On May 17, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced it will be issuing a revised set of sanctions regulations against South Sudan. South Sudan has been sanctioned by OFAC since 2014, largely on the basis of widespread violence and human rights abuses. The proposed new regulations would amend the original regulations issued in 2014, to impose a more comprehensive regulatory program, provide additional interpretive and definitional guidance, and issue certain general licenses.
Unlike Iran, Cuba, Syria, North Korea, Crimea, Donetsk and Luhansk, South Sudan is not embargoed. U.S. persons are generally permitted to engage in transactions in, through, or with persons and entities in or from South Sudan, unless the counterparty or another interested party is on OFAC's Specially Designated Nationals and Blocked Persons List (the “SDN List,” and each such person or entity an “SDN”). In addition to a ban on commercial activity by U.S. persons with any SDN, all property and interests in property of an SDN that is in the United States or within the possession or control of a U.S. person must be “blocked” (i.e., frozen).
While the SDN List is publicly available and searchable through the OFAC website, the issue is complex due to OFAC's 50% Rule, which provides that an entity owned 50% or more by one or more SDNs is considered an SDN even if it is not listed by name on the SDN List. Accordingly, any U.S. person seeking to do business in, through, or with anyone from South Sudan must engage in due diligence to ensure that no SDN (whether or not listed by name) is a counterparty to, or a beneficiary of, the transaction.
OFAC has imposed varying degrees of economic sanctions on more than two dozen countries and geographic regions. The severity ranges from SDN sanctions limited to targeted persons and entities (e.g., South Sudan, Zimbabwe) to major nationwide restrictions on various types of commercial activity (e.g., Russia, Venezuela) to full embargoes (e.g., Iran, North Korea).
Careful attention is warranted when dealing with any of these countries or their nationals, as penalties for violating OFAC sanctions can be extremely onerous. In some cases, penalties have been in the billions of dollars. There is also risk of criminal prosecution. Before proceeding with a transaction that potentially involves a sanctioned country, region, entity, or individual, consultation with experienced sanctions counsel is essential.