Why should a company outside the US adhere to US Sanctions and OFAC regulations?

Companies outside of the US should obey the US Sanctions and the Office of Foreign Assets Control (OFAC) because refusing to do so will cause major penalties and other sanctions. OFAC is a US government agency that enforces economic trade sanctions based on U.S. foreign policy and national security goals.

While the sanction primarily applies to U.S. firms and people, some non-U.S. parties still apply in some cases. The U.S. sanction laws can apply to parties in many different ways if a foreign party has a contact under a “secondary sanction” (sanction that applies to non-U.S. parties)

Or if you were to provide support to other parties that have been targeted for sanctions.

You should also consider that OFAC targets parties for the imposition of sanctions. Targeted parties are frequently placed on a U.S. list of Specifically Designated Nationals and Blocked Persons (SDN list) or other restricted party lists.

If placed on the SDN List, you’re cut off from a major portion of international business and financial transactions and cut off from the dollar-denominated U.S. financial system. The U.S. restricted party list has become a major tool for the U.S. to cut off foreign adversaries and advance interest worldwide without military use.

Another factor that might make OFAC jurisdiction is if the company engages in transactions involving U.S. persons or U.S. product technology or services or even has a presence in the U.S. OFAC has even stated that a non-U.S. company who engages in business transactions in the U.S. dollars, the foreign party is availing itself to the U.S. financial system and therefor under U.S. sanction laws.

Civil and criminal penalties can go up to 20 years in prison and a fine of $1,000,000 per violation.

Can you explain to me how OFAC decides when it’s illegal to do business with individuals or companies that have been sanctioned or banned?

OFAC decides this by publishing individuals or companies on 1 of 2 lists. The Specially Designated Nationals (SDN) List or the Sectoral Sanctions Identifications (SSI) list. Doing business with anyone on these lists is generally prohibited unless OFAC issues specific licenses authorizing the transactions.

Why do the United Nations and nation-states or Blocks of nation-states impose sanctions against other nation-states, Companies, or Individuals, and who enforces these sanctions globally?

The United Nations (UN) and individual nation-states impose sanctions against other nation-states, companies, or individuals to apply political or economic pressure for a specific foreign policy or national goal.

These sanctions are not imposed unless behaviors threaten international peace and security, like terrorism, weapons influx, or human rights violations. The UN is responsible for sanctions on a global level, while nation-states can impose them as individuals.

Why do certain nations worry about international sanctions, such as those imposed by the United Nations, while others do not?

While global sanctions are meant to be applied universally for global security purposes, there are many different approaches to how certain countries enforce them. Some countries may have a strong commitment to international law, while others focus on the national interest over the global interest.

Some countries might decide to be more lenient in enforcing sanctions due to political interests and economic considerations, and some may not be able to enforce them.

Some companies and even countries appear to view circumventing sanctions as a sport or challenge.  Why should we be skeptical of “friendly helpers” who offer answers to sanctions and embargo-related problems?

Individuals and companies who offer to help you “get around” sanctions or embargoes maybe engage in illegal activities. Companies that seem to be ‘lending a hand’ caught in illegal activities could expose you to reputational damage and your business and relationships with customers.

One should be cautious when dealing with companies and individuals trying to find “a way” around sanctions. If you have any concerns about the legality or risks associated with a particular activity, you may want to seek the advice of legal counsel.