USA LAW AND PRACTICE Contributed by: Seward & Kissel LLP
7.2 Scope of Designation Pursuant to OFAC’s 50 Percent Rule, the property and interests in property of entities directly or indirectly owned 50% or more, whether individually or in the aggregate, by one or more blocked persons are them - selves considered blocked. Therefore, if one or more sanctioned persons own an entity, and their collective ownership stake is 50% or higher, then that entity and its property will also be sanctioned. OFAC’s guidance in this area emphasises the importance of conducting thorough due diligence to determine relevant owner- ship stakes. 7.3 Circumvention 7.3.1 Prohibiting Provisions US sanctions capture not only primary violations but also transactions that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate prohibitions imposed by OFAC under various sanctions authorities. Persons that pro- vide financial, material or technological support for or to a designated person may also be designated by OFAC under the relevant sanctions authority. 7.3.2 Criminal Penalties Although violations of OFAC sanctions can result in civil liability, wilful violations – including wilful efforts to evade or avoid sanctions, or to facilitate prohibited transactions – can lead to criminal charges brought by the DOJ under IEEPA. Should OFAC believe that a particular case might warrant criminal penalties, it may refer the case to the DOJ. Under IEEPA, violators can face criminal fines of up to USD1 million or imprison - ment for up to 20 years for willful sanctions violations.
A narrow exception exists where a party holds a judgment against a “terrorist party” (including foreign states designated as state sponsors of terrorism) with- in the meaning of the Terrorism Risk Insurance Act of 2002 (TRIA) (28 USC.S. § 1610 note). The TRIA per - mits such parties to seek the attachment and execu - tion of blocked assets, provided that doing so would otherwise satisfy the requirements of applicable law. Courts have held that, in these circumstances, such attachment and execution may proceed without a separate requirement to obtain a licence from OFAC.
7. Designation, Compliance and Circumvention 7.1 Executive Body
Depending on the underlying authority used to desig- nate a person for sanctions, different US government agencies may have the lead with respect to designa- tion decisions. The US Department of the Treasury is in charge of publishing and administering the SDN list, and is typically the primary authority in charge of designation decisions. That said, many programmes call for designations to be made by the Treasury, in consultation with other parts of the US government, such as the Department of State and the US Attorney General. Other programmes will give the Department of State or other US agencies (often in consultation with the Department of the Treasury) the authority to designate persons for sanctions.
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