On Tuesday, May 1, 2012, President Obama signed an Executive Order authorizing the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") to expand current sanctions by "Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria."
Under this new Executive Order, the Treasury Department is specifically targeting foreign individuals and entities that have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions against Iran or Syria, or that have facilitated "deceptive transactions" for or on behalf of persons subject to U.S. sanctions concerning Syria or Iran. The term "deceptive transaction" means "any transaction where the identity of any person subject to United States sanctions concerning Iran or Syria is withheld or obscured from other participants in the transaction or any relevant regulatory authorities." If a foreign individual or entity is determined by the Secretary of the Treasury to have violated, or caused another to violate, the U.S. sanctions on Iran or Syria, or facilitated deceptive transactions, then that individual or entity may be designated by the Treasury Department as a foreign sanctions evader.
Once a party is designated as a foreign sanctions evader, the Treasury Department may prohibit all transactions or dealings involving the designated party in or related to goods, services, or technology in or intended for the United States or provided by or to U.S. persons, wherever located. According to OFAC guidance, this means that, in effect, the designated individual or entity will be cut off from the U.S. commercial and financial systems. Foreign sanctions evaders will be listed publicly by the Treasury Department on the agency's website. Individual foreign sanctions evaders may also be denied visas for entry into the United States.
With its focus on entities that have "caused" a violation or facilitated "deceptive transactions," the Order allows for sanctions to be imposed against non-U.S. entities who, for instance, conceal from a counterparty information indicating that a transaction benefits a party subject to U.S. sanctions against Iran or Syria. Notably, in view of the absence of jurisdictional limitations in the definition of "deceptive transaction," the Order broadly authorizes the imposition of sanctions against foreign parties as a result of transactions that are otherwise outside of U.S. jurisdiction. For instance, under the terms of the Order, a foreign bank or other foreign entity could be identified as a foreign sanctions evader and thereby cut off from the U.S. commercial and financial transactions as a result of withholding or obscuring the identity of a blocked or sanctioned party, even in a transaction conducted completely outside of the United States by non-U.S. persons.
The full text of the Executive Order is available here.