A Global Review of Sanctioned Countries
28th May 2018
The first known use of sanctions dates to 432 BC when General Pericles of Greece imposed sanctions on its neighbor, Megara, in response to the abduction of three women.1 In more recent times, the first U.S. sanctions date back to Thomas Jefferson’s Embargo Act of 1807, which, at the time, prohibited all trade with Europe.2 During the Civil War, Congress passed legislation that prohibited trade with the Confederate States of America.3 Other notable uses of U.S. sanctions include the embargo against Cuba in response to Fidel Castro’s revolution in 1959, as well as sanctions levied against Iran in response to the 1979 hostage crisis.
The Office of Foreign Funds Control (FFC) was established during World War II following the German invasion of Norway in 1940. It was intended to prevent Nazis from using funds seized from occupied countries. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the successor to the FFC, was founded in 1950 as a result of China’s involvement in the Korean War. In response, President Truman blocked Chinese and North Korean assets and declared a national emergency.4
To this day, OFAC continues to administer and enforce all U.S. economic sanctions programs.5Economic sanctions are “U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.”6
Sanctions are applicable to “all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the U.S., all U.S. incorporated entities and their foreign branches.” For some programs there are sanctions requirements for foreign subsidiaries of U.S. companies.7
Economic Sanctions in 2017
In its first year, the Trump administration implemented and/or enhanced sanctions targeting North Korea, Iran, Russia, Venezuela and Cuba as well as abusers of human rights globally. The administration also “decertified” Iran’s performance under the Joint Comprehensive Plan of Action (JCPOA), an effort by the P5+1 (China, France, Germany, Russia, the U.K. and the U.S.) to ease existing sanctions to encourage the scaling back of Iran’s nuclear program. In addition, after 20 years, Sudan had its comprehensive sanctions lifted.
Congress, by an overwhelming majority, passed sanctions legislation that the president signed into law. As these sanctions are not implemented via executive order, the president is limited in his ability in terminating, waiving or modifying them.
There were also numerous additions to the non-country specific list of Specially Designated Nationals (SDNs); a collection of individuals, groups and entities that have been identified as terrorists, narcotics traffickers, drug kingpins and other bad actors.
OFAC continues to vigorously enforce existing sanctions requirements. Penalties in 2017 were almost six times greater than those collected in 2016—$119,527,8458 versus $21,609,315.9
In summary, the current administration (along with Congress) demonstrated that, like previous Democratic and Republican administrations, it is willing to use economic sanctions as a key foreign policy tool. In addition to issuing new or expanded sanctions, President Trump reversed certain sanctions concessions implemented by President Obama. Furthermore, OFAC continues to demonstrate that enforcement is a priority. As such, complying with economic sanctions requirements continues to be a critical component of any compliance program.
Countering America’s Adversaries Through Sanctions Act
On August 2, 2017, the president signed into law the Countering America’s Adversaries Through Sanctions Act (CAATSA). During a period of tremendous political partisanship, CAATSA remarkably received near unilateral bipartisan support, passing the U.S. House of Representatives by a margin of 419-3 and the Senate by a margin of 98-2.10
CAATSA imposed additional sanctions on Iran, Russia and North Korea. Various sanctions were in force for all three countries as most transactions with respect to North Korea and Iran were already prohibited and Russian-related sanctions were enacted in 2014 in response to the Crimea occupation. Of all three countries, Russia’s sanctions increased the most significantly with the issuance of CAATSA.
In addition to implementing primary sanctions, which are specific prohibitions for U.S. citizens and companies that can result in civil or criminal penalties upon violation, CAATSA also imposed secondary sanctions, which target non-U.S. entities and governments.11
CAATSA also distinguishes between mandatory and discretionary sanctions. CAATSA notes that the president “shall” impose mandatory sanctions, since they are required, and that the president “may” choose to impose discretionary sanctions, since they are optional.
For the Russia-related sanctions, CAATSA includes a specific provision limiting the president’s ability to limit or reduce the restrictions going forward. The House Committee on Foreign Affairs noted that, “To ensure these economic sanctions remain in place as long as Russian aggression continues, this bill empowers Congress to review and disapprove any sanctions relief. This strong oversight is necessary and appropriate. After all, it is Congress that the Constitution empowers to regulate commerce with foreign nations.”12
As such, any removal or reduction in CAATSA-related Russia sanctions requires congressional approval (only Cuban sanctions have a similar limitation).13 The president responded to the CAATSA legislation by referring to the bill as “unconstitutional” and "significantly flawed," but also noted he would sign it into law “for the sake of national unity.”14
The following is a brief review of the action and impact for each country impacted by CAATSA.
