What are secondary sanctions and how should compliance teams screen for them?

par :name Olivia Cheng · Conformité aux sanctions · Apr 9, 2026 · 2 réponses Répondu

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This might be a basic question for the sanctions experts here, but I've been asked to update our sanctions compliance program to address secondary sanctions risk and honestly my understanding is fuzzy.

I get that primary sanctions apply to US persons directly. But what are secondary sanctions exactly? How do they differ operationally? And does the standard screening process cover them or do we need something additional?

We're a non-US financial institution with USD correspondent relationships, which I think makes us particularly exposed here.

Olivia Cheng

Membre depuis Apr 2026

Réponse acceptée

Not a basic question at all — secondary sanctions are one of the most misunderstood areas in compliance.

What are they? These are measures that target non-US persons for engaging in certain activities with sanctioned countries or parties. Unlike primary sanctions (which apply to US persons and USD transactions), these extraterritorial measures allow OFAC to sanction non-US entities for doing business with, say, Iran or Russia — even if no US person or USD is involved.

Why they're tricky: You won't find dedicated targets on a separate list. The risk comes from your counterparties' activities, not from a name match. A perfectly clean counterparty could expose you if they're doing significant business with sanctioned jurisdictions.

How to screen for them:

Standard screening against the SDN list and consolidated screening list — this catches primary designations
Counterparty due diligence — understand who your correspondents and major customers do business with
Jurisdiction-level risk assessment — flag transactions involving high-risk jurisdictions even if no named party is sanctioned
Negative news monitoring — watch for reports of your counterparties dealing with sanctioned entities

For a non-US institution with USD correspondent relationships, this extraterritorial risk is very real. US correspondent banks routinely terminate relationships with non-US banks they believe have excessive exposure to these measures.

LexFlag Team

Membre depuis Apr 2026

2 réponses

To add a practical example: we had a client who was doing legitimate trade with a company in a sanctioned country through a non-USD, non-US channel. Completely legal under our local laws. But when our US correspondent bank found out, they threatened to cut our relationship because of the extraterritorial risk it created for them.

The concept essentially means: "even if you're not subject to US law, the US can penalize you for activities that undermine US sanctions objectives." It extends American sanctions policy extraterritorially which is controversial but very real in practice.

I'd say OFAC's enforcement of these measures has been the single biggest driver of de-risking in correspondent banking over the last decade.

Tomás Herrera

Apr 12, 2026 at 10:47 PM