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Client Alert 20 Mar. 2024
Please download the full client alert here.
On March 6, 2024, the U.S. Departments of Commerce, Treasury, and Justice issued a Tri-Seal Compliance Note (“Note”) warning non-U.S. persons of the risks of violating U.S. sanctions and export control laws.
The Note follows previous tri-seal compliance notes focused on voluntary self-disclosure policy and the use of third-party intermediaries for sanctions evasion and reflects enhanced interagency cooperation on enforcement of sanctions and export controls.
The Note does not impose any new legal obligations or amend existing laws.
Application of U.S. Sanction Laws to Non-U.S. Persons
All “U.S. persons” must comply with U.S. sanction laws wherever located. “U.S. persons” are United States citizens, permanent resident aliens, entities organized under the laws of the United States including their foreign branches and subsidiaries and all persons located in the United States. In certain sanctions programs, including Iran, Cuba and North Korea, foreign entities owned or controlled by U.S. persons also must comply with U.S. sanction laws.
However, the Note warns that non-U.S. persons are also subject to sanctions prohibitions. “Non-U.S. persons are prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as from engaging in conduct that evades U.S. sanctions.”
The Note provides examples of activities by non-U.S. persons that constitute violation of U.S. sanctions, including where a non-U.S. person:
OFAC may use its enforcement authorities against U.S. and non-U.S. persons who violate applicable sanctions prohibitions. OFAC’s authority to enforce prohibitions against non-U.S. persons is distinct from its authority to impose sanctions on non-U.S. persons.
Application of U.S. Export Controls to Non-U.S. Persons
The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) administers and enforces U.S. export controls contained in the Export Administration Regulations (“EAR”). All items of U.S. origin, items physically located in the United States as well as items produced outside the United States that incorporate a certain percentage of U.S.-origin components or produced using U.S. technology or software are subject to the EAR wherever located in the world. Such items are “subject to the EAR.”
The Note stresses the extraterritorial application of the EAR and the types of transactions that the regulations cover, which are exports, reexports (transfer from one foreign country to another foreign country) and transfer within a foreign country of all items subject to the EAR.
Criminal Penalties
For willful violation of U.S. sanctions and export control laws, the Department of Justice (“DOJ”) can impose significant criminal penalties including imprisonment of up to 20 years and a fine of $1 million.
How Non-U.S. Persons Can Comply with U.S. Sanctions and Export Controls
The Note recommends measures for non-U.S. persons to remain compliant with U.S. sanctions and export control laws, including:
Conclusion
The Note’s emphasis on extraterritorial application of U.S. sanctions and export controls highlights risks for non-U.S. persons operating in global commerce. Non-U.S. persons are strongly advised to establish extensive internal screening and due-diligence systems and employ a risk-based approach to remain compliant with U.S. sanctions and export control laws.
Economic Sanctions
International Sanctions Regimes
Ana Amador
Associate
Marwa Farag
Ziad El Oud
Waka Taniguchi
International Associate
Jason D. Wright
Partner
New York
+1 212 696 6000
Washington, D.C.
+1 202 452 7373
client alert
UK Government Permits Acquisition of Shares by Company Owned by Sanctioned Oligarchs
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