U.S. financial institutions are prohibited from maintaining financial accounts that are opened on behalf of, or to a known enabler for, a North Korean entity.
Mandatory sanctions are applicable for facilitating the purchase of certain minerals (gold, copper, silver), rocket or aviation fuel, or other supplies that can be used for North Korean aircraft or ships.
Discretionary sanctions can be levied for purchases of coal, textiles, precious metals or stones, online activities, the export of North Korean workers, as well as for the facilitation of any additional transactions in the transportation, mining, energy or financial services industries.
Sanctions may also be applicable for those who engage in activities that are inconsistent with U.N. Security Council sanctions or U.S. policy, such as trafficking products and services for military use.
The additional sanctions levied against North Korea (including additional SDN designations for North Korean and other entities/individuals) continue to isolate the country from the U.S. financial system (and therefore a significant portion of the global banking infrastructure). In addition, the U.S. is sending a clear message that it will no longer transact with foreign countries, people or companies that engage with the North Korean government and/or enable their missile and nuclear programs.
Previous Russia-related sanctions (such as those related to Crimea or cybercrimes), originally implemented by executive order, have now been codified into law.
Mandatory sanctions are applicable for those involved in corruption, human rights abuses, cyber warfare, sanctions evasion, as well as those supplying arms to Syria.
Discretionary sanctions can now be imposed for activities that benefit energy, intelligence or defense sectors (including cyberthreats).
On October 27, 2017, the U.S. Department of State issued a list of 39 entities that are affiliated with the Russian government’s defense or intelligence sectors. Sanctions are applicable for “significant transactions” with people who are a part of, or operating for or on behalf of, Russia’s defense or intelligence sectors.15
More importantly, these 39 entities are not designated as SDNs, which would require an asset freeze. In addition, the 50 Percent Rule (a requirement that any entity owned by a combination of SDNs whose aggregate ownership is 50 percent or more is also a prohibited party16) is not applicable as these entities only need to be 33 percent-owned to be subject to sanctions.
CAATSA also expanded the scope of the existing “sectoral” sanctions, originally imposed on Russia in response to the Crimea occupation. Additional CAATSA-related guidance was issued on October 31, 2017, indicating that state-owned entities in the railway, metals and mining sectors may now be subject to sanctions as well. Debt restrictions are now applicable to short-term debt and prohibited drilling-related activities were expanded from only deep water, Arctic offshore or shale, to any entities that have oil-producing potential.17
As previously mentioned, while comprehensive sanctions have long been in place against North Korea and Iran prohibiting most transactions, Russia sanctions increased most significantly under CAATSA.
U.S. citizens and companies that seek to do authorized business with Russian entities need to ensure they are screening against the new non-SDN entities identified pursuant to CAATSA. Additional due diligence is also required to ensure there are no transactions with, or on behalf of, Russia’s prohibited energy, intelligence and defense sectors or projects.
These sanctions send the message that the U.S. will continue to target Russia for perceived nefarious activities, and furthermore, sanctions will focus on Russian key industries, such as gas and energy.
CAATSA imposed sanctions related to Iran’s ballistic missile and weapons programs, as well as human rights abuses. However, the new sanctions legislation were not issued in relation to its nuclear program, thus keeping the JCPOA unmolested by the passing of CAATSA.
Mandatory sanctions must be implemented against people who support or engage in actions that contribute to Iran’s ballistic missile program and other weapons of mass destruction, including the supply of material, advice, training or resources.
Secondary sanctions can now be imposed for people responsible for human rights violations carried out by either the Iranian government or other parties.
As mentioned above, CAATSA does not negatively impact the JCPOA, avoiding any sanctions related to nuclear proliferation. It was reported that “the Act was carefully crafted to avoid conflict with U.S. commitments under the JCPOA . . .[as] several policy-makers raised concerns that expansion of sanctions could serve to undermine the JCPOA and would be negatively perceived by U.S. allies.”18
CAATSA requires mandatory sanctions for any person, globally, that “contributes to Iran’s ballistic missile program, who are officials, agents or affiliates of the Islamic Revolutionary Guard Corps, or who knowingly supply or support the supply of arms, combat vehicles, etc., to Iran or provide related technical training or services to Iran” as well as anyone responsible for human rights violations in Iran.19
These actions make clear that, despite the sanctions relief brought about by the JCPOA, this administration will continue to put pressure on Iran and others with respect to terrorist activities carried out by the Islamic Revolutionary Guard Corps (IRGC), for providing support to the Assad regime in Syria, and for any gross violations of human rights.
