Types of Sanctions: Comprehensive, List-Based, Sectoral, Secondary

Not all sanctions prohibit the same things, and the exam expects you to classify them quickly. Think in four shapes. Comprehensive sanctions are a near-total embargo on a whole jurisdiction.

List-based, or targeted, sanctions hit specific named persons and entities. Sectoral sanctions impose narrow prohibitions on a slice of an economy, like certain financing of an energy or defense sector. And secondary sanctions reach over non-U.

S. persons, threatening to cut them off from the U.S.

market if they deal with sanctioned targets. Get comfortable sorting any measure into one of these, because the type tells you what's actually forbidden.

Comprehensive sanctions are the bluntest tool: a broad embargo against an entire country or region, where nearly all transactions are prohibited unless a license authorizes them. Programs that have included comprehensive elements involve places such as Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine. With a comprehensive program, geography itself is the trigger, the customer doesn't have to be a designated person, the connection to the embargoed jurisdiction is enough.

Because these are so broad, they usually come with general or specific licenses that carve out humanitarian or other permitted activity. When a scenario centers on a sanctioned country rather than a named individual, comprehensive sanctions are likely in play.

List-based sanctions, also called targeted or smart sanctions, are the most common modern form. Instead of embargoing a country, the authority designates specific people, entities, vessels, and aircraft, and the prohibitions attach to those named targets wherever they go. OFAC's Specially Designated Nationals list, the S-D-N List, is the classic example: deal with a person on it, and you've likely breached.

For blocking-type designations, the target's property and interests in property must be frozen, and you're prohibited from dealing with them. Targeted sanctions are popular because they aim pressure at decision-makers while sparing ordinary civilians. Most of your screening work, name screening against lists, exists because of this category.

Sectoral sanctions are subtler, and they trip people up. Rather than fully blocking a target, they prohibit only specific activities with entities in a designated sector, for example, dealing in new debt or new equity beyond a set maturity, or providing certain services to an energy or financial sector. OFAC captures these on the Sectoral Sanctions Identifications list, the S-S-I List, and the precise prohibition is spelled out in directives.

Here's the trap the exam loves: a sectoral target is not a blocked person. You may still do ordinary business with it, just not the specifically prohibited activity. So if a scenario puts a counterparty on the S-S-I List and asks whether you must freeze its assets, the answer is usually no, you must only avoid the prohibited dealings.

Read the directive, not just the listing.

Finally, secondary sanctions. These are aimed not at U.S.

persons but at the rest of the world: the threat is that if a non-U.S. firm engages in certain dealings with a sanctioned target, it can itself be cut off from the U.

S. financial system or designated. Authorities like the Countering America's Adversaries Through Sanctions Act, CAATSA, give OFAC this reach.

The point is deterrence by leverage, persuading the whole world to avoid a target even where local law doesn't forbid it. The European Union, by contrast, generally does not impose secondary sanctions of this kind, and has at times used blocking statutes to push back against them.

Let's turn the four shapes into a quick exam reflex, because a scenario rarely labels the sanction for you. Ask: is a whole jurisdiction the trigger, regardless of who the parties are? Then it's comprehensive.

Is a specific named person or entity fully blocked, assets frozen, all dealings barred? Then it's list-based. Is only a particular activity prohibited, like new debt or new equity, while ordinary business is still allowed?

Then it's sectoral, and remember the trap, the target is not fully blocked. And does the measure threaten to penalize non-U.S.

persons for dealing with a target? Then secondary sanctions are in play, and even an E.U.

or Asian firm should care if it touches dollars. Run that four-question check and you'll classify almost any measure correctly. In the next lecture, we get concrete about the lists themselves, the S-D-N List, the consolidated lists, and the powerful 50 Percent Rule.