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Posted on: 5th April 2016, Re-posted on: May 17, 2018
By: Bryan R. Early, Ph.D., Associate Professior, University at Albany, SUNY*

The United States employs economic sanctions more than any other country in the world. For companies, keeping up with all the sanctions obligations imposed by the U.S. Government can be a significant challenge and burden. It can also be a costly burden if ignored. In 2014 and 2015, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) collected approximately $1.2 billion and $600 million from companies in sanctions-related penalties.To date, there have not been any systematic efforts to analyze which parties OFAC takes enforcement actions against for violating U.S. sanctions.  This report explores trends in sanctions enforcement actions undertaken OFAC from 2003-2015.  The trends reveal significant variation in the number of enforcement actions undertaken during the Bush and Obama Administrations, but also interesting differences in which sectors’ companies are most frequently penalized, where they are located, and what sanctions programs they allegedly violated.

The U.S. Department of Treasury’s OFAC is the body responsible for implementing U.S. sanctions policies.  OFAC manages the set of states, entities, and individuals that the U.S. Government has subjected to economic sanctions. The body is responsible for promoting compliance with the sanctions obligations and penalizing violations.  OFAC can also work with other federal, state, and local law enforcement bodies in undertaking sanctions enforcement actions. OFAC enforcement actions have targeted both domestic and foreign actors that violate U.S. sanctions.  On its website, OFAC has published summary descriptions of over 900 enforcement actions undertaken against individuals and corporate entities from 2003-2015.Importantly,most OFAC enforcement actions did not result involve prosecutions or admissions of guilt by the entities that allegedly violated U.S. sanctions. Instead, over 90% of the documented OFAC enforcement actions resulted in settlement agreements that involved financial penalties.

In order to provide a systemic method of analyzing trends in OFAC enforcement actions, SanctionsAltert.com created the “OFAC Enforcement Action Database” that summarizes each of the OFAC enforcement cases.  Each database entry contains information about the actors subject to enforcement action, the nature of the alleged violation, which sanctions policies were allegedly violated, and the outcomes of the cases.  In this report, I analyze the empirical trends in which parties were subject to sanctions enforcement actions.

Since 2003, the number of enforcement cases that OFAC has pursued against both individuals and entities has dramatically declined.  Figure 1 illustrates the trends in the number of enforcement actions undertaken against individuals from 2003-2015. The number of enforcement actions against individuals peaked in 2005 during the administration of President George W. Bush and plummeted shortly thereafter. During the administration of President Barack Obama, there have been almost no enforcement actions undertaken against individuals by OFAC. Notably, nearly all of the individual enforcement actions undertaken by OFAC against individuals involved violations of U.S. sanctions imposed against Cuba.  The striking differences in the number of enforcement actions undertaken against individuals appears reflective of the President Bush’s versus President Obama’s stances on the sanctioning effort against Cuba. Whereas President Bush strengthened the sanctions imposed against Cuba, President Obama has relaxed many of the executive-based sanctions that against Cuba and sought to normalize relations with the country.  Both with respect to Cuba and more generally, trends suggest that OFAC rarely initiates enforcements against individuals any more.

Figure 1 provides a count of the total number of individuals listed in the case summaries on a yearly basis.In many of the OFAC case summaries involving enforcement actions against individuals, numerous individuals are reported as being part of the enforcement action.

Similar trends with respect to OFAC enforcement actions against corporate entities can be observed in Figure 2, but not nearly to the same extent. During the Bush Administration, the total number of enforcement actions undertaken by OFAC peaked at 195 in 2004. Since then, the total number enforcement actions undertaken by OFAC declined substantially. During the Obama Administration, OFAC engaged in no more than 28 enforcement actions against companies in a given year—averaging just over 21 case per year. Taken together, these trends suggest that OFAC has adopted a much more concentrated strategy in initiating enforcement actions that has focused almost exclusively on corporate entities.

