Understanding US Sanctions and Sanctions Lists

Sanctions are among the most powerful tools in a government’s foreign policy and national security arsenal. Of all the nations wielding such tools, the United States has arguably the most extensive, far-reaching, and impactful sanctions programmes in the world. For businesses operating globally, understanding how US sanctions work and how to navigate US sanctions lists is not just prudent;  it is essential for legal compliance, operational continuity, and risk management.

This article provides an in-depth look at the structure of US sanctions, how sanctions lists are maintained and enforced, the key agencies involved, types of sanctions, compliance challenges, and practical steps firms should take to stay on the right side of the law.

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What Are US Sanctions?

At its simplest, a sanction is a legal penalty or restriction imposed by one country or group of countries against another country, organisation, or individual to influence behaviour, punish wrongdoing, or deter future misconduct. The United States uses sanctions to address a wide array of threats, including terrorism, narcotics trafficking, human rights abuses, the proliferation of weapons of mass destruction (WMD), cybercrime, and foreign aggression.

US sanctions can be broad or targeted. Comprehensive or country-based sanctions typically prohibit nearly all trade and financial transactions with certain countries. Targeted or “smart” sanctions focus on specific individuals, companies, or sectors rather than entire nations.

Sanctions are a form of “economic statecraft”, enabling the US to project power without resorting to military action. They are also used to reinforce international norms and signal disapproval of actions that breach global rules.

The Key Agencies: Who Administers US Sanctions?

Multiple US government agencies play roles in the design, implementation, and enforcement of sanctions. The two most central players are:

Office of Foreign Assets Control (OFAC)
OFAC, a division of the US Department of the Treasury, is the primary body responsible for administering and enforcing economic and trade sanctions. It issues regulations, maintains blacklists, processes licence applications for exemptions, and investigates possible violations.

Bureau of Industry and Security (BIS)
Part of the US Department of Commerce, BIS handles export control regulations through the Export Administration Regulations (EAR). It maintains lists like the Entity List, which restricts access to US goods and technology for certain foreign parties deemed threats to national security or foreign policy.

Other bodies also contribute, such as the Department of State, which manages diplomatic aspects, and the Department of Justice, which prosecutes criminal breaches of sanctions laws.

The Main US Sanctions Lists

US sanctions lists are databases of restricted parties that companies, banks, insurers, and others must screen against to ensure compliance. Some of the most important include:

Specially Designated Nationals (SDN) List
OFAC’s flagship list includes individuals, groups, and entities such as terrorists, drug traffickers, corrupt officials, and entities linked to sanctioned regimes. US persons are generally prohibited from dealing with SDNs, and their assets within US jurisdiction are frozen.

Consolidated Non-SDN Sanctions List (NS-NS List)
OFAC maintains other designations not on the SDN List but still subject to sanctions. This includes sectoral sanctions lists (for example, targeting certain activities in Russia’s energy sector) and lists of foreign sanctions evaders.

Entity List
Maintained by BIS, this list names organisations and individuals restricted from receiving US-origin items and technologies without a licence. It targets those involved in activities contrary to US national security or foreign policy interests — for example, Chinese companies linked to military applications or human rights abuses.

Denied Persons List
Also issued by BIS, this list restricts certain parties from participating in export transactions.

Unverified List
A BIS list identifying parties whose bona fides could not be verified during pre-license checks.

Foreign Sanctions Evaders List
Targets those who have violated or attempted to violate US sanctions against Iran and Syria, prohibiting certain dealings even if the party is not on the SDN List.

It is vital to note that these lists are dynamic. Names are added, removed, or amended frequently as geopolitical situations evolve and new intelligence emerges.

Types of US Sanctions

US sanctions can be grouped broadly into the following categories:

Comprehensive Country-Based Sanctions
These block nearly all transactions with certain countries. For decades, Cuba was a prime example, with severe restrictions dating back to the Cold War. North Korea, Iran, and Syria also face broad prohibitions.

Targeted or List-Based Sanctions
These apply to named individuals, companies, ships, aircraft, or other assets. They are often used for counterterrorism, anti-narcotics, or human rights measures.

Sectoral Sanctions
Sectoral sanctions limit specific economic sectors rather than entire countries. For example, the US restricts financing for certain Russian banks and energy companies but does not ban all business with Russia outright.

Secondary Sanctions
These penalise non-US persons for doing business with sanctioned entities. Secondary sanctions extend the reach of US law globally by threatening to cut off violators from the US financial system.

Legal Basis for US Sanctions

US sanctions derive their authority mainly from federal statutes and presidential executive orders.

International Emergency Economic Powers Act (IEEPA)
This Act allows the President to regulate commerce in response to an unusual and extraordinary threat to the US which has a foreign source.

Trading with the Enemy Act (TWEA)
One of the oldest sanctions laws, originally used during wartime. It remains in use for Cuba sanctions.

