Publication
Sanctioned by the United States? Mexican Individuals and Companies May Have Options
The United States has an intricate and sometimes complex web of overlapping economic sanctions and export laws and regulations that impact international trade. A United States sanctions designation can immediately affect banking, travel, payments, contracts, and customer relationships. The immediate reaction may be to dismiss the issue if the person does not live in the United States, does not have assets in the United States, or believes the allegations are incorrect. However, there are options for those companies impacted (either as the sanctioned entity or the entity in a sanctioned company’s supply chain) to address a sanctions designation to alleviate risks.
A designation does not always mean the issue is permanent, but it should be addressed carefully. There are administrative and judicial processes to seek removal from sanctions lists, correct inaccurate information, request authorization for certain transactions, and present evidence that the sanctions concern has been resolved. Many individuals and companies have been successfully removed from United States sanctions lists through these processes.
I. What Happens After a United States Sanctions Designation?
A United States sanctions designation can create immediate disruption. In many cases, the first sign is practical rather than legal. The person or company may learn of the problem when a payment is frozen, an account is restricted, a transaction is cancelled, or a visa issue arises.
For example, in the case of sanctions against a Mexican national or company, they can expect:
- Frozen funds or blocked property;
- Closed or restricted bank accounts;
- Rejected or delayed wire transfers;
- Loss of access to U.S. dollar transactions;
- Visa denial or revocation;
- Difficulty entering the United States and other countries that rely on United States sanctions or visa decisions;
- Terminated contracts or commercial relationships;
- Increased scrutiny from banks, investors, suppliers, customers, insurers, and payment processors; and
- Serious reputational harm in Mexico, the United States, and other countries.
These consequences may be severe even if the person or company believes the designation is wrong. The immediate priority is to understand what was designated, what property or transactions are affected, and what communications have already occurred with banks, counterparties, or other government authorities.
II. Why OFAC Sanctions Matter Outside the United States?
United States financial sanctions are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, commonly known as OFAC. When OFAC designates a person or company, that person or company is typically added to the Specially Designated Nationals and Blocked Persons List, collectively referred to as the SDN List.
In general, United States persons and companies cannot conduct transactions with entities or individuals on the SDN List, and property subject to United States personal and extraterritorial jurisdiction must be blocked. Because the United States financial system is central to international commerce, non-United States banks and companies often treat OFAC designations as global risk events, not merely United States legal events, and cease doing business with those listed.
This consequential reality matters for Mexican individuals and companies with cross-border businesses, international accounts, U.S. dollar payments, foreign travel, or multinational relationships.
III. Administrative and Judicial Options May Be Available
A United States sanctions designation should be evaluated as with any other legal issue impacting global supply chains. Although OFAC has broad authority, sanctioned persons and entities have a process to respond.
The administrative path usually begins with a request for reconsideration to OFAC. The substance of that request depends on the facts of each case. Some cases involve mistaken identity or inaccurate information. Others involve changed circumstances, separation from a high-risk relationship, changes in ownership or management, remediation measures, or evidence that the person or company no longer presents the concern that led to designation.
Litigation may also be appropriate in some cases. Sanctioned persons have challenged OFAC actions in U.S. federal court where they believe the agency acted unlawfully, failed to support its decision, or did not properly consider the actual administrative record. Even though a lawsuit is not always the immediate first step, it should be considered early enough that the factual record and communications do not undermine that option.
IV. The Strategic Response to Address Sanctions Designations
A response to a sanctions designation should be strategic. A rushed explanation to OFAC, a bank, a counterparty, or another government agency may create other issues if it is incomplete, inconsistent with documents, or disconnected from a later delisting or litigation strategy.
For Mexican individuals and companies, the response often requires parallel coordination as to various approaches to different agencies and financial institutions. The strategy may need to address the OFAC designation, blocked funds, bank inquiries, visa and travel issues, business continuity, public reputation, ownership and control, source of funds, and relationships with persons or entities viewed as high risk.
V. Conclusion
A sanctions determination by the United States can severely disrupt a Mexican individual’s life or a Mexican company’s business. But, it does not always mean the issue is permanent. A strategic approach to address the issues may lead to relatively expedited resolution and minimization of impact on company operations.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Phoenix and Tucson, Arizona; Los Angeles, Orange County, Palo Alto and San Diego, California; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno-Tahoe, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