So, which sanctions programs have received the most attention from OFAC in seeking to punish violations?  Figure 3 provides a breakdown by sanctions program of the number of the total enforcement actions undertaken by OFAC during the Bush and Obama Administrations.  Not all of the sanctions programs are included in Figure 3, but the ones that resulted in the most enforcement actions are.  The figure reveals that violations involving the Cuba sanctions during the Bush Administration constituted the leading number of OFAC enforcement cases by far.  That number of Cuba-related sanctions violations that OFAC pursued enforcement actions for dropped significantly during the 7 years of the Obama Administration.  Notably, the number of enforcement actions undertaken by OFAC with respect to the Iran and Sudan were also substantially lower during the Obama Administration despite the continued saliency of those cases.There were no cases during the Obama Administration involving the sanctions program against countries that were part of the former Yugoslavia due to the length of time that had passed since those sanctions were terminated. Indeed, only the sanctions program against Burma actually involved a greater number of OFAC enforcement actions during the Obama Administration.

Significant variation also exists with respect to which sectors that OFAC targeted with enforcement actions during the Bush and Obama Administrations.  Figure 4 breaks down the number of enforcement actions undertaken against corporate entities by their industry sector.  The chart only shows the leading sectors that were subject to enforcement actions.  By far, the financial sector was the leading target of enforcement actions by OFAC, followed by the shipping and tourism industry.  Within the database, the following companies and their affiliates were subject to OFAC enforcement actions the largest number of times: American Express, Bank of America, Bank of New York, Citigroup, Deutsche Bank, HSBC, and JPMorgan Chase. More than another other sector, OFAC has sought to target sanctions violations in the financial services industry in support of the U.S. Government’s sanctioning efforts. Once again, Figure 4 also shows across-the-board declines in the number enforcement actions undertaken by OFAC during the Obama Administration as compared to the Bush Administration.  Only the insurance industry was targeted more during Obama Administration. These enforcement actions, in particular, were linked to the Obama Administration’s strategy of restricting Iran’s access to international financial and insurance services.  The financial services sector still has continued to receive the lion’s share of OFAC’s attention, though, in pursuing enforcement actions.

Finally, the data on OFAC’s enforcement cases provides insights into where alleged sanctions violators were from.  In total, there were 636 enforcement actions that involved U.S. companies and 52 that involved foreign companies.  This makes sense, as the application of U.S. sanctions to foreign entities is much more controversial.  Enforcement actions against foreign firms are also much harder to investigate and can provoke the ire of foreign governments.  OFAC has primarily focused its attention on going after foreign financial institutions that violated U.S. sanctions, as the U.S. Government can leverage its central role in the global financial system to force foreign banks into complying with its sanctions policies.The Obama Administration accounted for 61% of the enforcement actions against foreign firms.

Table 1 lists the U.S. states that experienced the leading number of companies subject to OFAC enforcement actions.  As the table reveals, New York and California surpassed all other states in the number of enforcement actions that were brought against their companies.  Financial companies in New York City, which is home to Wall Street and is a global financial hub, were responsible for a substantial portion of the enforcement actions that OFAC undertook.Notably, the New York County District Attorney’s Office assisted in a number of enforcement proceedings against alleged sanctions violations that took place in New York.  California, which possesses an economy as large as many independent governments, is second on the list.  No other states had nearly as many sanctions-related infractions as these states.

Table 1: States with the Most OFAC Enforcement Actions against Entities
Name# of Actions
New York137
California109
Florida44
Texas39
Illinois31
New Jersey27
Massachusetts23

These trends illustrate that there is a great deal of inconsistency in how U.S. economic sanctions have been enforced.Just within the past 13 years, the number of average enforcement actions brought by OFAC has declined dramatically and the body has nearly ceased targeting individuals.  Additionally, the steepest decline in enforcement actions of still active sanctions occurred with respect to Cuba.  This suggests that political saliency with which U.S. Presidents view particular sanctions regimes influences which sanctions programs get more or less attention from OFAC. One consistent trend, though, has been that OFAC has focused launched the largest number of its enforcement actions against the financial services industry.  Banks are clearly within OFAC’s cross-hairs for violating U.S. sanctions.  This also helps explain why companies in New York faced sanctions enforcement actions more than any other state.

Yet even though the data show that OFAC is pursuing far fewer cases in recent years, the total amount of money OFAC has collected from sanctions-related penalties is as high as it has ever been.  This suggests that it is also important to understand how OFAC’s behavior has changed with respect to the penalties it imposes. The next report in this series will explore how and why OFAC’s approach towards penalizing companies has changed substantially over the past 13 years.

*Bryan R. Early is an Associate Professor of Political Science and the Director of the Center for Policy Research at the University at Albany, State University of New York. He is the author of Busted Sanctions: Explaining Why Economic Sanctions Fail (Stanford University Press, 2015).