Sanctions are essential mechanisms employed by countries and international bodies to support national security, uphold human rights, and combat illegal activities such as terrorism, drug trafficking, and international crimes.
According to Alessa, these tools are crucial in exerting non-military pressure to promote political stability and safeguard the global financial system.
Primary sanctions target individuals, organizations, or nations deemed threats by restricting trade and financial transactions within the sanctioning country. For example, the U.S. Office of Foreign Assets Control (OFAC) prevents American financial entities from dealing with parties on the specially designated nationals list to block indirect support for Iran’s nuclear ambitions or North Korea’s illegal activities.
Secondary sanctions extend their reach to third-country entities that engage with primarily sanctioned bodies, aiming to deter support for high-risk activities in countries like Iran and the Russian Federation. This framework was evident when secondary sanctions were reinstated against the National Iranian Oil Company to curtail interactions that could undermine the Joint Comprehensive Plan of Action.
In the U.S., the legal authority for imposing sanctions derives from Executive Orders and is enforced by OFAC. The sanctions list from OFAC details individuals and organizations involved in prohibited activities, aligning with broader compliance objectives to protect the global economic landscape.
Businesses navigating sanction rules face substantial challenges, with severe penalties for non-compliance including fines and criminal prosecution. It’s crucial for businesses to engage in thorough due diligence and maintain robust monitoring to ensure adherence to both primary and secondary sanctions.
To manage sanctions effectively, companies should employ several best practices such as regular training for staff on updated sanctions, utilizing automated tools for transaction screening, and conducting frequent audits on international operations to mitigate risks associated with secondary sanctions.
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