What is the Ukraine-related sanctions program and who does it target?
Interviewee: The Ukraine-related sanctions were issued as a result of the crisis in Crimea. The sanctions designate specific persons, and any property subject to U.S. jurisdiction belonging to those designated persons is blocked. Additionally, U.S. persons and U.S. businesses are prohibited from transacting with those designated persons. The sanctions are to target those persons that are determined by the U.S. government to have asserted a governmental authority in the Crimean region without the permission of the government of Ukraine. From our perspective in the United States, our national security is threatened when democratic processes of an ally are undermined overseas.
Do people engaged in business transactions with Ukrainian people or working in Ukrainian corporations need to worry?
Interviewee: Yes and no. The sanctions are called the Ukraine-related sanctions because that’s the region where the disputes and the crisis have emerged. The sanctions are really targeting Vladimir Putin’s inner circle of colleagues and confidants with the goal of changing Vladimir Putin’s decision-making calculus and his decision to invade and occupy the Crimean peninsula. The sanctions are not really meant to hurt the Ukrainian people, but U.S. persons should worry. Worrying is a good start before engaging in any transactions in that part of the world, but taking proactive measures to comply with the law is a better course of action. One particular thing that is causing U.S. people a lot of compliance headaches is OFAC’s guidance on entities owned by blocked persons. Cross-checking your potential business partners against the SDN list seems like a safe way to ensure your compliance. However, OFAC warns that if a person or entity is at least 50 percent owned by blocked persons, thatbusiness or entity is also considered blocked even if it doesn’t appear on the SDN list. There is the potential to inadvertently or unwittingly violate the law even though you’ve checked the SDN list.
OFAC’s entity guidance was also recently amended to clarify that if the aggregate ownership of SDNs is 50% or more, then the entire entity is considered block, even if no single SDN owns 50% of the entity.
Is it likely that these sanctions would be lifted in the foreseeable future?
Interviewee: That is not really foreseeable; OFAC doesn’t tend to announce whether or not it’s going to lift sanctions. Looking at the situation in Ukraine and how recent the situation is, it’s not very likely that the sanctions will be lifted any time soon. However, there really is no way to account for it in the future.
Where does the legal authority for OFAC sanctions come from?
Interviewee: The statutes primarily used in this area of law are the International Emergency Economic Powers Act (IEEPA), which gives the president broad authority to impose sanctions. There’s also the Trading with the Enemy Act, which is a little bit dated. The only sanctions program that is administered under that statute is the Cuba sanctions program. There are other related statutes on the books like the UN Participation Act, which allows the United States to adopt the sanctions that are imposed by the United Nations. There are also several others, but those three are probably the most common ones used to impose sanctions at the presidential level.