On December 14, OFAC published a new “Non-SDN Menu Based Sanctions List.” The publication is designed to be a reference tool that identifies individuals and entities subject to certain non-blocking menu-based sanctions. OFAC’s publication is available here.
“Menu-based” sanctions authorize the relevant agency to select one or more sanctions from a menu of options. OFAC explained that when asset blocking is chosen as a menu-based sanction, that individual or entity will be identified solely on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”). Thus, an individual or entity will only be designated on OFAC’s Non-SDN Menu Based Sanctions List if the individual or entity is subject to a menu of non-blocking sanctions, such as those set out in § 235 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), as implemented by Executive Order 13849, and the Ukraine Freedom Support Act of 2014, as amended by CAATSA.
OFAC clarified that its new Non-SDN Menu Based Sanctions List is distinct from its List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions, which lists foreign financial institutions for which the opening or maintaining of a correspondent account or a payable-through account in the US is prohibited or subject to certain conditions.
For the past few years, US list-based sanctions have progressively become more complex, insofar as such sanctions, with increasing frequency, do not involve complete “blocking” and prohibition of any business dealings involving US persons, but may instead involve limited restrictions applicable only to some forms of business dealings. Both US and non-US companies should consider these complexities when developing compliance programs.
Designations Pursuant to OFAC’s Non-SDN Menu-Based Sanctions List
On the same day, the US Department of State, in consultation with OFAC, designated Turkey’s Presidency of Defense Industries (“SSB”) to OFAC’s Non-SDN Menu-Based Sanctions List. SSB is Turkey’s primary defense procurement entity and is responsible for defense industrial development. SSB is the first entity to be designated on OFAC’s Non-SDN Menu-Based Sanctions List.
The US government designated SSB pursuant to Section 231 of CAATSA, for knowingly engaging in a significant transaction with Rosoboronexport, Russia’s main arms export entity. The US government imposed the following five sanctions on SSB, out of a menu of twelve possible options:
- “Export-Import Bank Assistance For Exports To Sanctioned Persons,” which prohibits the Export-Import Bank of the US from approving the issuance of any guarantee, insurance, extension of credit, or participation in the extension of credit in connection with the export of any goods or services to SSB (§ 235(a)(1)).
- “Export Sanctions,” which prohibit the US government from issuing any specific license or granting any other specific permission or authority to export any goods or technology to SSB (§ 235(a)(2));
- “Loans From United States Financial Institutions,” which general prohibits any US financial institution from making loans or providing credits to SSB totaling more than $10,000,000 in any twelve-month period (§ 235(a)(3));
- “Loans From International Financial Institutions,” which requires the US executive director to each international financial institution to use the voice and vote of the US to oppose any loan from the international financial institution that would benefit SSB (§ 235(a)(4)); and
- “Sanctions On Principal Executive Officers,” which imposes sanctions on the principal executive officer or officers of SSB (§ 235(a)(12)).
As a part of this action, the US government also imposed full blocking sanctions and visa restrictions on Ismail Demir, the president of SSB; Faruk Yigit, SSB’s vice president; Serhat Gencoglu, SSB’s Head of the Department of Air Defense and Space; and Mustafa Alper Deniz, Program Manager for SSB’s Regional Air Defense Systems Directorate.
We will continue to monitor developments in this area. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.