In addition to CAATSA, which levied sanctions on multiple countries, the administration also issued sanctions targeting individual countries.
On September 21, 2017, the White House announced through an executive order that additional sanctions against North Korea are warranted as a result of the “provocative, destabilizing, and repressive actions and policies of the Government of North Korea,” including intercontinental ballistic missile launches, its nuclear testing, its human rights abuses and its “use of funds generated through international trade to support its nuclear and missile programs and weapons proliferation.”20 This action is separate from, and unrelated to, CAATSA.
New “secondary” sanctions were imposed targeting foreign entities and people who facilitate or support trade with North Korea. Foreign financial institutions that continue to trade with North Korea are subject to U.S. blocking. Aircraft and vessels that were in a North Korean port for the previous 180 days are now prohibited from entering the U.S.
In addition, the executive order does not designate specific people or entities but provides broad categories of prohibited activity that could lead to sanctions designations, including operating within certain industries or maintaining a transportation port in North Korea or conducting significant transactions with North Korea.
Furthermore, all North Koreans are now blocked — even if they are not members of the North Korean government, affiliated with the military and are not otherwise violating sanctions requirements. Cuba is the only other country that has had their nationals blocked outside their country.21
In addition to the actions above, on November 20, 2017, the administration returned North Korea to the exclusive list of State Sponsors of Terrorism, joining Sudan, Syria and Iran.22Countries that are designated are subject to “four main categories of sanctions, including restrictions on U.S. foreign assistance; a ban on defense exports and sales; certain controls over exports of dual use items; and miscellaneous financial and other restrictions.”23 However, given the large in-force sanctions by the U.S., there is limited impact of this designation from a sanctions perspective.
These actions expand existing comprehensive sanctions in that it targets third parties (and non-U.S. entities) who transact with North Korea, including financial institutions as well as ships and vessels that port in North Korea. It also takes the drastic measure of blocking North Korean citizens outside of North Korea. The administration is sending a loud and clear message that it will continue to apply pressure to those that engage with North Korea to further isolate the rogue nation.
On August 23, 2017, as a result of “recent actions and policies of the Government of Venezuela, including serious abuses of human rights and fundamental freedoms; responsibility for the deepening humanitarian crisis in Venezuela; establishment of an illegitimate Constituent Assembly, which has usurped the power of the democratically elected National Assembly and other branches of the Government of Venezuela; rampant public corruption; and ongoing repression and persecution of, and violence toward, the political opposition,”24 the president issued an executive order imposing economic sanctions.
The executive order prohibits transactions related to certain securities, including the issuance of debt, dividend payments or other distribution of profits to the government of Venezuela or the state-owned oil company, Petróleos de Venezuela, S.A. There is also a prohibition of U.S. citizens from purchasing certain securities from the Venezuelan government. There will be certain allowances allowing petroleum-related transactions, including with Citgo, who has a significant presence in the U.S.25
The additional sanctions do not unilaterally block all transactions with Venezuela (i.e., these are not “comprehensive” sanctions), but are more targeted, similar to the Russian “sectoral” sanctions issued in response to the Crimea conflict.
Prohibiting trades of existing bonds issued by the Venezuelan government is “intended to harm and sow discontent among Maduro’s inner circle” as these bonds are exclusively held in Venezuela “by high-level government, military and business leaders.”26
On November 9, 2017, the Department of Treasury implemented additional sanctions targeting the “Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba.”27 This action was not a total surprise, as on June 16, 2017, while in Miami, the president announced, “I am canceling the last administration’s completely one-sided deal with Cuba.”28
The State Department also published a new list of prohibited entities (the State Department’s List of Restricted Entities and Subentities Associated with Cuba, or the Cuba Restricted List). The list of prohibited entities are “under the control of, or otherwise act on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions would benefit” the Cuban military, intelligence or security services or personnel at the “expense of the Cuban people or private enterprise in Cuba.”29
There are also additional restrictions with travel to Cuba. Current regulations do allow for travel to Cuba, but only if they qualify under 12 “categories of authorized travel.”30 Three of these categories (people to people, educational and support for the Cuban people) have new limitations, including the requirements that travel is arranged by a U.S. entity that sponsors such exchanges, that travelers are accompanied by a U.S. representative of the sponsoring organization, and for travel under the Support for the Cuban People General License, travelers must also “enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities.”31 The Support for the Cuban People authorization now requires travelers to stay at privatized residences, restaurants and small businesses.
