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