What’s the difference between US primary and secondary sanctions, and how do I know which ones are relevant to me? | LegaMart

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QuestionOct 4, 2020 - 7:28

What’s the difference between US primary and secondary sanctions, and how do I know which ones are relevant to me?

i want to make sure I don’t violate the US primary sanctions that will remain in place

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Oct 10, 2020 - 18:15

The primary sanctions are related to the various OFAC sanctions against countries, entities, individuals, and activities that have a US nexus. The secondary sanctions are related to the non-US citizens who engage in specific activities involving targeted countries, entities, and individuals without a US nexus. If your activities have a US nexus, such as involving the US dollar you may be subject to the US primary sanctions. To see if you would not be subject to the secondary sanctions, it depends on the kind of your business and your transactions.

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Apr 25, 2021 - 5:11

Us primary sanctions are applied by blocking or freezing the country’s assets (the Specially Designated National (SDN)). By doing so, the SDN’s assets in the US cannot be retrieved without OFAC’s (Office of Foreign Assets Control) permission. Based on this type of sanction, US persons’ transactions with NDA’s are generally forbidden. In some cases, the primary sanctions target entire countries or geographic regions. Therefore, US persons cannot have any economic relation with these countries. Here the US person includes (i) US citizen (ii) US permanent residence (iii) US based entity (including foreign branches) and, (iv) anyone in the US (which generally includes US branches of foreign entities, as well as any individuals who are physically in the US). While the primary sanctions are only regarded US persons transactions with SDNs, by considering the “facilitation” element, the scope of such sanctions will be applied broadly. This rule means that a US person cannot use a non-US person to make a transaction which itself is prohibited to conduct under the sanctions. The facilitation factor is mostly related to the US dollar transactions. Secondary sanctions target non-US persons by threatening them that if they get involved in transactions with SDNs, they will be excluded from the US market. Secondary sanctions have been existed for many years. However, since 2010 (by using such sanctions against Iran), they have been more considered. Secondary sanctions also target countries such as North Korea, Russia, Venezuela and, Syria. For tracking the US sanction’s regulation which may affect your business, there are some factors you may want to consider: • 50% Rule: If an SDN owns 50% or more of an entity, that entity is itself treated as an SDN. Based on this rule, the ownership is the criterion not the controlling factor of the entity. • The SDN list regularly changes. • OFAC has an updated SDN list. You can see the latest list and changes here https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists

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