These sanctions contrast with the Obama administration’s approach of relaxing restrictions with respect to Cuba. In addition to caring for the SDN and other lists of prohibited parties, U.S. citizens and companies also need to ensure they are screening against the new Cuba Restricted List. In addition, due diligence is required to ensure there are no transactions with military, intelligence and security services. The new sanctions also expand the scope of prohibited officials of the government of Cuba.
In addition, while U.S. travelers can still embark on authorized trips to Cuba, it is much harder to travel individually. Many trips now require booking via an authorized organization and travelers must be accompanied by an authorized employee.
The new restrictions intend to restrict Cuban military and government entities from the U.S. financial system, while strengthening private Cuban enterprise.
Recertification Under the JCPOA
Although it is a requirement under the JCPOA to recertify Iran’s compliance, on October 13, 2017, the president announced that he would not be “recertifying” Iran’s compliance under the deal.
The JCPOA, negotiated in 2015 with the support of China, Russia, France, the U.K. and Germany, provided sanctions relief in exchange for the cessation of Iran’s nuclear program.32 Part of the terms of the deal require mandatory inspections of Iran’s nuclear facilities.
Congress, in 2015, passed the Iran Nuclear Agreement Review Act, which requires a certification by the president every 90 days that Iran is compliant with the agreement. Failure to be certified provides Congress the option to reinstate the sanctions that were lifted under the JCPOA.33
However, President Trump did not assert that Iran violated the agreement. In that scenario, there would be an international dispute resolution process by a joint commission consisting of the JCPOA members.34
In addition to the decertification, the president also designated the IRGC as a Specially Designated Global Terrorist. This action has limited consequences from a sanctions perspective, since the IRGC was originally designated as an SDN in October 2007, and U.S. citizens and companies were already prohibited from transacting with them.35
While the JCPOA lifted certain Iranian nuclear-related sanctions, Iran remains comprehensively sanctioned and virtually all Iranian-related transactions remain prohibited.36 The sanctions that were lifted were “secondary” sanctions, targeting non-U.S. entities and people. It also allowed certain imports (such as carpets) and allowed for the sale of non-military aircraft.37
The JCPOA is “not a treaty or an executive agreement and is not a signed document.”38 Thus, it is not binding under international law and the U.S. can walk away at any time and reimpose the previous sanctions. However, it is very unlikely that the other partners in the agreement would follow suit.39 However, congress and our European allies from the JCPOA “consider the deal a great success contributing to their security.”40
Failure to recertify does not pull the U.S. from the JCPOA. It puts the decision back to Congress as to whether sanctions should be reinstated. It also allows the president to take a tougher public stance on Iran. Additional SDN designations were announced simultaneous to this announcement, emphasizing the harsher approach towards Iran.
While the purpose of this article is to summarize 2017 sanctions, it is worth noting that on January 12, 2018, President Trump waived nuclear sanctions against Iran for what he asserted to be the last time.
The official Statement by the president on the Iran Nuclear Deal noted that, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal. Instead, I have outlined two possible paths forward: either fix the deal’s disastrous flaws, or the United States will withdraw.”41
Global Magnitsky Human Rights Accountability Act
On December 20, 2017, the president issued an executive order indicating that as a result of “human rights abuse and corruption” that have “reached such scope and gravity that they threaten the stability of international political and economic systems,” sanctions would be expanded as part of the Global Magnitsky Human Rights Accountability Act.42
The executive order blocks the property of any person responsible for, or complicit in, serious human rights abuses such as murder or torture. The sanctions apply to non-U.S. individuals, and include those assisting, financing, providing material support or concealing such actions.43
The original Magnitsky-related sanctions were intended to punish those responsible for the actions surrounding the 2009 death of Sergei Magnitsky, a Russian auditor and lawyer, who was investigating corrupt government activity.44 The additional sanctions give OFAC “broader authority to target human rights abusers and corrupt actors globally,” expanding the scope of these sanctions beyond Russia and its government.45
The new executive order targets human rights abusers anywhere in the world and designates SDNs from the Gambia, South Sudan, Russia, Nicaragua, China, Pakistan, Democratic Republic of the Congo, Dominican Republic, Uzbekistan and Ukraine. By expanding the reach of this act, the U.S. has given itself the ability to target human rights abusers globally.
