Secondary Sanctions & Extraterritorial Reach Flashcards

What is the primary purpose of secondary sanctions in U.S. foreign policy?

Answer: To deter non-U.S. persons from conducting business with sanctioned parties by threatening their access to U.S. markets

Secondary sanctions deter third-country actors by threatening to cut off their access to U.S. markets and financial systems if they conduct business with sanctioned parties.

Which of the following best describes the difference between primary and secondary sanctions?

Answer: Primary sanctions prohibit U.S. persons from engaging with sanctioned parties; secondary sanctions threaten non-U.S. persons for doing the same

Primary sanctions bind U.S. persons and entities, while secondary sanctions extend U.S. reach extraterritorially to non-U.S. persons who deal with sanctioned parties.

The Countering America's Adversaries Through Sanctions Act (CAATSA) primarily targets which three countries?

Answer: Russia, Iran, and North Korea

CAATSA, enacted in 2017, established mandatory and discretionary secondary sanctions targeting Russia, Iran, and North Korea.

Under CAATSA Section 231, a foreign person may face sanctions if they knowingly engage in a 'significant transaction' with which sector?

Answer: Russia's defense or intelligence sectors

CAATSA Section 231 authorizes the President to impose sanctions on foreign persons who knowingly engage in significant transactions with Russia's defense or intelligence sectors.

Which of the following would most likely trigger a secondary sanctions designation for a non-U.S. financial institution?

Answer: Providing significant financial services to an OFAC-designated party

A non-U.S. financial institution providing significant financial services to OFAC-designated parties risks being cut off from the U.S. financial system under secondary sanctions.

What does 'extraterritorial reach' mean in the context of U.S. sanctions?

Answer: The application of U.S. sanctions laws to conduct occurring outside U.S. territory by non-U.S. persons

Extraterritorial reach refers to the application of U.S. sanctions laws to foreign persons for conduct occurring outside U.S. territory, enforced through threats to market access.

What is the primary enforcement mechanism OFAC uses to implement secondary sanctions against foreign financial institutions?

Answer: Prohibiting or restricting the foreign institution's access to U.S. correspondent accounts

OFAC primarily implements secondary sanctions against foreign financial institutions by prohibiting or restricting their access to U.S. correspondent banking relationships.