specialized counsel.

Designation Defense and OFAC Investigations

If OFAC has threatened designation or opened an investigation for potential secondary sanctions violations, we provide emergency representation. Our team prepares responses to OFAC subpoenas, conducts internal investigations, and negotiates with OFAC to prevent or minimize designations. Time is critical in these situations — contact us immediately.

Sanctions Delisting (SDN Removal)

For clients already designated as SDNs or blocked persons following secondary sanctions enforcement, we prepare and submit administrative reconsideration petitions to OFAC. We also represent clients in federal court challenges to OFAC designations under the Administrative Procedure Act and constitutional due process arguments.

Transactional Due Diligence

We provide secondary sanctions due diligence for M&A transactions, joint ventures, financing arrangements, and trade deals where counterparty exposure to sanctioned parties or programs creates deal risk. Our pre-closing secondary sanctions analysis has prevented clients from acquiring hidden sanctions liability in cross-border transactions.