Civil and Criminal Penalties of Sanction Violation

Introduction

Sanction is a punitive measure against violators of any order by the government. These punitive measures can be against government organizations or private entities. Sanctions can be economic, political, or diplomatic, depending upon the nature of the sanction violation. 

In international relations, imposing and withdrawing sanction, violation is a common practice from time to time. Countries individually and collectively impose sanctions on other countries, organizations, and entities to impose punitive measures upon them. 

Sanctions can be in selected parts or applicable to the whole nation like sanctions can be imposed on trade with the country, but employment opportunities could be allowed. Alternatively, a country could impose blanket sanctions that cover all transactions.

This article will help us understand the sanction violation imposed by the USA, how these sanctions are implemented, who is covered by them, and what consequences result from violating them. 

OFAC Sanctions Program

Considering sanctions can be imposed by individual countries, an organization or body is responsible for monitoring their implementation. In the USA, OFAC is the governing body.

The USA implements sanction violation on countries and individuals that are related to or part of aggression, terrorism, drug trafficking, and so on. The OFAC governs US sanctions under the department of Treasury.

OFAC office began operations in 1950. Before that, there was the office of foreign funds controlling FFC. OFAC governs the economic and trade sanctions implemented by the USA. Its jurisdiction ranges from citizens of the USA, Cuba, Iran, resident aliens, and those activities that have substantial USA nexus. The OFAC has over 12 sanction programs and 6300 names sanctioned under it, Adding the US to the list of active users of the sanction violation programs. 

OFAC, What Does It Do and How Does It Address Sanction Violation?

Congress approves economic sanctions in the USA by using emergency powers by President. Sanction violation usually applies when danger looms upon national security or the economy of the USA. Sanctions are like economic, asset freezing, and trade ban so that effect is felt in the daily life of the nation, organization, or individual.

OFAC is the head of all forms of sanction programs in the USA following are a few important ones:

1. Balkans-Related sanctions.
2. Belarus Sanctions.
3. Burma Related Sanctions.
4. Burundi Sanctions.
5. Central African Republic Sanctions
6. Chinese military companies sanction through the sanctions act Of 2017 ( CAATSA)
7. Counter Narcotics Sanctions Trafficking Sanctions.
8. Counter Terrorism Sanctions.
9. Cuba Sanctions.
10. Cyber terrorism Sanctions
11. Hong Kong Sanctions
12. Iran Sanctions
13. Lebanon Sanctions
14. Libya Sanctions
15. Nicaragua Sanctions
16. Non-Proliferation Sanctions.
17. North Korea Sanctions
18. Sudan Sanctions 
19. Syria Sanctions.
20. Russia Sanctions.

Sanction Violation in OFAC Falls into the Following Categories:

Comprehensive Restrictions

It is the most regressive restriction, affecting the whole trade and the transaction system if the country is blocked. The embargo is a good example.

Limited Restrictions

There may be trade restrictions, but licensing and obtaining permission can be the way out. There are only a few numbers of restrictions, not a complete ban, and you can get around them with a permit.

List Based Restrictions

Only a few activities are listed to have maximum effect. Activities like money transfer or import or export are listed to punish a country.

Who and What are SDN?

Specially designated nationals are individual sanction violation imposed on designated people, organizations, or institutions. The sanction violation of this nature is not for the whole nation, but is more regressive upon selected entities.

OFAC Laws and Sanction Violation Penalties 

Under the law, every citizen, authority, and organization operating or incorporated in the USA has to bind by the regulations program of the OFAC. OFAC has complete discretion in deciding the nature and amount of punishment for the violation. Each violation weighs in on the balance of:  

1. In what way was the matter disclosed? 
2. Was it disclosed voluntarily or discovered during the investigation?
3. Was the violation intentional, or was it unaware? 
4. What harm is done by the violation?
5. What is the entity’s size?
6. How long have violations been going on?

The punitive measures vary from stage to stage in OFAC. Below is the order in which they proceed:

1. When the matter is very minute, a person is not punished or held responsible.
2. If an entity or person has violated the law but is not very serious, they release a cautionary letter to that entity.
3. If there is a visible and clear violation of OFAC rules, penalties will apply.
4. If there is a violation of serious nature, the matter is dealt with by the criminal justice system, and the person can face imprisonment for 30 years.

OFAC Screening 

Banks, financial institutions, and corporates must comply with the OFAC regulations before taking any new customers or making any commercial transaction. The list of rules and sanctioned countries is available on the OFAC website for the public.

The OFAC search includes internal search as per OFAC programs in anti-money laundering, counter-terrorism, and aggression. A complete screening of the new customer is mandatory before making any financial relations.

Entities must do a thorough KYC before entering into any transaction with other entities.

Entities interested in the USA business or dealing with goods and technology developed in the USA are also treated as subjects of OFAC and have to comply with its rules.

How Do Organizations Block and Reject Transactions?

Rejecting and blocking are the two ways to deal with the transactions on sanctioned list.

Rejecting 

Transactions carried on by a potential connection with a sanctioned country but without an actual connection are rejected.  

Blocking 

If the sanctioned entity carries the transaction and the actual connection is made, the transaction will be canceled with no refund. The money in this transaction is blocked or frozen, and in 10 days, report the transaction and freeze to OFAC. Institutions that hold blocked or frozen assets must prepare an annual report of the list of blocking.

Do Governments Outside the US Have a Screening List?

It is the standard practice that allies and business partners interested in different nations respect and follow the regulations. 

Under OFAC, there is a provision that even if the contact does not exist, even if there is suspicion of contact with the sanctioned entity or individual, it shall be treated as a sanctions violation of a given time, and punitive measures will follow.

Conclusion

Sanction violation have been there from ancient times and served as powerful tools to punish and correct other nations. 

The sanctity of sanction violation is protected by solid implementation and enforcement measures. Every nation tries to implement sanctions imposed to the fullest. 

OFAC proves how strongly the USA stands by its principles of international relations and maintaining its law and order and holding entities responsible and making them face the consequences, even if they are citizens or large corporates.