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Are you based in Latin America and interested in learning about how OFAC sanctions apply in the region?

The Office of Foreign Assets Control (OFAC), a division of the U.S. Department of the Treasury, is responsible for enforcing executive orders related to foreign policy and national security, including the imposition of sanctions against certain countries, entities and individuals that pose a threat to U.S. national security, foreign policy or economy, due to their involvement in illegal activities such as terrorism, drug trafficking and proliferation of weapons of mass destruction. Once the relevant executive orders are issued, OFAC is responsible for implementing and enforcing the directives contained in such executive orders, ensuring compliance with U.S. sanctions programs. 

OFAC sanctions typically bring consequences, such as:

  • Economic: Sanctions can lead to economic hardship for the targeted countries, entities and individuals, restricting their access to the global financial system and reducing their ability to engage in international trade.
  • Political: Sanctions exert political pressure on governments and regimes, seeking to encourage them to change certain policies or behaviors.
  • Compliance: Transactions with sanctioned countries, and designated entities or individuals must be avoided so as to comply with OFAC regulations and avoid applicable penalties which may include fines, revocation of licenses or authorizations needed to conduct certain types of businesses, asset freezes, being barred from accessing U.S. markets and conducting business with U.S. financial institutions, imprisonment and reputational damage which may affect the  ability to conduct business internationally. OFAC emphasizes compliance and offers resources to ensure companies and individuals adhere to sanctions regulations. Violations can be reported through voluntary self-disclosures, which may be considered mitigating factors when determining applicable penalties. To learn about the advantages of having a compliance manual that conforms to U.S. law, you can read Brown Rudnick’s article on that topic by clicking here.

OFAC maintains various lists to implement and enforce U.S. sanctions programs effectively. The following OFAC lists are particularly relevant in Latin America:

  1. Specially Designated Nationals and Blocked Persons List (SDN List): This list includes individuals, entities and organizations with whom U.S. persons and companies are prohibited from doing business.
  2. Sectoral Sanctions Identifications List (SSI List): This list focuses primarily on specific sectors and industries of a targeted country’s economy limiting certain types of transactions. 
  3. Foreign Sanctions Evaders List (FSE List): This list includes individuals and entities that have engaged in activities intended to evade U.S. sanctions.
  4. Non-SDN List: Various Non-SDN lists impose specific restrictions on certain individuals, entities and sectors without the comprehensive prohibitions of the SDN List.

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Assets of SDNs are typically blocked, and U.S. persons are generally prohibited from dealing with them. “Blocked assets,” are technically frozen and cannot be transferred, paid, exported, withdrawn or otherwise dealt in without authorization from OFAC.

Blocked assets may include: 

  1. Financial assets, including bank accounts, securities, and other financial instruments that belong to individuals or entities on the SDN list, or other OFAC lists. U.S. financial institutions are required to block these assets and report them to OFAC.
  2. Real estate owned by sanctioned individuals or entities, which cannot be sold, rented or otherwise utilized without OFAC’s approval.
  3. Tangible and intangible property, including machinery, equipment, intellectual property and other nonfinancial assets that are owned or controlled by sanctioned individuals or entities.
  4. Economic benefits or interests in assets that sanctioned individuals or entities may own, directly or indirectly. 

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The primary objectives of OFAC sanctions imposed throughout Latin America include combating drug trafficking, addressing human rights abuses, promoting democracy and preventing the financing of terrorism. Examples of OFAC sanctions dealing with Latin America include:

  1. Colombia: OFAC has imposed sanctions targeting Colombian drug cartels and their financial networks.
  2. Cuba: The longstanding U.S. embargo against Cuba is administered by OFAC. This includes restrictions on trade, travel and financial transactions with Cuba.
  3. Nicaragua: Sanctions against Nicaraguan officials and entities target those involved in corruption and human rights abuses.
  4. Venezuela: OFAC has imposed extensive sanctions on the Venezuelan government, targeting individuals, state-owned enterprises and sectors of the economy (such as oil, gas and gold). 

In the context of its sanctions program, OFAC has the ability to issue two types of licenses which authorize certain types of transactions and activities that would otherwise be prohibited under U.S. sanctions regulations:

  1. General licenses: General licenses are intended to provide a streamlined way to permit activities that are consistent with U.S. policy objectives, without requiring individuals or entities to apply for specific licenses. They apply broadly to all persons or entities covered by the relevant general license.
  2. Specific licenses: OFAC specific licenses are issued on a case-by-case basis in response to a written license application submitted to OFAC, which enable individuals and entities to engage in transactions that serve humanitarian, business, or other permissible purposes while ensuring compliance with U.S. sanctions policy. The application process for specific licenses is thorough and tailored to the unique circumstances of each application.

If you need assistance in understanding OFAC sanctions and learning how they may affect your business’s day-to-day operations, let us know. Our team of international lawyers, many of whom are also admitted to practice law in Latin American countries, can help create a tailor-made strategy to ensure compliance with OFAC regulations.