Sanctions are legal measures that impose costs on certain targets, which can be countries, geographic regions, governments, non-state groups, entities, and individuals.  Such costs may be: asset freezes, financial prohibitions, trade restrictions, or others. They arise from foreign policy interests or to protect security, whether collective or national. Its purpose is to create economic pressure that degrades the target’s ability to: move money, carry out activities defined as harmful, and protect both the financial system and international markets. The penalties are very specific with respect to what activity cannot be carried out, and there may be exceptions, i.e. activities that can be carried out and a system that allows you to request an authorization (license) for some transactions, under specific conditions. Among the main actors imposing such sanctions are the United Nations, the European Union (EU), the United Kingdom and the United States.

In the case of the U.S., sanctions can be primary or secondary. The central idea is that the primaries directly affect the relationship between the country that establishes them, and the target defined in the sanction (country, organization, individual, etc.), without seeking to influence the economic activity of a third party, whether they are third States (for example: Panama), organizations or nationals within them. Secondary sanctions seek to “discourage” this third party from carrying out certain economic relations with the target defined by the sanction. This presents a dilemma for a “third party”, since, if you want to maintain economic relations with the US, you cannot develop this type of economic relationship with the target of its sanctions. However, such sanctions can go beyond restrictions on access to the U.S. market, up to specific penalties. But neither should we act a priori, rejecting in advance the economic relationship with the counterparty subject to sanction, having to investigate in each case, the existence of licenses in a given sanctions program and their validity. There should also be clarity on the process for applying for such licenses.

But does the U.S. have jurisdiction to do so? There are doubts, for example, from the European Union, but what interests us here is its concrete existence. It is important to understand that this constitutes pressure on third parties to comply with the primary sanctions of the United States, even when they do business with non-American persons, totally outside the United States and in which the transactions have no connection to the United States. Given the above, you can cross a red line without noticing it and be subject to unexpected penalties. This leads us to rethink the great importance of this topic for compliance officers and the objective need to specialize in it.