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US economic sanctions targeting Latin America: Recent changes, developments and compliance challenges
Journal of Financial Compliance,
7
(3),
268-292
(2024)
Abstract
The United States — specifically through the US Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of State — has maintained economic sanctions against certain Latin American countries since the 1950s. Starting with broad-based sanctions against Cuba, where OFAC prohibited virtually all transactions, the Department of the Treasury has instituted more-targeted sanctions regimes against Venezuela and Nicaragua, where non-government dealings are, for the most part, authorised. Together, the Departments of State and the Treasury also administer sanctions against various narcotics and terrorist organisations operating in Latin America. Most notable is the Foreign Narcotics Kingpin Designation Act, which has targeted trafficking organisations, foreign officials and their money laundering empires. To that end, sanctions, while initially imposed to fight certain political regimes, have developed into sanctions targeting all kinds of wrongdoing such as sponsoring terrorism, aiding and abetting drug trafficking, corruption and the commission of human rights violations. US sanctions violations are assessed under a strict liability standard (ie, no knowledge of the violation is required to trigger liability) and impact not only those directly subject to the jurisdiction of the US but also may carry implications for non-US persons undertaking certain ‘significant transactions' with sanctioned persons and jurisdictions. Further, while sanctions apply to US persons, OFAC can institute penalties on non-US persons for causing a US person to violate their compliance obligations. In addition, OFAC (or the Department of State) may sanction persons (individuals or entities) by adding them to the Specially Designated and Blocked Nationals (SDN) List. US persons must block the property and interests in property of SDNs, and are prohibited from virtually all, direct and indirect, transactions involving an SDN. SDN restrictions also apply to ‘Shadow SDNs' which are entities owned 50 per cent or more, directly or indirectly, by one or more SDNs in the aggregate. A Shadow SDN receives the same treatment as SDNs, regardless of whether such entity is itself on the SDN List. The challenge with Shadow SDNs is that they can only be discovered through rigorous due diligence into beneficial ownership structures of sometimes opaque corporate entities. This is where the world of sanctions compliance and enforcement crosses with that of anti-money laundering. The evolving customer due diligence, ongoing customer monitoring, suspicious activity investigations and reporting, and know your customer (KYC) (and know your customer's customer [KYCC]) evidenced are reflected through the evolving Financial Action Task Force (FATF) Recommendations, the Financial Action Task Force on Money Laundering in South America (GAFISUD) and domestic regulations. As a result of the increasingly unpredictable political changes in Latin America, and the concurrent changes in sanctions regimes, financial institutions (FIs) should maintain a proper understanding of the current sanctions prohibitions, the trends and updates in the area, but equally important, they should also maintain a good understanding of the complex legal provisions authorising certain behaviours — including the general licences and exemptions — that may apply. FIs must balance mitigating the risks of sanctions violations, and the associated hefty penalties, with the risks of a cumbersome and overly restrictive compliance regimen. An appropriately risk-based compliance programme that achieves both of these objectives is very much an art and not a ‘one size fits all’ model.
Keywords: sanctions; Specially Designated and Blocked Nationals (SDN); Office of Foreign Assets Control (OFAC); Latin America; Cuba; Venezuela; Nicaragua; financial institutions; anti-money laundering (AML); compliance
The full article is available to subscribers to the journal.
Author's Biography
Cari N. Stinebower is a member of Winston & Strawn's Government Investigations, Enforcement, and Compliance Practice and chair of the firm's International Trade Practice. She also works closely with colleagues in the Global Privacy & Data Security Practice, Financial Services, Corporate, and Complex Commercial Litigation groups. Cari counsels clients on compliance with US economic sanctions, Bank Secrecy Act and anti-money laundering (AML) laws and regulations, export controls, and anti-corruption/anti-bribery laws and regulations. She works with financial institutions and multinational corporations to develop compliance programs, conduct AML and Office of Foreign Assets Control (OFAC) risk assessments, conduct internal investigations, respond to government investigations, and address potential conflicts of law arising from non-US data privacy and ‘blocking’ laws and regulations. Cari also works with industry groups to develop sanctions and AML best practices policies and procedures. Cari served as counsel for the US Department of the Treasury's OFAC and as a Programs Officer for OFAC, where she advised on sanctions and anti-terrorism legislation and drafted United Nations Security Council Resolutions and related executive orders. Cari acted as agency counsel in Treasury's defence of a number of challenges to OFAC's authority, whether in litigation related to enforcement actions or in response to congressional investigations. As a result of her work at Treasury, Cari received the Secretary of the Treasury's Certificate for her role in providing guidance in the war against terrorism, establishing a programme targeting the Taliban, working with the interagency group to unwind the first sanctions targeting the government of Libya, and drafting the Foreign Narcotics Kingpin Designation Act. Cari is a frequent writer and speaker on sanctions, AML and anti-corruption/anti-bribery related issues. She has been quoted in publications such as The Wall Street Journal, The New Yorker, Reuters, Bloomberg and MoneyLaundering.com. Cari also served on Law360's 2022 International Trade Editorial Advisory Board.
Mariana Pendás Fernández is a member of Winston & Strawn's Government Investigations, Enforcement and Compliance Practice in the firm's Washington, DC office. Mariana is a dual-qualified lawyer in Spain and New York, and holds a Master in Swiss law (Swiss Juriste). She advises clients on US and European economic sanctions, anti-money laundering (AML) and anti-bribery/anti-corruption laws and regulations. Mariana also has extensive experience in conducting Foreign Corrupt Practices Act and AML internal investigations and participating in international commercial arbitrations. Her civil and common law legal experience and her multilingual skills make her an ideal lawyer to represent and advise clients on international matters. Mariana's practice has a special focus on Latin America and she has been recognised as a ‘rising star’ and named as one of the ‘Top 100 Female Lawyers' for international trade matters and international arbitration by Latinvex. Mariana was also recently recognised as a ‘rising star’ by The Legal 500 US 2023 for international litigation. Prior to joining private practice in the US, Mariana worked in international arbitration for a well-regarded international law firm in Paris and a well-known Spanish law firm in Madrid. She was a key member of the arbitration practice, where she participated in several arbitrations before the International Chamber of Commerce in Paris. Mariana also has experience in preparing and conducting Spanish national court and arbitration proceedings before Spanish arbitration institutions.
Daimiris Garcia is a member of Winston & Strawn’s Litigation Practice in the firm’s New York office. Daimiris practises in the areas of international arbitration, international trade regulatory compliance and government investigations. She works closely with financial institutions, not-for-profits, and public and private companies in the technology, manufacturing, client services and energy sectors. Daimiris’s international dispute resolution practice focuses on commercial litigation and arbitration, enforcement of arbitration awards in the US, and international trade regulation compliance. Daimiris has particular expertise representing and advising clients on international matters, including in Latin America, Cuba and the Middle East. She helps counsel clients on compliance with export controls under the Export Administration Regulations (EAR) and US economic sanctions issued by the Office of Foreign Assets Control (OFAC). She also helps clients respond to False Claims Act (FCA) government investigations and related qui tam/whistleblower litigation. Prior to joining Winston and Strawn, she received her J.D. from the Columbia Law School where she served as a judicial intern for the Honorable Lewis Liman in the Southern District of New York and public affairs editor for the Columbia Journal of Transnational Law. Daimiris is a native Spanish speaker and is fluent in French.
