U.S. Economic Sanctions

Your U.S. Economic Sanctions Roadmap- Key Concepts, Agencies, Their Jurisdiction and Roles and Who to Contact for What

During this practical opening session, the expert instructors will take you through the key agencies involved in U.S. sanctions implementation and enforcement and discuss the evolving framework of U.S. Secondary Sanctions and Human Rights-related actions including:

• Basics of sanctions law: e.g., TWEA, IEEPA, Executive Orders, and Designations
• Introduction to OFAC, BIS, DOJ, State Department, Congress and how they work together
• U.S. Sanctions Jurisdiction: Extra-Territoriality
• What are Primary, Sectoral, and Secondary Sanctions?
• Introduction to OFAC’s 50% Rule
• Key Licenses and Exemptions
• Sources of Guidance: Alerts, FAQs, and Enforcement Actions

Enforcement and Secondary Sanctions

• Enforcement framework and penalty exposure
• Scope: Menu-based versus Designations
• Application in Practice
• Financial Institution Considerations

Intersection of Economic Sanctions, Export Controls and other National Security Rules

• Russia & Belarus case study: sanctions, export controls, tariffs and more
• Human Rights: Import controls, export controls and sanctions to target human rights violations and abuses

The Essentials of an Effective Sanctions Compliance and Screening Program

Management Commitment

• Creating culture of compliance 
• Ensuring sufficient resources, authority, and autonomy
• Determining what is a potential violation
• How to resolve an apparent violation

Risk Assessment

• How to perform a holistic risk-based assessment
• Documenting the review
• What are the key risk metrics?

Internal Controls (please bold this)

• Need for written policies and procedures
• How often to perform the review?
• What type of documentation is required?
• Recordkeeping policy
• Review of common weakness areas

Testing and Auditing

• Need forindependent testing
• Key audit procedures to follow
• Frequency of testing
• Identification of root causes
• Working with internal audit
• How to fix internal weaknesses

Training

• Periodic scheduled training
• Different levels for different employee types
• Should the training be live, or computer based?
• Modifying for different geographies or languages
• Who should develop the training?
• Documenting the training process

Core Elements of Sanctions

• Screening Need to review customers and transactions
• What lists to screen against?
• How to screen for different geographies
• Rules and exceptions
• What is (and isn’t) a “hit”
• How to clear a hit
• Common screening mistakes to avoid
• Hypothetical scenarios

A Deep Dive into the Latest Russia Sanctions

Introduction: Key Themes / Takeaways from an unprecedented year of 2022

Summary of Current Program

Overview of framework for current Russian program

• Which authorities are implementing Russia-related restrictions
• How we got here: key time periods in the Russian sanctions evolution

“Where” Based Restrictions

• Embargoes on Ukrainian occupied territories
• Key differences across US, EU, and UK
• “Transaction” Prohibitions: US & EU
• Limited list-based sanctions: the “sectoral” sanctions program current

“Who” Based Restrictions

• Asset freezing restrictions including primary targets (banks, oligarchs, politicians, defense industry)

“What” Based Restrictions

• Trade Controls: Export & Import Restrictions
• Professional Services Bans
• Investment bans
• Capital market / securities restrictions
• Shipping, Aircraft, and Trucking

Key Compliance Issues & 2023 Predictions

Ownership & Control Assessment

• US 50% Rule
• EU/UK Ownership & “Control” Analysis: How can you prove control?

