U.S. Government to Foreign Persons: Comply with Economic Sanctions and Export Control Laws

By: Olga Torres and Derrick Kyle
Date: 03/07/2024

In a move that highlights the U.S. government’s ongoing fight against evasion of sanctions and export control laws, the Departments of the Treasury, Commerce, and Justice yesterday published yet another Tri-Seal Compliance Note directed specifically at foreign persons, describing the applicability of these international trade and finance laws to foreign-based persons (the “March 6 Compliance Note”). Since Russia’s invasion of Ukraine in February 2022 and the significant increase of sanctions and export controls targeting Russia, these Departments have published Tri-Seal Compliance Notes on “Third-Party Intermediaries Used to Evade Russia-Related Sanctions” and “Export Controls and Voluntary Self-Disclosure of Potential Violations.”

The March 6 Compliance Note is divided into three sections discussing specific exposure of foreign persons to each agency’s relevant laws, regulations, and enforcement authorities. Specifically detailed are the sanctions laws and regulations administered by the Department of the Treasury Office of Foreign Assets Control (“OFAC”); export control laws and regulations under the Export Administration Regulations (“EAR”), administered and enforced by the Department of Commerce Bureau of Industry and Security (“BIS”); and Department of Justice (“DOJ”) criminal prosecution of sanctions and export control laws. Additionally, each section describes recent enforcement actions against foreign persons. Importantly, while DOJ criminal prosecution is premised on willful violation of the law, BIS and OFAC civil enforcement is based on strict liability. Strict liability means the violating party may be held liable for prohibited conduct even without knowledge or reason to know that the conduct was prohibited.

OFAC Sanctions

OFAC administers and enforces economic and trade sanctions against targeted foreign countries, certain individuals and entities listed on the Specially Designated Nationals (“SDN”) List, and in other circumstances specified by relevant sanctions programs. The sanctions include comprehensive trade embargos of a foreign country or region, “blocking” or freezing assets subject to U.S. jurisdiction, and more targeted sanctions preventing certain transactions related to specified industries. OFAC sanctions are applicable to all U.S. persons, which includes citizens and legal permanent residents, all persons within the United States, and entities incorporated in the United States and their foreign branches. The extent to which OFAC sanctions apply to foreign persons varies depending on the particular sanctions program. For example, under certain Iran, Cuban, and North Korean sanctions programs, sanctions are applicable to foreign entities owned or controlled by U.S. persons.

Foreign persons have other exposure to OFAC sanctions, including causing or conspiring to cause U.S. persons to violate sanctions and evasion of sanctions. Examples of OFAC enforcement against foreign persons include situations where the foreign person:

  • Fails to disclose the involvement of a sanctioned party or jurisdiction in documentation related to a financial transaction involving a U.S. person;
  • Causes a U.S financial institution to process payment for a prohibited transaction; and
  • Misleads a U.S. exporter into exporting goods destined for a sanctioned jurisdiction.

Export Control Laws

The EAR applies to the export to a foreign country, the reexport between foreign countries, and the transfer within foreign countries U.S.-origin items, items that incorporate a certain percentage (“de minimis”) of controlled U.S.-origin content, and certain foreign-made items produced using EAR-controlled software, technology, or production equipment (“foreign direct products”). U.S. and foreign parties are equally subject to export controls on items subject to the EAR; as described in the March 6 Compliance Note, “the law follows the goods.”

An export to a third country prior to reexport to the final destination does not relieve the original exporter nor the reexporter of its obligations under the EAR. Therefore, foreign parties to transactions involving EAR-controlled items must adhere to EAR requirements, including obtaining reexport licenses where applicable. Additionally, foreign persons may be subject to EAR export controls on foreign produced items, either due to the presence of a de minimis amount of U.S. content in the foreign item or because the item is a foreign direct product. The foreign direct product rules may apply where the product never entered U.S. commerce and there is no presence of a U.S. person. The foreign direct product rules are of particular relevance in transactions involving Huawei, Chinese entities involved in advanced semiconductors, and defense-related entities in Russia, Belarus, and Iran.

DOJ Enforcement of Sanctions and Export Control Laws

DOJ brings criminal prosecutions for violations of sanctions and export control laws under the authority of the International Emergency Economic Powers Act (“IEEPA”) and the Export Control Reform Act of 2018 (“ECRA”), respectively. The IEEPA prohibits any person, including foreign persons, from causing a violation of any “license, order, regulation, or prohibition issued,” and the ECRA similarly prohibits the causing or inducing of prohibited acts under the EAR or the omission of any act required by the EAR. Willful violations of the IEEPA or ECRA can lead to imprisonment of up to 20 years and a $1 million fine per violation.

The March 6 Compliance Note details recent DOJ actions between October 2022 and December 2023 involving charges against foreign persons for allegedly violating export control or sanctions laws to transfer U.S.-items to prohibited destinations. Among other actions, the March 6 Compliance Note highlights the November 2023 guilty plea by Binance Holding Limited, the operator of the world’s largest cryptocurrency exchange, for violations of sanctions laws and the Bank Secrecy Act, leading to a $4.3 billion financial penalty.


The March 6 Compliance Note closes by providing a list of “Compliance Considerations for Foreign-Based Persons.” The considerations include:

  • Developing, implementing, and updating a sanctions compliance program;
  • Ensuring Know Your Customer (“KYC”) information and geolocation data are integrated into  screening protocols;
  • Training foreign subsidiaries and affiliates on U.S. export control and sanctions laws;
  • Taking immediate corrective action when compliance issues are identified;
  • Conducting due diligence related to export control and sanctions risks prior to merging with or acquiring other entities; and
  • Voluntarily disclosing potential violations of sanctions and export control laws. (We recommend obtaining experienced legal counsel prior to disclosing violations to the relevant agency.)

The March 6 Compliance Note sends a clear message to foreign persons that they are squarely in the U.S. government’s enforcement crosshairs. Foreign companies should conduct a risk analysis based on the extraterritorial reach of U.S. sanctions and export control laws and take steps to mitigate these risks to avoid becoming the next example of U.S. enforcement against a foreign party.

If you have any questions about the March 6 Compliance Note, previous Tri-Seal Compliance Notes, or sanctions and export control laws, generally, or if you require assistance conducting a sanctions and export control risk analysis or disclosing potential violations, please contact the attorneys at Torres Trade Law.