The Office of Foreign Assets Control (OFAC) is responsible for enforcing U.S. economic and trade sanctions against individuals, businesses, and foreign entities that pose a threat to national security or violate U.S. laws. Sanctions are designed to restrict financial and commercial transactions with targeted parties.  Federal prosecutors charge individuals and businesses based on allegations that they have attempted to evade these restrictions by misrepresenting sources of funds, using shell companies, or exporting prohibited goods without the required licenses. Alleged sanctions violations carry severe financial and criminal penalties.

Understanding how OFAC enforces sanctions, the role of the International Emergency Economic Powers Act (IEEPA), and the risks associated with potential charges of evasion is critical for anyone under investigation or facing sanctions-related charges.

What is OFAC and How Do U.S. Sanctions Work?

OFAC operates under the U.S. Department of the Treasury and administers a variety of sanctions programs targeting countries, individuals, and entities engaged in illicit activities, including terrorism, human rights abuses, and international money laundering.

Types of Sanctions:

• Country-based sanctions – Broad trade restrictions imposed on specific nations (e.g., Iran, North Korea, Russia).
• Entity and individual sanctions – Designations on the Specially Designated Nationals (SDNs) List, which prohibits U.S. persons and businesses from engaging in financial transactions with the listed parties.
• Sectoral sanctions – Industry-specific restrictions on transactions within targeted economies, such as the Russian energy sector or Venezuelan financial system.

Although individuals and entities operating in foreign countries may be engaging in conduct that is legal where they are located, the Department of Justice often claims that foreign individuals and entities are subject to these sanctions and must comply with U.S. laws.  Federal prosecutors thus sometimes claim that foreign individuals or entities with no connection to the U.S. nevertheless cannot engage in unauthorized financial transactions, exports, or trade with sanctioned parties.

The Role of IEEPA in Sanctions Enforcement

The International Emergency Economic Powers Act (IEEPA) grants the President of the United States broad authority to regulate commerce in response to extraordinary threats to national security, foreign policy, or the economy. IEEPA serves as the primary legal basis for many U.S. sanctions programs enforced by OFAC.

Under IEEPA:

• The U.S. government can freeze assets, block transactions, and prohibit financial activities involving sanctioned parties.
• Businesses and individuals found evading sanctions can face severe penalties, including criminal prosecution, civil fines, and asset forfeiture.
• Federal agencies, including the DOJ, FBI, and Homeland Security, can investigate and prosecute violations related to sanctions evasion and money laundering.

IEEPA violations often result in federal charges that carry lengthy prison sentences and significant financial penalties.

Common Allegations of Sanctions Evasion

Federal authorities aggressively pursue individuals and businesses suspected of circumventing sanctions. Common allegations of evasion include:

• Misrepresenting the source of funds or business transactions to banks and financial institutions.
• Using shell companies or third-party intermediaries to facilitate transactions with sanctioned entities.
• Exporting controlled or prohibited goods to embargoed countries without proper licensing.
• Structuring financial transactions to avoid detection and reporting by U.S. regulators.
• Concealing ownership interests in businesses or real estate to bypass restrictions.

While there are likely to be significant legal challenges and factual defenses to charges under IEEPA, the DOJ takes a broad view that such actions fall under OFAC regulations and IEEPA, leading to the risk of serious legal consequences for those involved.  IEEPA charges tend to be legally and factually complex. A successful defense of such charges requires a detailed knowledge of the relevant law and a thorough investigation of the facts.

Criminal and Civil Penalties for Violating OFAC Sanctions

Sanctions violations can lead to both criminal and civil penalties, including:

• Criminal penalties:
  • Up to 20 years in prison for willful violations.
  • Fines up to $1 million per violation for individuals and businesses.
• Civil penalties:
  • Significant monetary fines, even in cases without criminal intent.
  • Asset freezing or forfeiture if linked to prohibited transactions.
• Additional legal consequences:
  • Loss of export privileges and business licenses.
  • Potential placement on government watchlists, restricting future trade and business operations.

Defenses Against OFAC and IEEPA-Related Charges

Facing federal charges for sanctions evasion requires a strategic defense. Possible defenses include:

• Lack of intent – Demonstrating that the accused did not knowingly engage in prohibited activities or that the violations were the result of compliance errors.
• Due diligence efforts – Showing that the business or individual took reasonable steps to comply with OFAC regulations.
• Challenging financial evidence – Investigating whether prosecutors misinterpreted financial records or misapplied regulatory definitions.
• Invalid designation – Arguing that the accused was wrongfully linked to a sanctioned entity due to incorrect or outdated information.

How a Federal Criminal Defense Attorney Can Help

Individuals and businesses accused of evading sanctions, laundering restricted funds, or misrepresenting financial transactions need experienced federal defense counsel. A qualified federal criminal defense attorney can:

• Review the case and identify weaknesses in the prosecution’s claims.
• Challenge the application of IEEPA and OFAC regulations to specific transactions.
• Defend against financial penalties and criminal charges in court.
• Advocate for reduced charges or alternative resolutions when appropriate.

Protect Your Rights Against Sanctions Evasion Charges

With increased federal enforcement of sanctions violations under OFAC and IEEPA, individuals and businesses accused of misrepresenting transactions, laundering funds, or exporting restricted goods face severe legal consequences. The complex nature of U.S. sanctions laws and prosecutors’ broad interpretation of financial regulations make experienced legal defense critical in these cases.

If you are under investigation or facing charges related to sanctions evasion, contact Burnham & Gorokhov, PLLC today for strategic legal defense and guidance on protecting your rights.