In addition to broad sanctions legislation such as CAATSA and targeted sanctions against individual countries such as Venezuela and Cuba, OFAC continues to issue specific SDN designations of people, entities, vessels and organizations over the course of the year, including:
- North Korean officials involved in weapons development; trading, labor and shipping companies and vessels; and banks and representatives linked to North Korean financial networks;
- Supporters of Iran’s IRGC and networks responsible for cyberattacks against the U.S.;
- Human rights abusers and key ballistic missile entities in Iran;
- Chinese and Russian entities and individuals supporting the North Korean regime;
- “Thieves-in-Law” Eurasian Transnational Criminal Organization;
- Lord’s Resistance Army facilitators involved in the illicit trade of ivory, weapons and money in Central Africa;
- Colombian, Mexican and Peruvian drug traffickers;
- Venezuelan government officials;
- Individuals and entities involved in the ongoing conflict in Ukraine;
- ISIS recruiters and fighters;
- Individuals and entities responsible for violence on Syrian citizens by the Syrian government, including Syrian Scientific Studies and Research Center staff;
- Pakistan-based terrorist leaders and facilitators; and
- Central African Republic militia commanders
The Trump administration, following through on an initiative started by the previous administration, lifted sanctions against Sudan. Sudan was subject to U.S. sanctions for nearly 20 years.
There are several reasons why sanctions were lifted, including greater cooperation with the international community, the promise to not interfere in the South Sudan civil war that has raged since 2013 and perhaps most importantly, a willingness to cooperate with the U.S. in the fight against international terrorism.
The U.S. Treasury Department announced on October 6, 2017 that effective October 12, 2017, sanctions would be revoked “in recognition of the Government of Sudan’s sustained positive actions to maintain a cessation of hostilities in conflict areas in Sudan, improve humanitarian access throughout Sudan, and maintain cooperation with the United States on addressing regional conflicts and the threat of terrorism.”46 As a result, the prohibition that U.S. citizens and companies can no longer transact with Sudan and its government was removed.
Despite this action, there are still important restrictions in place with respect to Sudan. Targeted sanctions against specific people/entities remain in place, such as those designated on the OFAC SDN list as a result of human right abuses and/or Darfur sanctions (which were not lifted). In addition, other restrictions, such as export control limitations, remain because of Sudan’s designation as a State Sponsor of Terrorism.
The Trump administration demonstrated over the past year that, like the administrations that preceded his, they are willing to implement economic sanctions to further U.S. foreign policy interests.
Congress has also taken a proactive role in economics sanctions, given the bipartisan approval of CAATSA, as well as the requirement to review any subsequent modifications.
In addition, OFAC (and other regulators such as the New York State Department of Financial Services) continues to enforce existing sanctions requirements, as evidenced by enforcement actions and monetary fines.47
The Bank Secrecy Act/Anti-Money Laundering Examination Manual notes that while “not required by specific regulation, but as a matter of sound banking practice and to mitigate the risk of noncompliance with OFAC requirements, banks should establish and maintain an effective, written OFAC compliance program that is commensurate with their OFAC risk profile (based on products, services, customers, and geographic locations). The program should identify higher-risk areas, provide for appropriate internal controls for screening and reporting, establish independent testing for compliance, designate a bank employee or employees as responsible for OFAC compliance, and create training programs for appropriate personnel in all relevant areas of the bank.”48
In addition to screening against SDNs and other lists of prohibited parties, U.S. citizens and companies should continue to use extreme care and due diligence with respect to sanctions matters, especially as foreign affairs remain volatile and sanctions are subject to frequent change.
Howard Spieler, CAMS, CFE, executive board member, ACAMS New York Chapter, New York, NY, USA, firstname.lastname@example.org
The views expressed in this article are those of the author and do not represent the views or positions of his employer or ACAMS and its affiliates.
For more information on crucial sanctions compliance principles that all compliance staff should understand, please visit: http://www.acams.org/sanctions-compliance-training/.
SOURCE: ACAMS TODAY