Due Diligence in International Business Isn’t an Option as List of USG’s “Bad Guys” Grows

U.S. businesses must be more and more careful when choosing foreign business partners because the list of “bad guys” keeps getting longer and longer.  The U.S. Government (USG) is once again extending the reach of U.S. Syrian and Iranian sanctions.  A new Executive Order (EO) targeting “foreign sanctions evaders” (FSE) prohibits U.S. persons from transacting or dealing with listed foreign entities who have, attempted to, or helped to violate U.S. sanctions against Iran or Syria.  The EO also prohibits FSEs from entering the U.S.  See EO 13608 “Prohibiting Certain Transactions With and Suspending Entry Into the United States of Foreign Sanctions Evaders With Respect to Iran and Syria.”

The U.S. Treasury Department can now publically identify FSEs in order to isolate them from the U.S. financial and commercial systems.  Unlike other sanction programs, the FSE EO does not block assets, but instead stops transactions, financial or otherwise, by prohibiting U.S. persons from taking part in them.  For U.S. persons and businesses, this means a bar on all aspects of trade in goods, services, or technology with evaders.  Previously acquired Office of Foreign Assets Control (OFAC) licenses do not exempt a transaction and license holders must stop all dealings with listed evaders unless OFAC re-authorizes the transaction under the FSE EO.  This means U.S. companies and individuals must conduct comprehensive due diligence on foreign partners to ensure there are no connections to prohibited entities.

Research potential partners as part of a comprehensive compliance program – whether foreign or domestic – and run names through government lists.  In fact, your lawyer or compliance officer may have access to database that can review all the lists with just one search.  A few small steps now can save a lot of headaches and liabilities in the future.