On April 24, 2024, President Biden signed into law H.R. 815, an extensive legislative package consisting of: provisions of foreign aid for Ukraine, Israel, and Taiwan; measures meant to force the sale of Chinese-owned TikTok; and sanctions provisions and modifications detailed in the 21st Century Peace Through Strength Act (collectively, the Act), which itself consists of multiple sanctions-related acts. The scope, number, and scale of the Act's sanctions-related provisions make it one of the more significant pieces of sanctions legislation in recent years. We provide an overview of the Act's most critical sanctions-related aspects and key takeaways on what this means for sanctions compliance and risks going forward. 

Overview

Key sanctions components of the Act include the following: 

• An extension of the statute of limitations for commencing sanctions enforcement actions from five to 10 years. This applies to both criminal and civil sanctions violations enforced pursuant to any sanctions programs administered under the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), which encompass the vast majority of existing sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). Amending the statute of limitations under IEEPA will also impact national security-related regulations outside of the sanctions context that have been implemented under IEEPA, including certain emerging programs focusing on outbound investments and the bulk collection of personal data, among others. It remains to be seen whether OFAC will amend the sanctions record-keeping provisions to track the new statute of limitations, since the two have often run in parallel.
• Expanded sanctions authorities and modifications to secondary sanctions with respect to Iran that appear to target the following:
  • Persons, ports, vessels, vessel operators, and refineries involved in shipping, transferring, refining, and other dealings with Iranian crude oil, petroleum, and petroleum products 
  • Chinese financial institutions that engage in the purchase of petroleum or petroleum products from Iran 
  • Foreign financial institutions involved in the purchase of Iranian unmanned aerial vehicles (UAVs), UAV parts, or related systems
  • Persons knowingly involved in activities to help Iran acquire, develop, and deploy various types of technology used in ballistic missiles 
  Additionally, the Act requires the president to determine whether various Iranian government or government-controlled entities (including those located outside of Iran) and persons serving on boards of certain Iranian-government controlled entities meet the criteria for being sanctioned under one or more existing sanctions programs, impose sanctions on such persons, and provide reports to Congress with details of such determinations. 
• Mandatory sanctions targeting Palestinian and other terrorist organizations and activities, including Hamas, Palestinian Islamic Jihad, Al-Aqsa Martyrs Brigade, and the Lion's Den. The Act also includes sanctions authorities authorizing the imposition of sanctions on foreign persons and foreign terrorist organizations that provide support or engage in significant transactions with these sanctioned terrorist organizations and persons involved in directing the use of so-called "human shields." 
• Expanded sanctions authorizations targeting foreign persons determined to be responsible for, complicit in, or knowingly engaged in significant cyber-related activities that are "reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States." This essentially mirrors OFAC's existing cyber-related sanctions regulatory authorities, but also gives certain congressional committees more powers to formally request and obtain information about OFAC's rationale for determining whether or not to sanction persons under this provision. 
• Mandatory sanctions authorities targeting certain drug trafficking and production. The provisions authorize sanctions targeting persons knowingly trafficking in fentanyl, fentanyl precursors, or other related opioids traffickers. Separately, the Act includes sanctions authorities authorizing sanctions on persons involved in producing or contributing to the proliferation of captagon, a synthetic amphetamine-type stimulant, which is reportedly produced and trafficked at an industrial level by the Syrian government through armed groups such as Hezbollah. 
• Mandatory sanctions authorities targeting foreign persons who have been determined to threaten or have taken steps to use violence against any current or former U.S. government officials. 
• New mechanisms for seizing and "repurposing" immobilized or blocked Russian sovereign assets purportedly ranging from $4 billion to $5 billion that may be subject to U.S. jurisdiction. Most critically, the Act:
  • Restricts the conditions under which blocked or immobilized Russian sovereign assets subject to U.S. jurisdiction can be released
  • Requires financial institutions where Russian sovereign assets are held to submit reports on the status of Russian sovereign assets and for the president to report on these assets to Congress
  • Authorizes the president to "seize, confiscate, transfer, or vest any Russian aggressor state sovereign assets, in whole or in part, and including any interest or interests in such assets, subject to the jurisdiction of the United States" and to transfer those funds to a newly established "Ukraine Support Fund" to support certain activities related to compensation, assistance, reconstruction, rebuilding, recovery, economic assistance, and humanitarian assistance for Ukraine
  • Provides for limited judicial review of claims related to this "repurposing" mechanism where an action potentially violates constitutional rights
• Numerous provisions requiring the president to provide reports or written strategies to congressional committees concerning various sanctions-related determinations, sanctions enforcement, and OFAC resources. 

