Companies must vet business partners.

• Author: Connolly, Carol A.
• Position: Ethics Corner

* Most people know the United States sanctions trade and other business activities with certain countries to advance its foreign policy and national security goals. However, the details of these sanctions and how to avoid violating them can be somewhat complicated.

For companies that wish to do legitimate business with potentially sanctioned countries or corporations, understanding the ins and outs of the U.S. government's enforcement regime and whether a potential trading partner is under sanction are key.

The Treasury Department's Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions against certain countries, their respective governments and a long list of so-called Specially Designated Nationals (SDNs). Most often, sanctions amount to the blocking or freezing of assets and restrictions on trade.

The list of SDNs includes individuals and companies owned, controlled by, or acting for or on behalf of, targeted countries. It also includes non-state actors such as terrorists, criminals engaged in the proliferation of weapons of mass destruction and international narcotics traffickers.

Generally, OFAC regulations bar "U.S. persons" from dealing with SDNs, or parties of which they own more than 50 percent, even if those parties are not identified on the SDN list. The term "U.S. persons" includes U.S. citizens and U.S. lawful permanent residents, wherever located; entities organized under U.S. law and their foreign branches; and any person present in the United States, regardless of nationality.

U.S. persons working with SDNs can be subject to civil or criminal penalties, including imprisonment. OFAC criminal penalties--which require a showing of willfulness--can include fines of $1 million per violation, asset forfeiture and up to 20 years in prison. Depending on the OFAC sanctions program, civil penalties range from $250,000 per violation or twice the amount of transaction, to more than $1 million. In a narrow set of circumstances, dealings with SDNs may be "exempt" from the regulations or can be licensed by OFAC.

OFAC in March released a new screening tool for the public to search for SDNs. This free tool is designed to assist the public in complying with sanctions programs. Using the tool, companies can quickly determine whether an entity or individual with whom they want to conduct business is an SDN and, therefore, off limits.

The tool previously returned results only for exact matches to the search...