Export Controls

• Rising expectations on financial institutions (FinCEN Advisory)
• Integration of export and import functions and use of HTS
• “Technical assistance” and related services controls
• Diversion

Enforcement

• Publicly identified actions to date
• Expected regulator pivot to investigation and enforcement as rules stabilize
• Cross-border investigations and cooperation (including US-UK joint announcement)
• UK: SRA Focus on Lawyers as Well

Where are we going in 2023

• One-way ratchet on restrictions with a long-time frame
• Designations / export controls / restricted services
• Re-risking timeline
• Strategies for remaining in Russia
• Best practices to exit Russia
  

Comprehensive Overview into Recent OFAC Guidance and Risk Mitigation for Your Chinese Operations

Overview of Current U.S. Sanctions and Other Restrictions Relating to China

• SDN Designations
• Human Rights (Global Magnitsky and Hong Kong Autonomy Act)
• Iran, DPRK, Russia-related
• CMIC Sanctions
• Limited scope targeting securities
• Overview of OFAC guidance
• Export Control Restrictions
• Entity List designations (Huawei, etc.)
• Military End-User/End-Use Controls
• Semiconductors and advanced computing
• Import/Supply Chain Restrictions
• Uyghur Forced Labor Prevention Act
• Information/Communications Technology Supply Chain Rule

Chinese Responses

• Blocking Statute and Anti-Foreign Sanctions Law
• Overview and scope
• Current status and enforcement
• Strategies to address conflicting obligations
• Experience with similar risks from EU and other jurisdictions
• Uncertainty over degree of enforcement

Thinking About Risk Mitigation Now and in the Future

• Managing U.S. sanctions compliance for firms with Chinese operations/subsidiaries
• Supply chain due diligence
• Contingency planning
• Lessons learned from Russia

Recent OFAC Gideance

• Virtual Currency
• Compliance guidance for instant payments
• Oil price caps

Deciphering Country Specific Sanctions: Cuba, Venezuela, Syria, North Korea, Iran, Afghanistan, Belarus Cuba

Cuba

• Different statutory authority — TWEA instead of IEEPA
• Crucial difference in scope: Cuba regulations are binding on “persons subject to U.S. jurisdiction” which includes foreign subsidiaries owned or controlled by US persons
• Other OFAC programs bind only “U.S. persons” unless extra steps are taken to make them binding on foreign subsidiaries
• Differences in exemptions (no travel exemption under TWEA) and civil penalties (TWEA’s statutory maximum penalties are lower)
• Broad prohibitions — all property in which Cuba or any Cuban national has an interest is blocked
• General licenses allowing dealings with Cuban nationals permanently residing outside of Cuba

Venezuela

• Among the more complicated OFAC sanctions programs
  • Not a full embargo, but the Government of Venezuela (GoV) and state-owned entities including PdVSA are blocked
  • Various other sanctions apply to Venezuelan bonds, new debt (similar to sectoral sanctions on Russia), purchases of securities from the GoV, pledges of collateral by the GoV, and transfers of equity interests owned by the GoV
  • Blocking sanctions have been imposed on persons operating in certain sectors
  • Wide range of general licenses, including broad authorizations for CITGO-related transactions
  • Dealings in many PdVSA and GoV bonds are authorized by general licenses
  • Bondholder issues related to large CITGO stake previously pledged as collateral for certain PdVSA bonds
  • Possible loosening of certain sanctions via limited new general licenses

Iran

• Evolution of the U.S. embargo and impact of JCPOA withdrawal
• Part 560: How the embargo works today
• Other, overlapping sanctions: IRGC, SDGT, NPWMD, etc.
• Frequently used general licenses and their practical limitations
• Broad array of secondary sanctions authorities Section 13(r) of the Exchange Act: SEC reporting requirements for public companies
  • Section 13(r) of the Exchange Act: SEC reporting requirements for public companies
    

Syria

• Government of Syria and state-owned entities are blocked
• Which investments in and exports to Syria are generally prohibited by OFAC or BIS?
• Prohibited imports of petroleum products from Syria
• Terrorism-related sanctions considerations in Northern Syria

North Korea

• Government of North Korea and state-owned entities are blocked
• Foreign subsidiaries of US financial institutions are prohibited from transacting with the Government of North Korea or certain North Korean SDNs: How does this play out in practice?
• Investment in, exports to, and imports from North Korea are prohibited
• Significant secondary sanctions authorities to block property of those who are found to have engaged in certain sanctionable activities (including some broadly defined activities)
  

