USA – WASHINGTON, DC Trends and Developments Contributed by: Jonathan M. Epstein, Daniel E. Goren, Tahlia Townsend and Manny Levitt, Holland & Knight LLP
US Economic Sanctions: An Introduction The US government continues to employ economic sanctions aggressively to achieve national security and foreign policy objectives, creating increasingly complex compliance risks for both US and non-US businesses. The stated purpose of US sanctions is to deter, cut off resources to, and force change among governments, companies, and individuals who engage in activities that threaten US national security or foreign policy, such as development of weapons of mass destruc - tion, terrorism, transnational criminal enterprises, gross violations of human rights, government corrup - tion, destabilising democratic regimes, cybercrime, and sanctions evasion. US sanctions are primarily administered and enforced by the US Department of the Treasury (Treasury) Office of Foreign Assets Control (OFAC), although the US Departments of State (State) and Justice (DOJ) also play important roles. Sanctions programs may origi - nate in or be expanded by legislation passed by Congress, or they may derive from Executive Orders issued by the President under statutory authorities, including the International Emergency Economic Pow - ers Act. Broadly speaking, US primary sanctions fall into three categories: • territorial embargoes, currently targeting Cuba, Iran, North Korea, Syria, Crimea, and the self-pro - claimed Donetsk and Luhansk Peoples’ Republics; • list-based sanctions, which range from full block - ing sanctions that prevent a Specially Designated National (“SDN”) from accessing the US financial system or participating in nearly any other transac - tion involving US persons to more limited restric - tions such as prohibitions on purchasing equity in the sanctioned party, and which typically extend to parties in which one or more sanctioned parties cumulatively hold 50 percent or more of the equity (the so-called 50 Percent Rule); and • sectoral sanctions, which prohibit specified activi - ties involving a target jurisdiction but stop short of a total embargo – for example, sanctions that restrict new investment in Russia, imports of vari - ous Russian products, and exports of luxury goods and many types of services.
The restrictions imposed under US sanctions apply to “US persons”, which include entities organised under US law, as well as citizens, lawful permanent residents, and persons located in the United States. In the case of the Cuba and Iran programs, foreign subsidiaries of US entities are also required to comply. Nonetheless, US sanctions have a vast extraterritorial scope, primarily because: • US persons are not only prohibited from engag - ing in restricted activities, but also from facilitating prohibited activities by non-US persons; and • non-US persons can face liability for engaging in transactions prohibited by US sanctions if there is any US nexus that could “cause” a US person to violate US sanctions. Breaches of US sanctions may be enforced through criminal or civil actions. Civil enforcement actions may be pursued even for unintentional violations (strict lia - bility), and, in most cases, are subject to a maximum civil penalty currently set at USD377,700 per violation. In addition, where there is no US nexus, such that the US government cannot claim a breach of sanctions or pursue an enforcement action, so-called “secondary sanctions” authorities authorise the US government to designate non-US persons as SDNs (or impose other sanctions) for engaging in activities such as providing goods and services to specific targets of US sanctions or operating in specified sectors of a target country’s economy (eg, the Russian defence sector). US Sanctions in 2025 As of June 2025, over 17,000 entities and individuals have been designated as SDNs and are thus subject to US blocking sanctions. These include governments and their instrumentalities, private and state-affiliated businesses, individuals, vessels, and aircraft in coun - tries worldwide. Of these SDNs, 3,125 were added between 2023 and 2024, marking a 25% increase over that period. While geopolitical events can lead to rapid changes in US sanctions policy, there has been little slowdown in 2025 thus far. The broad extraterritorial reach of US sanctions, the rising number and complexity of prohibitions, and the expansion of secondary sanctions authorities have significantly increased the risks for companies world -
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