Navigating U.S. Economic and Trade Sanctions: A Compliance Lesson for International Banking and Trade Finance
By Hera U. Smith*
The United States imposes sanctions and embargoes on countries, entities or individuals that have been deemed to pose a threat to its national security and foreign policy. These sanctions are primarily enforced by the U.S. Treasury Office of Foreign Assets Control ("OFAC"), which has the power to impose significant monetary penalties on those who violate the sanctions. The sanctions imposed by the United States usually have extraterritorial application; hence, international corporations must be vigilant about keeping up to date and not engaging in any transaction that would violate United States sanctions.
Economic sanctions come at a huge cost for international corporations. The price of compliance has been steadily climbing and the penalties for non-compliance are rising even faster, with international banks being fined up to billions of dollars for violations. Economic sanctions have also harmed United States corporations. For example, these corporations have had to forgo doing business with prohibited countries, such as Cuba and Iran, as well as certain entities or individuals, which has resulted in significant actual costs due to the withdrawal from pre-existing commerce and lost prospective business opportunities.