Fines of more than US$1.5bn imposed during the last three years on European companies send out a clear message: the global enforcement of US sanctions is becoming an increasing issue. Transactions in US dollars usually involving a correspondent bank or a branch office automatically fall under the jurisdiction of the US authorities. With the US dollar being the reserve currency and primary means of payment in many areas of the international economy, compliance with US sanctions is becoming increasingly important for European companies that traditionally have business relationships with countries holding large amounts of US currency.

Since the presidency of George W. Bush, the US has increasingly tailored its sanctions to focus on entities and individuals instead of nation states. Where once primarily state sponsored individuals or enterprises from sanctioned countries were in focus, the sanctions today are targeted against a diverse set of individuals and legal entities in many different countries.

The sanctions list published by the Office of Foreign Asset Control (OFAC) of the US Treasury includes ‘Blocked Persons’ and ‘Specially Designated Nationals’ (SDNs) of the country-based sanctions programs. Besides the three strict programs against Iran, Sudan (excluding South Sudan) and Cuba, and the partially blocking programs against Syria, Myanmar (Burma) and North Korea, there are also currently over 4500 legal entities and individuals from 147 countries on the list, which are accused of terrorist activities, terrorist financing and drug trafficking. The latter are covered as independent entities under penalties regardless of whether their homelands are subject to sanction programs or not. Analysing the distribution of the SDN’s (legal entities as well as individuals) countries of origin it becomes clear that in particular the Middle East and South America are among the high-risk regions. Dealing with entities from these regions, one must not only avoid conducting business with sanctioned entities, but, moreover, examine with particular care whether the business partners in legitimate dealings are owned by SDNs and therefore must be treated as SDNs as well.

Oct-Dec 2013 issue

PricewaterhouseCoopers AG