OFAC Sanctions

The United States plays an important role in the international fight against
money laundering, terrorism financing, and other financial crimes – and does so
by imposing economic sanctions against the countries, entities and individuals
engaged in those activities. The United States’ sanctions are implemented and
enforced by the Treasury Departments’ Office of Financial Assets Control.
What is the OFAC Sanctions List?

The OFAC Sanctions List contains information on the current targets of sanctions by the United States.
OFAC maintains several sanctions lists, each dealing with a group of targets.
 The Specially Designated Nationals (SDN) List

 Sectoral Sanctions Identifications List

 The Foreign Sanctions Evaders List

 The Iranian Sanctions List.

Who must comply with OFAC regulations?
• U.S. citizens and permanent residents wherever located.
• All persons and entities within the United States
• All U.S. incorporated entities and their foreign branches.
• Foreign subsidiaries owned or controlled by U.S. companies also must comply.
• Foreign persons in possession of U.S.-origin goods.
How much are the fines for violating these
regulations?
OFAC considers non-compliance with sanctions to be a serious threat to national
security and foreign relations.
Consequently, those who breach OFAC sanctions without obtaining the proper
license can face severe legal repercussions. Fines range up to $20 million,
depending the offence, and prison sentences can be as long as 30 years.
The numbers vary considerably depending on the specific crime committed and
the number of times it occurred.
Sectoral Sanctions Identifications
• OFAC publishes a list of Sectoral Sanctions Identifications (SSI), which lists persons, companies, and
entities in sectors of the Russian economy (especially energy, finance, and armaments), prohibiting
certain types of activity with these individuals or entities by United States persons, wherever located.
• OFAC has restricted US persons and persons within the United States from transacting in, providing
financing for, or otherwise dealing in new “debt” of longer than 90 days’ maturity issued for
sanctioned persons, any entity such sanctioned person owns, directly or indirectly, 50 percent or
more, their property, or their interests in property. 
• In the case of the sanctioned entities solely in the financial sector, the same restrictions also apply to
newly issued “equity.”
• The SSI List identifies entities in the Russian financial and energy sectors that OFAC has targeted for
the new debt and new equity sanctions.
Sectoral Sanctions Identifications

 Definition of debt.  “Debt” includes bonds, loans, extensions of credit, loan guarantees, letters of
credit, drafts, bankers acceptances, discount notes or bills, or commercial paper. 

 Definition of equity.  “Equity” includes stocks, share issuances, depositary receipts, or any other
evidence of title or ownership.

 Broader restrictions for Russian financial sector.  Directive 1 – restricts transactions related to

new debt and new equity issued by listed entities in the financial sector.  Directive 2 – which
pertains to the energy sector, restricts transactions related only to new debt only. (
https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1576 )

 Effective dates.  The restrictions set forth in Directives 1 and 2 apply to new debt and new equity
issued on or after July 16, 2014 and with a maturity of 90 days or longer. 
Broader restrictions for Russian financial sector
• Directive 1, as amended, prohibits the following transactions by U.S. persons and within the United
States:
• (1) all transactions in, provisions of financing for, and other dealings in new debt of longer than
30 days maturity or new equity of persons determined to be subject to Directive 1, their
property, or their interests in property; and

• (2) all activities related to debt or equity issued before September 12, 2014, that would have
been prohibited by the prior version of Directive 1.

• Directive 2, as amended, prohibits the following transactions by U.S. persons and within the United
States: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90
days maturity of the persons subject to Directive 2, their property, or their interests in property.
Examples of sanctioned entity
1. The sanctions were mostly directed at banks:
• Sberbank, VTB, Gazprombank, Rosselkhozbank, Vneshekonombank, Bank of Moscow

2. Major publicly owned companies in the fuel/energy sector:

• Rosneft, Transneft, Gazpromneft

3 .Military-industrial complex:
• Uralvagonzavod, Oboronprom, OAC, etc.
 Impact of OFAC
• The main channels of the sanctions’ influence on the real sector
• Increased cost of debt financing limits access to refinancing, thereby
affecting investment opportunities for companies.
• Moreover, restrictions on technology exports to the Russian
Federation constrain the potential growth of total factor productivity.
• Sanctions have considerable indirect effects on the Russian economy
in the form of decreasing foreign direct investment, fewer borrowing
opportunities for companies and banks not directly targeted by the
sanctions.
• Lower capital inflow into the government debt market. 
Other Sanctions Programs
• Burma Sanctions
• Cuba Sanctions
• Iran Sanctions
• North Korea Sanctions
• Somalia Sanctions
• Sudan, Darfur, and South Sudan-related Sanctions
• Syria Sanctions
• Venezuela Sanctions
Does OFAC have a web-based search
engine for its sanctions lists?
• Yes, OFAC does maintain its own web-based search service.
• https://sanctionssearch.ofac.treas.gov/
OFAC COMPLIANCE CHECKLIST FOR BANKS
OFAC does not require banks to set up a specific compliance program.
All it requires is that banks and financial institutions abide by its laws,
such as:

• Perform due diligence to determine whether a “hit” is a valid OFAC match.

• Block transactions, including the opening of new accounts, that involve
countries and entities on the SDN list.
• Reject transactions not involving SDNs but prohibited by sanctions laws.
• Report blocked or rejected transactions to OFAC within 10 business days.
• Provide an annual report of blocked property by September 30 of each year.
What to do when facing a potential
sanctions issue ?
• Never ignore any sign of a sanctions issue
• Credit Suisse and all its personnel are responsible for ensuring they
follow the key elements of Globally applied Sanctions firmwide.
• As per GP-00012 Escalation, you have an obligation to recognize,
communicate and escalate unusual incidents or concerns.