As you may know, the U.S. frequently imposes economic sanctions against countries, drug traffickers, and terrorists. As sanctioned countries, entities and individuals try to avoid being excluded from the U.S., they frequently adopt different names and forms as they try to find ways to remain in contact with U.S. businesses. U.S. associations with international members should adopt internal controls to protect the association against inadvertent violations of these serious laws by screening international applicants for membership.
U.S. sanctions programs are administered by the Office of Foreign Assets Control ("OFAC"), part of the U.S. Treasury. Over the years, OFAC has adopted a general policy with regard to U.S. membership associations: They may accept as members entities and individuals from a sanctioned country so long as (a) the entity or individual is not itself (or him or herself) on OFAC’s list of excluded persons (the “SDN List”), and (b) the association only provides such members with pre-existing information or informational materials available to all members. The association may not, however, provide the member with any additional “services,” such as professional certification or marketing services. Receipt of membership dues payments from such members generally is permitted, with some limitations, as described further below.
Under the laws governing almost all U.S. economic embargoes, the export and import of “information or informational materials” (broadly defined in the statute) may not be regulated. Therefore, no matter how stringent an embargo may be, it will almost always allow informational materials to be exported to and imported from the sanctioned country. (The export of technical data may be limited by other laws.) Based on this strong policy, OFAC takes the position that U.S. associations may “export” via mail and the Internet informational materials to members in sanctioned countries.
So, while the export of other goods and services may be either prohibited or allowed only when specifically licensed, trade associations and professional societies may provide the same informational materials to all members, regardless of where located. It should be noted, however, that the exemption does not apply to: (a) the substantive alteration of informational materials by the association for members in sanctioned countries, or the provision of marketing and business consulting services to such members, and (b) services such as professional certification, professional certification exams, and credit card services.
A second, more limited general policy is that the association may accept dues payments from its members in sanctioned countries. In this regard, OFAC recognizes that the membership dues paid may exceed the value of the informational materials provided to members in sanctioned countries (as these members may not have access to certain professional services, etc.).
Depending upon the country involved, however, there are limits on how membership dues payments may be made. For example, if an association has a member in Iran, dues may not be paid by or through an Iranian bank account. The dues must come from a non-Iranian bank and an account not controlled by the Government of Iran. Moreover, as most Iranian banks are subject to more than one sanctions program, such banks should be avoided unless OFAC specifically allows a transaction.
Complying with OFAC sanctions is a fact-specific process. If an association is interested in accepting members from any country subject to U.S. sanctions, the association should establish internal controls that meet OFAC’s requirements: (1) check each prospective member against the Specially Designated Nationals List (“SDN List”) maintained by OFAC, (2) ask appropriate questions of each prospective member so that ownership (if an entity) is clear, (3) maintain a list of information available to all members, (4) establish appropriate financial mechanisms for accepting membership dues, and (5) do not hesitate to contact OFAC should questions arise.