OFAC Asks Non-U.S. Persons to Advance U.S. Foreign Policy

Of late, we have seen this "mission creep" carry over into the arena of trade sanctions, which are enforced by the Treasury Department's Office of Foreign Assets Control (OFAC). According to OFAC, these programs are meant to advance "U.S. foreign policy and national security goals." One might find it surprising that OFAC regards it as the responsibility of individuals outside of the United States to work to advance the nation's foreign policy and national security goals. And yet that seems to be the case. Indeed, 23 of the 67 settlements and enforcement actions OFAC has brought since May of 2017 — more than one-third of OFAC's announced cases — have targeted non-U.S. companies.

That OFAC would have such a heavy focus on foreign actors is not self-evident from its policy statements. For example, in its website's FAQ section, OFAC addresses the question of "[w]ho must comply with OFAC regulations," and emphasizes that U.S. individuals and entities must comply. It states that U.S. persons and permanent residents must comply with OFAC regulations, as well as "all persons and entities within the United States, all U.S. incorporated entities and their foreign branches." In addition, "foreign subsidiaries owned or controlled by U.S. companies also must comply" with certain sanctions programs. Finally, OFAC states that "[c]ertain programs also require foreign persons in possession of U.S.-origin goods to comply." Consistent with this, most of the cases that have been brought against non-U.S. entities are brought against those who transact in U.S.-origin goods (such as the 2/26/20 SITA settlement, the 8/24/17 COSL settlement, the 3/7/17 Zhongxing settlement, and the 1/12/17 Aban settlement) or involve non-U.S. financial institutions who interact with U.S. financial institutions for purposes of clearing U.S. dollar transactions (such as the 1/14/21 UBAF settlement and the 9/17/19 BACB settlement).