New U.S. Legislation Extends Sanctions Statute of Limitations and Authorizes New Sanctions: What Companies Need to Know

The 21st Century Peace Through Strength Act became law recently as part of H.R. 815, which also provided aid to Ukraine, Israel and Taiwan. The law contains important sanctions measures that:

• Extend the statute of limitations to 10 years for violating most sanctions programs administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). 
• Expand authority and mandates for the President to sanction entities and individuals in connection with fentanyl trafficking as well as activities of Hamas, Iran and Syria. 

The law also contains prohibitions targeting the provision of “personally identifiable sensitive data” of U.S. individuals to China, Iran, North Korea and Russia, which Orrick’s Cyber, Privacy & Data Innovation team explores in a related article. In addition, the law creates new national security controls that provide the President with authority to ban certain software applications controlled by China, Iran, North Korea and Russia.

Extended Statute of Limitations for Sanctions Violations

The new law extends the statute of limitations for most sanctions violations from 5 to 10 years. 

This change applies to civil enforcement and criminal prosecution of violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), thus, covering violations of most OFAC-administered sanctions programs and certain other non-sanctions programs administered under IEEPA. 

The impacted non-sanctions programs include certain programs administered by the U.S. Department of Commerce’s Bureau of Industry and Security and regulations the U.S. Department of Justice (DOJ) plans to issue pursuant to an executive order concerning the transfer of U.S. government and bulk sensitive data to countries of concern. 

The extended statute of limitations is expected to lead to a similar extension of the current 5-year OFAC regulatory recordkeeping requirements. 

The new law does not change the 5-year statute of limitations for export control violations of the Export Control Reform Act or the Arms Export Control Act.

What Companies Should Consider Doing

Companies should consider adapting to this new compliance and enforcement landscape by:

• Adjusting internal compliance and recordkeeping measures.
• Expanding due diligence.
• Seeking expanded representations and warranties in commercial and corporate transactions. 

The new 10-year statute of limitations may pose challenges when considering the review period for internal investigations of potential sanctions compliance irregularities. 

The extended statute of limitations is likely to reduce OFAC’s reliance on tolling agreements. 

Other Sanctions Measures

The statute also includes sanctions measures that target:

• Fentanyl trafficking and related activities.
• Various Iran-related activities, such as missile proliferation and foreign support for production of Iranian-origin petroleum products.
• Foreign support for Hamas.
• Foreign support for Syria’s illicit production and international illicit proliferation of Captagon, a synthetic amphetamine-type stimulant. 

The law authorizes but does not require the President to harmonize U.S. sanctions designations with EU and UK sanctions measures.

In addition, the statute targets activities of foreign financial institutions engaging in activities that are contrary to U.S. interests. It includes measures that would prohibit or restrict U.S. financial institutions from opening or maintaining correspondent accounts for:

• Foreign financial institutions determined to be involved in the purchase of Iranian unmanned aerial parts and related systems.
• Chinese financial institutions determined to be involved in the purchase of petroleum or petroleum products from Iran, regardless of the value, frequency or other aspects of the transaction.

The new law also authorizes the Secretary of the Treasury to restrict U.S. financial institutions’ dealings with foreign financial institutions the Secretary determines to be of “primary money laundering concern” in connection with illicit opioid trafficking.