Afghanistan

• With the Taliban in control of the government, what is required for a sanctions program? (Government is blocked because the Taliban are on the SDN list, but the country is not subject to a broad trade and investment embargo)
• Broad General Licenses authorizing humanitarian activity by NGOs and international organizations
• The scope of limits on fund transfers to the Taliban and the Haqqani Network, even in relation to authorized humanitarian activity

Belarus

• Expanded use of SDN designations and export controls following Belarus support for Russia’s invasion of Ukraine
• Increased use of sanctions in response to human rights violations
• Major companies, banks, and state-owned enterprises are designated as SDNs; broad reach with 50% rule
• SDN designation risk for companies determined to operate in specified sectors of the Belarussian economy
  

Compliance Weaknesses and Penalties Under the Microscope: Lessons from Key and Recent Enforcement Actions

Understanding sanctions enforcement is critical for effective compliance and avoiding common pitfalls. Our experienced instructors explain how U.S. sanctions enforcement works and what you can learn from it, including the reasons companies disclose (or choose not to disclose) to OFAC, the potential consequences of an OFAC enforcement action, and key lessons from recent OFAC enforcements.

How Sanctions Enforcements and Disclosures Arise

• Internal investigations and blocking or rejecting reports
• Notices from other parties
• Responding to OFAC subpoenas and requests for information
• Considerations for whether to make a voluntary self-disclosure

Potential Enforcement Outcomes

• No action letters, cautionary letters, finding of violations, settlements, penalty notices, and criminal referrals
• Public versus private disposition
• Sanctions enforcement as punishment and policy

Recent Key Enforcements and Lessons Learned

• Geofencing and IP address blocking
• Counterparty screening, due diligence, and / or compliance procedures
• Leveraging technological tools for sanctions compliance purposes
• Preparing a voluntary self-disclosure
• Remediation and corrective actions
• OFAC’s enforcement guidelines and penalty calculations
• Civil versus criminal enforcement / liability
• Supply chain due diligence
• Parent and successor liability
• U.S. sanctions jurisdiction over non-U.S. persons

Hypothetical Exercises, Q & A and Review on the Do’s and Don’ts
Toward solidifying your understanding of the enforcement process, the instructors will take you through a series of hypothetical scenarios to help you apply and understand voluntary self-disclosure best practices. At the end of this module, instructors will provide additional clarification and guidance and take your questions.

How to Submit an Application to the OFAC Licensing Division: Practical Guidance for Preparing Your Submissions

How to Submit a Specific License Application for Transactional Requests

• The information necessary for OFAC to consider the application “complete”
• Differences and similarities between a specific license application and a request for interpretive guidance on general licenses
• The role of an OFAC Statement of Licensing Policy or FAQs in a license application
• The interagency process – the roles of the State Department and/or Commerce Department in certain types of applications

How to Submit a License Application for the Release of Blocked Funds

• How does this type of license application differ from a Transactional Request?
• Types of information required for OFAC to process the application
• What is the process for these types of applications?

Other Types of OFAC Licensing Communications

• General License Guidance Letters – what do these do?
• Denial Letters – what happens if your license application is denied

How to Contact OFAC

• Understanding the timing of getting an OFAC response
• The difference between a formal OFAC determination and the OFAC Compliance hotline
  

Practical Guidance for Working Effectively with OFAC – and Review of Proficiency Assignment

How to Work Effectively with OFAC

• Understanding how OFAC is structured
• The importance of OFAC FAQ’s
• Lessons learned from Enforcement actions
• Reporting to OFAC
• Importance of communication
• How to get your questions answered

Review of Proficiency Assignment

In advance of this last unit, participants will complete an assignment on various sanctions scenarios. The questions will be based on real-world case studies. During this last session, participants will share their responses to the assignment questions, followed by in-depth feedback from the expert instructors.

Award of “Passport to Proficiency”
Participants who have completed all Units will receive a certificate reflecting their proficiency in the essentials of the U.S. Economic Sanctions