Secondary Sanctions & Extraterritorial Reach Flashcards

Which Executive Order most broadly authorizes secondary sanctions related to Russia's harmful foreign activities post-2021?

Answer: E.O. 14024

Executive Order 14024, issued in April 2021, provides the broadest authority for secondary sanctions targeting those who operate in specified Russian economic sectors or support Russian government activities.

How do 'blocking' (primary) sanctions differ from secondary sanctions in terms of their immediate legal effect?

Answer: Blocking sanctions freeze assets and prohibit U.S. person transactions; secondary sanctions extend prohibitions to non-U.S. persons dealing with sanctioned parties

Blocking sanctions immediately freeze assets and prohibit all U.S. person transactions with the designated party, while secondary sanctions deter non-U.S. persons from engaging with those parties by threatening their own access to U.S. markets.

A European bank processes a payment for a Russian energy company on the SSI (Sectoral Sanctions Identifications) List. Under U.S. secondary sanctions, which outcome is most likely?

Answer: OFAC may investigate and potentially restrict the bank's access to U.S. correspondent banking

Under secondary sanctions, OFAC can investigate and potentially restrict a foreign bank's U.S. correspondent accounts if it finds the transaction was significant and in violation of applicable sanctions authorities.

The Sectoral Sanctions Identifications (SSI) List differs from the SDN List in which key way?

Answer: SSI listings impose targeted prohibitions on specific types of transactions rather than blocking all dealings with the listed entity

SSI-listed entities face sector-specific transaction prohibitions — such as restrictions on new debt over a defined maturity — rather than the comprehensive asset-blocking that applies to SDN-listed parties.

When OFAC evaluates whether to impose secondary sanctions on a non-U.S. person who transacted with an Iranian entity, which statement best describes OFAC's enforcement posture?

Answer: Secondary sanctions are largely discretionary — OFAC evaluates significance and policy factors before imposing consequences

Secondary sanctions are predominantly discretionary; OFAC typically evaluates the significance of the transaction and broader policy considerations before imposing sanctions on a non-U.S. person.

The OFAC '50 Percent Rule' is particularly relevant to secondary sanctions because it:

Answer: Extends sanctions to entities owned 50% or more by one or more SDN-designated parties, even if the entity itself is not listed

Under the 50 Percent Rule, any entity owned 50% or more by one or more SDN-listed parties is treated as sanctioned itself, expanding the universe of parties covered by both primary and secondary sanctions.

Which of the following best explains why correspondent banking relationships are the primary leverage point for U.S. secondary sanctions enforcement?

Answer: Access to U.S. dollar clearing and the U.S. financial system is essential for most international transactions, giving the U.S. significant leverage over foreign institutions

Because the U.S. dollar dominates global trade and most international transactions require access to U.S. dollar clearing, threatening correspondent banking relationships gives the U.S. extraordinary leverage over foreign financial institutions.