Executive Orders
Presidents use executive orders to declare national emergencies and issue new sanctions. For example, Executive Orders have underpinned sanctions against Russia for its actions in Ukraine, and against cyber actors targeting US critical infrastructure.

These legal tools give OFAC and other agencies broad powers to implement restrictions and impose penalties for breaches.

How Do US Sanctions Apply Internationally?

US sanctions have extraterritorial reach — a principle that often frustrates other countries and international companies. This means US sanctions apply to:

• All US citizens and permanent residents wherever they are.
  
  
• All persons or entities within the United States.
  
  
• All US-incorporated entities and their foreign branches.
  
  
• In some cases, foreign companies and individuals who cause violations within US jurisdiction or facilitate prohibited transactions.
  
  

For example, a European bank clearing US dollar payments through a US correspondent bank must comply with OFAC rules, even if neither the originator nor beneficiary is American. Many global firms voluntarily comply with US sanctions to avoid fines or losing access to the US financial system.

Enforcement and Penalties

OFAC has robust civil enforcement powers. It can impose substantial fines for breaches, often calculated per transaction. Penalties can reach millions or even billions of dollars for systematic violations.

High-profile enforcement actions have included:

• BNP Paribas was fined nearly $9 billion in 2014 for processing transactions for Sudan, Cuba, and Iran.
  
  
• Standard Chartered and HSBC have paid large penalties for sanctions breaches related to Iran.
  
  
• Smaller firms and individuals have also been fined, demonstrating that OFAC enforcement is not limited to major banks.
  
  

Criminal charges can be brought by the Department of Justice for wilful violations, which may result in imprisonment.

Compliance Challenges

Navigating US sanctions is complex, partly because lists and regulations change frequently and can be highly technical. Some challenges firms face include:

Keeping Up to Date
Names may be added or removed from lists overnight. Firms must ensure that their screening systems are updated regularly to avoid doing business with newly sanctioned parties.

False Positives
Name screening often results in matches that require manual review, especially with common names.

Complex Ownership and Control
OFAC’s 50 Percent Rule means entities owned 50% or more, directly or indirectly, by one or more SDNs are themselves automatically blocked, even if not named on any list. Untangling complex corporate structures is a major compliance headache.

Secondary Sanctions Risks
Multinational firms may face conflicting legal obligations if US sanctions contradict local laws, particularly in Europe where the EU’s Blocking Statute seeks to protect European firms from certain US extraterritorial sanctions.

Best Practices for Compliance

To manage US sanctions risk, firms should implement robust policies and procedures, including:

Risk Assessment
Understand which products, services, customers, and geographies expose the business to sanctions risk.

Screening and Monitoring
Use up-to-date technology to screen customers, counterparties, transactions, and third parties against US sanctions lists. Screening should occur at onboarding and on an ongoing basis.

Ownership Checks
Assess not just direct counterparties but also beneficial owners, subsidiaries, and affiliates to ensure compliance with the 50 Percent Rule.

Employee Training
Regularly train staff on sanctions obligations and how to escalate red flags.

Internal Controls and Auditing
Maintain clear policies, conduct regular audits, and test controls to identify and fix gaps.

Engage Legal Experts
When in doubt, consult with experienced sanctions counsel and consider applying for an OFAC licence if a transaction may be permitted under specific exceptions.

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The Role of Technology

Modern compliance teams increasingly rely on advanced screening solutions, artificial intelligence, and automated transaction monitoring to handle the scale and complexity of sanctions compliance.

Leading solutions check names against multiple watchlists, detect fuzzy matches, monitor media sources for new risks, and use machine learning to reduce false positives. This allows compliance teams to focus on genuine threats rather than sifting through masses of irrelevant alerts.

Trends and Outlook

The use of sanctions by the US shows no signs of slowing. Recent years have seen a surge in sanctions targeting cybercriminals, ransomware operators, corruption networks, and human rights abusers under the Global Magnitsky Act.

Geopolitical tensions (such as those involving Russia’s actions in Ukraine, US-China competition, and sanctions on Iran and North Korea) mean that companies must be prepared for sudden new restrictions.

At the same time, more countries and blocs are issuing their own autonomous sanctions regimes, adding layers of complexity for multinational firms. Businesses must reconcile US measures with UK sanctions, EU sanctions, and other local laws.

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Conclusion

US sanctions and the related lists administered by OFAC, BIS, and other agencies are formidable tools of foreign policy and national security. For businesses and financial institutions around the world, understanding these tools and building robust compliance programmes is critical.

Failing to comply carries severe legal, financial, and reputational consequences. Success requires more than just software: it demands a culture of compliance, well-trained staff, vigilant monitoring, and a clear understanding of ever-changing global geopolitics.

In an increasingly connected world, where a single cross-border payment can pass through multiple jurisdictions in seconds, compliance with US sanctions is not optional but an integral part of sound risk management and responsible corporate citizenship.

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