Takeaways

• The extension of the statute of limitations for IEEPA and TWEA violations, on its own, represents a major change that will likely have significant impacts on companies' sanctions compliance practices and potentially impact their exposure to liability for violations stemming from conduct beyond five years. As noted above, it is unclear if OFAC will amend the current recordkeeping provisions in its sanctions regulations to conform to this change (requiring certain records to be kept for 10 years instead of five). OFAC has traditionally expected that companies engaged in investigations, in the enforcement context, to "look back" to the beginning of the statute of limitations period in searching for similar potential violations, but it remains to be seen whether this expectation will continue given the doubling of the statutory period. Companies should continue to closely monitor any changes by OFAC with respect to recordkeeping requirements, while at the same deciding whether it is in their own best interests to keep relevant records for the statutory limitations period even if doing so is not required. 
  • Given the extended statute of limitations, companies may also need to adjust how they approach pre-merger/acquisition due diligence and review contract representations and warranties with respect to sanctions compliance, to ensure, for example, parties to a merger transaction disclose older potential sanctions violations that still may expose a buyer through successor liability. Additionally, company decisions, policies, and procedures related to internal investigations and voluntary self-disclosures should also take into account a now longer relevant period of conduct to ensure such investigations would probe into transactions within the expanded 10-year statute of limitations. 
• Provisions of the Act requiring that the president submit reports and strategies to Congress seem to illustrate key sanctions priorities for Congress and represent Congress's continuing interest in exercising increased oversight of and influence on sanctions-related actions. Examples include the following:
  • The Act requires reports detailing, inter alia, assets belonging to various Iranian government officials and groups that are subject to sanctions.
  • One of the Act's provisions appears designed to force OFAC to review potential gaps between U.K. and EU sanctions and U.S. sanctions, particularly with respect to Russia-related and Global Magnitsky sanctions. We note that the Act does not mandate that OFAC impose sanctions on persons or entities sanctioned by U.K. or EU sanctions authorities; it simply authorizes such sanctions where discrepancies exist and where there is already an existing applicable sanctions authority.
  • Regarding Iran and China in particular, the Act the requires the president to submit a strategy for countering China's potential role in evasion of Iran-related sanctions, requiring details about, inter alia, China's share of Iranian oil exports, vessels involved in shipping sanctioned petrochemicals, and the Chinese Communist Party's influence over non-state, semi-independent, and so-called "teapot" refineries.
• As the Act broadens OFAC's authority to designate foreign persons for sanctions, we can expect to see new executive orders to implement these changes, likely followed by changes in OFAC's regulations. We recommend that companies remain acutely aware of these impending changes to ensure continuance of risk-based, but event-driven sanctions compliance programs.

If you have any questions about how these new sanctions may impact you or your business, please contact:

Timothy P. O'Toole, totoole@milchev.com, 202-626-5552

Laura Deegan, ldeegan@milchev.com, 202-626-5942

Melissa Burgess, mburgess@milchev.com, 202-626-5914

Manuel Levitt, mlevitt@milchev.com, 202-626-5921

Annie Cho, acho@milchev.com, 202-626-1570

Rebecca Tweedie, rtweedie@milchev.com, 202-626-1487

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