Food for Sanctions Thoughts: How many OFAC lists should there be?

So, we all know about the SDN (Specially Designated Nationals) List, and the SSI (Sectoral Sanctions Identification) List. And, although they are less used, we can probably name the rest of the Consolidated Sanctions List: the Non-SDN Palestinian Legislative Council (NS-PLC) List, the Non-SDN Iran Sanctions Act (NS-ISA), the Foreign Sanctions Evaders (FSE) List and the new Correspondent Account and Payable-Through Account Sanctions (CAPTA) List. And, of course, we know about the 2 “do not do business with” lists over at the State Department: the Cuba Restricted List, and the CAATSA Section 231 List.

These kind of seem like a reasonable way to keep apples and oranges separate – until you look under the hood a little:

  • The CAPTA List “replaced” the Part 561 List, which was related to specific Iran sanctions-related activity. As the OFAC website states:
    • The CAPTA List is intended to include foreign financial institutions subject to correspondent or payable-through account sanctions pursuant to sanctions authorities including the Ukraine Freedom Support Act of 2014, as amended by the Countering America’s Adversaries Through Sanctions Act; the North Korea Sanctions Regulations, 31 C.F.R. part 510; the Iran Freedom and Counter-Proliferation Act of 2012; the Iranian Financial Sanctions Regulations, 31 C.F.R. Part 561; the Hizballah Financial Sanctions Regulations, 31 C.F.R. Part 566; and Executive Order 13846.  The CAPTA List also will specify the specific prohibition or strict condition(s) to which the foreign financial institutions are subject.
  • The SSI List contains parties designated under any or all 4 Ukraine/Russia-related sectoral sanctions Directives, even though those impose significantly different restrictions (especially Directives 1 and 4)
  • The SDN List, of course, contains all asset-blocking sanctions targets, and each listing has one or more program IDs associated with it. In addition to that:
    • Some of the specific listings are subject to secondary sanctions. While those under the Iran and Hizballah sanctions programs explicitly state that fact in the listings, those under the Ukraine/Russia Executive Orders 13660/13661/13662 do not (I believe those designated under the Crimea-related E.O. – 13685 – are not subject to secondary sanctions), despite that having changed after the passage of CAATSA
    • In one especially egregious case, the Chinese firm and its director sanctioned for significant transactions with a target on the CAATSA 231 List have the same programs code (CAATSA – RUSSIA) as Russian individuals sanctioned for their election interference (December) and Crimea and Eastern Ukraine-related activities (November). The CAATSA 231 list is effectively a list of targets for whom there are secondary sanctions attached (even though the phrase is not used), if we consider “secondary sanctions” as sanctions on third-country parties who do business with specifically designated prohibited parties. Thus, the CAATSA – RUSSIA program tag in the SDN list contains both primary sanctions targets and those on whom secondary sanctions were imposed (even if those secondary sanctions are asset freezes). In fact, the Chinese firm and director have, in their listings, details of what sanctions, beyond asset freezes, they are subject to.

So, what is the right model? I don’t think OFAC is far off – the base need is to have structured listings that enable automated, differentiated handling, even if that is just better unpacking of the data. Basically, everything should be structured similarly. Here are some ideas:

  • The CAPTA List, because it covers so many different sets of regulations, should have program tags like the SDN List does. No, it doesn’t change the handling, but it improves understanding of the listing.
  • The SSI List should have program tags for the 4 Directives. In this case, having these tags makes the data processing easier and clearer. Yes, I know – it’s not that hard to process the structured text like a program tag. But why shouldn’t it be provided that way?
  • Perhaps all the SDN List designations that have secondary sanctions attached should be moved to a separate list – like the Executive Order 13599 List was created to differentiate Iran sanctions designations that did not have secondary sanctions attached. But, certainly, the Ukraine/Russia-related designations should have similar wording to the Iran and Hizballah designations which denote the secondary sanctions. An alternate idea is to use a separate program tag for all designations in a given program that have secondary sanctions attached.
  • The CAATSA – RUSSIA secondary sanctions designations should be broken out – preferably on its own list, but at least with its own program tag. A separate list would highlight why those parties are sanctioned, as kind of a reminder that OFAC uses its extraterritorial reach when it deems necessary.
  • In a related matter, the CAATSA – RUSSIA designations should be broken out into multiple program tags, based on the reason for the designation. That certainly happens in other programs – why not this one?

My main thrust here is that OFAC’s lists are not merely operational tools for sanctions compliance. They are also tools of state and statecraft – by presenting them in a better-structured fashion, the actions and goals of U.S. foreign policy is clearer to all, both here in the U.S. and abroad.

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