Criminal Defense Lawyers

Non-US Companies and Sanctions

International companies are increasingly concerned about complying with U.S. sanctions laws. These laws restrict doing business with certain countries, companies, and even individuals worldwide. While they apply to U.S. firms, they can also apply to non-U.S. parties in some cases, even for activities unrelated to the U.S. Many foreign companies wonder how the U.S. government can extend its jurisdiction globally – yet U.S. sanctions on non-U.S. parties are rising.

Given the huge recent penalties against non-U.S. parties for U.S. sanctions violations – including $8.9 billion for financial institutions¹ and $1.19 billion for non-financial companies² – every non-U.S. company should understand these laws. This article examines U.S. sanctions laws and the risks they pose for foreign companies.

U.S. Sanctions Laws and Regulators

Various U.S. laws authorize sanctions against foreign governments, entities, and individuals. Key laws include the Trading with the Enemy Act, International Emergency Economic Powers Act, Arms Export Control Act, and others. These laws aim to achieve U.S. foreign policy and national security objectives.

Several U.S. government agencies administer sanctions programs, notably:

• Treasury Department’s Office of Foreign Assets Control (OFAC)
• State Department
• Commerce Department

OFAC is the primary sanctions regulator. It publishes lists of sanctioned countries, companies, vessels, and individuals – known as Specially Designated Nationals (SDNs). U.S. persons are generally prohibited from dealing with SDNs.

Risks for Foreign Companies

Foreign companies with sufficient U.S. contacts that violate sanctions face potential OFAC civil enforcement. But even without U.S. contacts, they still face risks, including:

• Reputational harm – Being publicly penalized can damage reputation and investor confidence.
• Loss of access to U.S. markets/finance – Violations may lead to loss of U.S. bank accounts, export privileges, etc.
• Personal liability – Corporate officers can be held personally liable for sanctions violations.

Civil Penalties

OFAC can impose civil fines up to $307,922 per violation or twice the value of the underlying transaction. Recent major OFAC cases include:

• BNP Paribas – $8.9 billion for processing transactions for sanctioned entities
• ZTE – $1.19 billion for exporting telecom equipment to Iran and North Korea
• UniCredit Bank – $553 million for processing transactions for sanctioned Iranian and Libyan entities
• Société Générale – $1.3 billion for violations related to Cuba and Iran

Criminal Penalties

Willful sanctions violations may also lead to criminal prosecution. Criminal penalties can include:

• Fines up to $1 million per violation for companies, $250,000 for individuals
• Jail time up to 30 years for individuals

Risk Mitigation for Non-U.S. Companies

Foreign companies can take several steps to mitigate U.S. sanctions risks:

• Sanctions compliance program – Have policies, procedures, training to screen transactions against U.S. sanctions lists.
• Transaction screening – Screen customers, suppliers, transactions against OFAC/other lists.
• U.S. contacts review – Review dealings with U.S. persons, use of U.S. financial system, U.S. touchpoints.
• Contract terms – Include sanctions compliance provisions in contracts.
• Awareness training – Educate staff on sanctions compliance.
• Audits – Conduct periodic audits of sanctions compliance program.

Given the steep penalties imposed on foreign firms, non-U.S. companies should evaluate their sanctions risk exposure and compliance measures. Robust screening solutions and effective compliance programs are essential.

1. U.S. Treasury Department, “BNP Paribas Sentenced for Conspiring to Violate the International Emergency Economic Powers Act and the Trading with the Enemy Act,” May 1, 2015. https://home.treasury.gov/news/press-releases/sm680 [return to text]

2. U.S. Department of Commerce, “Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government,” April 16, 2018. https://2017-2021.commerce.gov/news/press-releases/2018/04/secretary-ross-announces-activation-zte-denial-order-response-repeated.html [return to text]