U.S. Agencies Caution Foreign-Based Persons On Extraterritorial Reach Of U.S. Sanctions And Export Control Regulations

• Published date: 05 April 2024
• Subject Matter: International Law, Export Controls & Trade & Investment Sanctions
• Law Firm: WilmerHale
• Author: Mr Neena Shenai, Zachary Goldman, Barry Hurewitz, Jason Chipman, Richard Burger, Michael Dawson, Aaron Zebley, Ronald Meltzer and Monika Weisman

Executive Summary

On March 6, 2024, the U.S. Departments of the Treasury, Commerce, and Justice jointly issued a Tri-Seal Compliance Note titled "Obligations of Foreign-Based Persons to Comply with U.S. Sanctions and Export Control Laws" ("Tri-Seal Note" or "Note"). The Tri-Seal Note is significant for several reasons. First, it pointedly reminds foreign persons that they have considerable obligations to comply with complex provisions of U.S. sanctions and export control laws under the jurisdiction of the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), and the U.S. Department of Justice ("DOJ"). To prevent sanctions evasion and the illicit diversion of U.S. technologies, the Note also highlights the powerful extraterritorial reach of U.S. law to persons and activities that may, on their face, appear to have no connection with the United States. As the latest in a series of joint compliance notes showing enhanced coordination among U.S. regulators, the Note puts foreign persons on notice that the U.S. government intends to enhance scrutiny of non-U.S. companies and persons that fail to comply with U.S. law, and that it will employ the various criminal, civil, and administrative tools at its disposal. Finally, while the agencies issuing the Note have previously issued guidance on the compliance obligations of U.S. persons, this Note outlines specific compliance considerations for foreign persons that will likely be used as benchmarks for future enforcement cases'and that can be used as guidelines to try to avoid or mitigate enforcement scrutiny.

I. Introduction

On March 6, 2024, the U.S. Departments of Commerce, Treasury, and Justice issued a Tri-Seal Compliance Note titled "Obligations of Foreign-Based Persons to Comply with U.S. Sanctions and Export Control Laws" ("Tri-Seal Note" or "Note"). This Note is the latest in a series of joint compliance notes published by U.S. federal agencies highlighting the risks and responsibilities under U.S. sanctions and export control laws¹ and serves as a reminder to foreign-based persons of their obligations to comply with these laws under the jurisdiction of the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), and the U.S. Department of Justice ("DOJ"). The Note describes the breadth of U.S. jurisdiction and the various enforcement mechanisms available to the government to hold non-U.S. persons accountable; identifies specific measures non-U.S. companies should take to mitigate the risks of noncompliance; and puts on notice foreign-based persons regarding the activities that are likely to be subject to increased scrutiny and enforcement in the future.

II. Sanctions

Generally, OFAC sanctions apply to U.S. citizens and permanent resident aliens wherever located, all persons within the United States, and all U.S.-incorporated entities and their foreign branches. U.S. persons are further prohibited from providing "approval" or "facilitation"'defined broadly to include everything from passive information technology ("IT")...