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A wire routed through Dubai or Istanbul comes back with two words: “compliance reasons.” The counterparty isn’t on any list you checked, the goods are ordinary, and the bank won’t say anything else. Expect more of that after November 4, 2026.
That day the U.S. Treasury’s Office of Foreign Assets Control (OFAC) released a routine-looking sanctions update. Most of it wasn’t new designations. It was one line, added to more than a thousand existing entries on the Specially Designated Nationals and Blocked Persons List (SDN List). The line blocked no one new. It is, however, exactly the kind of field that bank screening software picks up.
OFAC secondary sanctions don’t aim at the blocked person. They aim at the non-U.S. businesses, banks above all, that keep dealing with that person outside U.S. jurisdiction. The new line spells out what such a bank stands to lose. Below is what that means for companies and individuals paying through banks in the UAE, Turkey, Hong Kong and Central Asia.
What Changed on November 4
Every entry in the Iran program created by Executive Order 13902 (EO 13902) now carries the text “Secondary sanctions risk: See Section 2 of E.O. 13902.” The list is long. By our count, it covers about 350 vessels, roughly 140 individuals, and companies including some 30 banks, most of them Iranian. The addresses cluster in Iran, the UAE, mainland China and Hong Kong, with a fair number in Turkey, India and Singapore.
OFAC filed the change under administrative list updates, and legally that’s accurate. Everyone on it was already blocked. What changed is that each entry now names the consequence for a foreign bank. OFAC secondary sanctions are spelled out in the list itself, so the screener no longer has to work them out.
The same day, OFAC designated the network of Suniel Kumar Sharma and his wife Jaspreet Preeti Shahid, based in Chandigarh, India. Treasury says the network helped Iran’s shadow fleet get around maritime law. One of its companies is a Singapore firm named after an Eswatini ship registry, and Sharma’s own entry lists websites for registries in the name of Eswatini and Timor-Leste. OFAC paired the action with an alert on false flags used by Iranian tankers. The new entries got the Section 2 flag from day one.
What Section 2 Means for a Foreign Bank
Section 2 of EO 13902 lets the Treasury Secretary sanction a foreign financial institution that knowingly conducts or facilitates a significant financial transaction for a person blocked under the order. The penalty is narrow and severe: a ban on opening a correspondent or payable-through account in the United States, or strict conditions on keeping one. For a bank that clears dollars, that is close to an existential threat.
Two definitions in the order matter here. “Knowingly” covers what the bank should have known, not only what it actually knew. And “foreign financial institution” is broad: payment companies, money service businesses, brokers, exchange houses and precious metals dealers all qualify.
Russia entries have carried a similar flag for a while (“See Section 11 of Executive Order 14024”). Now the Iran entries have one too. In practice, OFAC secondary sanctions rarely work through formal Treasury findings against a bank. They work through the bank’s own risk appetite. Turning down a payment costs less than explaining later why nobody noticed a flag sitting in the SDN entry. The bank isn’t asking whether the payment is legal. It’s asking whether the payment is worth it.
The order does keep one carve-out: it does not reach the provision of agricultural commodities, food, medicine or medical devices to Iran.
VTB Now Carries Three Flags
VTB Bank is among the flagged entries. It has been listed under the Iran program for some time, but its entry now shows three separate secondary sanctions flags: under the Ukraine-related regulations (31 C.F.R. 589.201 and 589.209), under Section 11 of EO 14024, and under Section 2 of EO 13902. The tankers Merope, Min Hang and Vesna carry the same three.
For Russian clients, this means a bank tracing a payment chain now sees Iran risk at VTB, not just Russia risk. The Iran program is the less forgiving of the two, with fewer general licenses and less room for exceptions. In our experience, OFAC has already denied specific license applications in matters involving VTB precisely because of its Iran-program listing. The new flag only reinforces that reasoning.
Companies That Aren’t on the List
The flag appears only on persons named on the SDN List. Under OFAC’s 50 percent rule, though, any company owned 50 percent or more in the aggregate by blocked persons is itself blocked. It isn’t listed, so it carries no secondary sanctions line. However, the risk to a bank is the same: OFAC secondary sanctions follow the blocked person’s money, not the line in the list. Banks that screen ownership already treat such companies as if they were listed.
Frequently Asked Question (FAQ) 402 covers what happens when blocked owners sell down below 50 percent. The company stops being blocked by operation of the rule, but only if the divestment took place entirely outside U.S. jurisdiction and without U.S. persons. Funds already frozen at a U.S. bank stay frozen, because OFAC doesn’t recognize an unlicensed transfer of a blocked interest. And the sale has to be real.
A Transfer on Paper Changes Nothing
OFAC set out what “not real” looks like in its March 31, 2026 Guidance on Sham Transactions and Sanctions Evasion. The premise is simple: if a blocked person gives property away on paper but keeps using or directing it, the blocked interest survives, and the property stays blocked. The guidance lists red flags:
- terms that aren’t commercially reasonable, or no real consideration
- a transfer to a family member or close associate
- no apparent business purpose
- layered structures in jurisdictions with no real connection to the asset
- the former owner still involved in managing or using the property
- timing close to the designation, before or after
- evasive answers to questions from banks or counterparties
The guidance’s own example: Vladimir Potanin moved Cyprus-based Sentimare Enterprises into four Liechtenstein foundations, each with one of his minor children as sole beneficiary. OFAC concluded that Potanin kept his interest, stopped the foundations’ funds from moving through U.S. banks, and in June 2024 designated Sentimare and all four foundations. The people who help carry risk too: OFAC has already fined a U.S. attorney for managing a trust tied to a sanctioned oligarch.
For a foreign bank, that list doubles as a review checklist. If a flagged name or its former company shows up anywhere near a payment, these are the questions compliance will ask. Restructuring doesn’t remove the risk. It draws attention to it.
If a Payment Has Already Been Stopped
Start by finding out where it stopped and why. A foreign bank that returns a wire isn’t blocking anything under U.S. law; it simply won’t take the risk. What helps there is screening counterparties, vessels, and owners against the SDN List, including the 50 percent rule, and giving the bank a document package that shows no flagged party is involved.
It’s a different problem if a U.S. bank, usually a New York correspondent, has frozen the funds. Then the only way to get them back is an OFAC specific license. That route is open to people and companies that aren’t on the list themselves but whose payment touched a blocked party along the way.
On November 4, OFAC secondary sanctions didn’t add a single new prohibition for anyone on that list. What they changed is how fast a foreign bank says “no.” Screening now has to happen before the payment, not after it bounces.
