Economic Sanctions and Trade Embargoes

Economic Sanctions and Trade Embargoes

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

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

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

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? • Yes, both Loren and her employer must comply. • Yes, but only Loren must comply. • No, because she is not on U.S. soil. • No, because her employer is Moroccan.

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

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

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

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

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

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

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

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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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

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

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? • No. • Maybe. • Definitely.

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

Final Quiz

Questions?

Thank you for participating! This course and the related materials were developed by WeComply, Inc. and the Association of Corporate Counsel.

Economic Sanctions and Trade Embargoes