The U.S. Approach to Sanctions Joseph J Dehner For the UIA Congress – October 2016

U.S. Sanctions  Tool to promote national security.  U.S. President may impose economic sanctions:  International Emergency Economic Powers Act (IEEPA)  To combat threats to U.S. national security, foreign policy or economy  Can block specific transactions or freeze assets  Trading with the Enemy Act (TWEA)  In time of war - to restrict trade between U.S. and enemies

Enforcement  Enforcement by the Treasury Department Office of Foreign Asset Controls (OFAC) 

Current U.S. Economic Sanctions Programs Program-BasedUser-Based Cuba Iran North Korea (DPRK) Sudan/South Sudan Syria Counter Narcotics Trafficking Sanctions Counter Terrorism Sanctions Cyber-related Sanctions Non-Proliferation Sanctions Rough Diamond Trade Controls Transnational Criminal Organizations Balkans Belarus Burundi Central African Republic Democratic Republic of the Congo Iraq Lebanon Libya Magnitsky Somalia Ukraine/Russia Venezuela Yemen Zimbabwe

SDN, Other Lists  SDN List: Specially Designated National (“SDN”)  Individuals, companies, financial institutions and vessels owned or controlled by targeted countries, or designated under other programs  df df  Updated frequently  Foreign Sanctions Evader List  Non-SDN Iran Sanctions Act List

Who is at risk?  Sanctions under IEEPA apply to “ U.S. Persons ”:  U.S. citizens and permanent resident aliens of U.S. anywhere  persons within the U.S. even if non-U.S. citizens  Entities organized under U.S. law, including foreign branches  Sanctions under TWEA (North Korea and Cuba) apply to a “ Person Subject to the Jurisdiction of the U.S. ”:  All of above +  Entities wherever organized owned or controlled by U.S. citizens, permanent U.S. residents or entities organized under U.S. law

Impact on Foreign Companies  Foreign company can be held liable if.  Senior management is of U.S. Persons.  Senior management is based in and runs company from U.S.  U.S. Persons in the business have dealings with sanctioned countries and have not properly recused themselves  Foreign persons use the mail or wires to communicate with a U.S. Person regarding a dealing or transaction with a sanctioned country.

Facilitation  No U.S. Person or Person Subject to the Jurisdiction of the United States may approve, finance, facilitate or guarantee a transaction by a foreign person where the transaction would be prohibited if performed by a U.S. Person.  Facilitation includes:  Altering operating policies or procedures to permit a foreign subsidiary to do business;  Referring to a foreign person purchase orders, requests for bids or similar opportunities to which a U.S. Person could not directly respond;  Changing or creating operating policies or procedures of a particular affiliate with the purpose of facilitating transactions otherwise prohibited; and  Using or authorizing use of freight forwarders, shipping agents or vessels owned or operated by an Iranian.

Recusal  Foreign companies with U.S. persons can use recusal.  Companies can have U.S. Persons formally recuse themselves from:  Receiving, initiating or forwarding correspondence, documents or other materials related to business with a sanctioned country;  Attending meetings where there are discussions related to business in sanctioned countries;  Participating in conversations where business with sanctioned countries is discussed.

Compliance  U.S. Persons and Persons Subject to the Jurisdiction of the U.S. may not refer sanctioned business to non-U.S. persons.  Employees should be trained on how to respond to inquiries.  Non-U.S. Persons should not:  Provide or forward correspondence, documents or materials with a sanctioned country to a U.S. Person,  Refer matters related to a sanctioned country to a U.S. Person,  Discuss any matters or opportunities with a U.S. Person, or  Request assistance from a U.S. Person.

Secondary Sanctions  Secondary sanctions – U.S. sanctions against third- country companies that do business with Iran  Intended to prevent non-U.S. financial institutions from conducting certain business with Iran or be barred from access to U.S. financial system  Only 2 non-U.S. banks without U.S. branches have been sanctioned (barring them from having accounts with U.S. financial institutions  Iran Threat Reduction and Syria Human Rights Act of 2012 – against non-U.S. persons who conduct certain business with Iran energy and weapons sectors  Creative ambiguity to deter involvement with Iran

Iran  January 2016 – Nuclear deal  400 persons and entities removed from SND and other OFAC lists  But U.S. persons cannot engage with persons that are Iranian Government or financial institutions  And OFAC license still required for exports, most transactions  Secondary sanctions remain for persons on SDN List or Islamic Revolutionary Guard Corps  Other details (e.g., UN prohibited transfers)

Russia  Not a program based sanction – not against Russia  Bars transactions with specific persons  Executive Orders 13660, 13661, (2014)

Attorney General Loretta E. Lynch Delivers Remarks on Department of Justice Efforts in the Fight Against International Fraud and Corruption (Rome, Italy – Oct. 20, 2016)

Kleptocracy Remarks  “In our increasingly globalized world, the United States is determined not only to hold U.S. citizens and officials accountable for their crimes, but also to ensure that our financial system offers no haven to those perpetrating corruption abroad. The Justice Department created the Kleptocracy Asset Recovery Initiative in 2010 for this very purpose: to detect fraud that passes through our financial system, and to ensure that, where possible, stolen assets are returned to or used to benefit the people wronged by corrupt actors. Just this past August, we brought the largest single action in the initiative’s brief history, filing suit to recover more than $1 billion in assets associated with an international conspiracy to allegedly steal funds from a Malaysian public trust and launder the funds through U.S. financial institutions.” Attorney General Lynch