Alert February 18, 2014

OFAC Issues New Foreign Sanctions Evaders List

Summary

U.S. companies and others engaged in cross-border transactions now have yet another list to check: OFAC’s new Foreign Sanctions Evaders List. Sanctions screening procedures should be amended to ensure that this new list is included.

The Office of Foreign Assets Control (“OFAC”), of the U.S. Department of the Treasury, has created a new list – the Foreign Sanctions Evaders List (“FSE List”) – that U.S. companies and others should consult when engaging in cross-border transactions.  The FSE List implements Executive Order 13608 by identifying non-U.S. persons and entities that have engaged in conduct evading U.S. economic sanctions with respect to Iran or Syria.  FSE-listed persons or entities need not be located in Iran or Syria, and in most instances they are not.

What is prohibited?

U.S. persons are generally prohibited from all transactions or dealings, direct or indirect, involving persons or entities identified on the FSE List related to any goods, services, or technology (i) in or intended for the United States, or (ii) provided by or to U.S. persons, wherever located.  Unlike the OFAC Specially Designated Nationals List with which most U.S. companies are familiar, the new FSE List does not require blocking of property and reporting of transactions with FSE-listed entities.

What should U.S. companies do to comply?

OFAC has elected to maintain a separate FSE List rather than include the FSE entries on the Specially Designated Nationals List.  Consequently, U.S. companies should screen their counterparties against both lists (as well as any other applicable U.S. or other prohibited-party lists), or confirm that the software or third-party service provider on which they rely for sanctions screening will include the FSE List within the screening protocol.  U.S. companies should also evaluate whether these new FSE List obligations should be reflected in their trade compliance programs, training, customer and distributor agreements, diligence procedures, or otherwise.

What about non-U.S. companies?

Non-U.S. companies, whether or not they are owned or controlled by U.S. persons, should also evaluate risks presented by the FSE List.  These risks include that their support of FSE List entities could result in the non-U.S. company itself being sanctioned, placed on the FSE List, and effectively denied access to the U.S. markets and financial system.

* * * * *

If you would like additional information about the issues addressed in this Client Alert, please contact Richard Matheny, who chairs Goodwin Procter’s National Security & Foreign Trade Regulation Practice, or the Goodwin Procter attorney with whom you typically consult.