Even Mr. Watchlist learns something from time to time – and yesterday was a very visible example.
When I looked at yesterday’s OFAC updates to a large number of North Korean sanctions designations, I was struck by the references to secondary sanctions. I was aware that secondary sanctions existed in the Iran program – just look at individual listings and it’s very clear that secondary sanctions are attached. Similarly, the Hizballah sanctions listings all specifically mention secondary sanctions.
Because I had seen how explicit OFAC had been with respect to Iran and Hizballah, I had been surprised by the fact that, when secondary sanctions were added to all parties under the Global Terrorism Sanctions Regulations (I read that right, didn’t I?), no changes were made to the SDN List designations – I assumed that OFAC, in order to make it easy for people to know when secondary sanctions applied, would put the wording in each listing. Additionally, I felt the need to ask OFAC why the Ukraine/Russia-related listings weren’t updated in the wake of CAATSA’s passage, which added secondary sanctions to all of those SDN designations.
So, this morning, I felt the urge to look in the North Korea Sanctions Regulations (NKSR) – specifically, 510.201 and 510.210 (the two sections mentioned in the text added yesterday). Sure enough, the Federal Register notice you bring up when you click on the NKSR link on the OFAC page – from 2018! – shows that foreign financial institutions (FFI) can be penalized under both sections.
I have a number of comments about this. First, about the actual NKSR bits. 510.201 can impose asset freezes on FFIs due to their involvement in North Korean trade or parties sanctioned under the program, etc. 510.210 can impose correspondent account closures and prohibitions for the same sorts of reasons. And, of top of this, the Treasury can designate any party, under other elements under 510.201, for a whole host of dealings with North Korea, including significant imports/exports of any goods, services or technology.
So, are these really secondary sanctions? While I can see the 510.210 authorities as being somewhat special and different than OFAC’s primary designation authority, 510.201 looks a lot like what OFAC always does. If you look at the Venezuela Sanctions Regulations (link leads to the Electronic Code of Federal Regulations (e-CFR), not the Federal Register), there is nothing similar to what you see in the NKSR.
However, Executive Order 13850 says that the following parties can be designated (among others):
(ii) to be responsible for or complicit in, or to have directly or indirectly engaged in, any transaction or series of transactions involving deceptive practices or corruption and the Government of Venezuela or projects or programs administered by the Government of Venezuela, or to be an immediate adult family member of such a person;
(iii) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity or transaction described in subsection (a)(ii) of this section, or any person whose property and interests in property are blocked pursu- ant to this order; or
So, doesn’t this imply that the Venezuela sanctions also have secondary sanctions? Or is 510.201 just a “normal” designation authority?
And this leads me to my second piece of commentary. I think we need some consistency here. It probably does make sense to consider the appropriate Venezuela sanctions listings as having secondary sanctions attached – and to denote them as such. The fact that most of us do not read the Federal Register or CFR comprehensively means that OFAC is setting a really high bar for proper compliance. It would be better for everyone if people complied because it was easy to understand this all, rather than being compelled to at economic gunpoint.
OFAC would benefit from a clear set of documents – and boilerplate in every related listing – that spells out the primary and secondary sanction designation authorities for each program. There are PDFs on at least some of the program pages (the North Korean one dates back to 2016), but they need to be kept up to date. Additionally, while the North Korean PDF notes that “any person” can be designated for certain activities (which have since been significantly expanded), it would probably be useful to have an explicit note that “any person” is not limited to nationals of North Korea, etc.
All this being said, Mr. Watchlist is grateful for yesterday’s update – hopefully, OFAC will make similar updates for the other programs (and update those overview documents!).