AML POLICY
Broad prohibitions, of course, permit an
almost infinite level of discretion when it
comes to the actual breadth of those restric-
tions. For example, when Myanmar had
broad sanctions imposed on them, the
import restrictions were limited to Burmese
jade, jadeite and other precious stones.
Similarly, U.S. Iranian import prohibitions
currently have a carve-out for carpets and
foodstuffs—although that exception was
terminated for a period of time when maxi-
mum pressure was being applied to Tehran.
In addition, there was a significant liberal-
ization of a number of OFAC Cuba sanc-
tions prohibitions during the latter stages
of the Obama presidency. Such measured
adjustments to sanctions programs provide
shows of goodwill, while providing some
modicum of economic relief as an incentive
for continued good faith dealings. • Required acquisition of beneficial ownership information for the account
subject to the Special Measure
Secondary sanctions:
The long arm of sanctions law • Prohibition on assistance from the Export-Import Bank for exports to the
sanctioned subject
Secondary sanctions provide a mechanism
by which regulators can exert pressure on
foreign persons and companies whose
actions make the domestic sanctions less
effective in achieving their goals. These
sanctions are used when the regulator does
not have jurisdiction to impose the types of
consequences (such as civil monetary pen-
alties) that can be levied on domestic per-
sons and firms. While relatively new as a
compliance term, secondary sanctions are
not really all that new as a policy tool. One
can consider the use of the Entity List by
the Commerce Department’s Bureau of
Industry and Security, as well as the Section
311 sanctions imposed by the Financial
Crimes Enforcement Network as the impo-
sition of secondary sanctions, as two prom-
inent examples that fit the functional
definition, but with which one may not
associate the term “secondary sanctions.”
While being placed on the Entity List is
pretty cut and dried (exports to firms on the
list require licenses), the other programs all
present a range of options. The Section 311
sanctions options (called Special Measures)
include:
• Enhanced reporting and record keeping
requirements for correspondent
accounts
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• Required identification of and information gathering for each customer
using correspondent or payable through accounts (PTAs)
• Outright bans on opening or maintaining correspondent accounts
In contrast, the Part 561 secondary sanctions options (part of OFAC’s Iranian
sanctions program) can result in one or more of the following restrictions being
imposed, in lieu of outright denial of correspondent relationships:
• Restrictions or prohibitions on trade finance transactions
• Restrictions or prohibitions on foreign exchange transactions
• Restrictions on transaction types
• Limits on the number of and/or monetary value of transactions
• Requiring pre-approval of each transaction
And while the Non-SDN Iran Sanctions Act List (NS-ISA) is currently empty, due
to the changes wrought by the Joint Comprehensive Plan of Action (JCPOA), the
Act provides for the imposition of five or more of the following restrictions:
• Restrictions on loans from U.S. banks
• Prohibition on being a primary dealer in U.S. government securities
• Prohibition on holding U.S. government funds on deposit
• Prohibition on procurement from the sanctioned party
• Prohibition on foreign exchange transactions
• Prohibition on all banking transactions
• Prohibition on ownership of any U.S. property
• A requirement to obtain export licenses for all controlled goods exports to
the sanctions target
• Prohibition on investing in securities issued by the sanctioned party
• Travel restrictions on the firm’s officers
Each of these possible regulatory actions imposes a commercial penalty on the
target of that action. While, to date, those designated under these programs
have largely been given the maximum possible penalty, the way regulations
are written provides a significant amount of flexibility to regulators. As behav-
ior changes, the level of ongoing restriction on business dealings can be
adjusted up or down to provide incentives for continued compliance with reg-
ulatory expectations or disincentives for continued non-compliance.
Secondary sanctions provide a mechanism by which
regulators can exert pressure on foreign persons
and companies whose actions make the domestic
sanctions less effective in achieving their goals
ACAMS TODAY | SEPTEMBER–NOVEMBER 2017 | ACAMS.ORG | ACAMSTODAY.ORG