Insights on OFAC Sanctions Compliance in Brazil  

Diaz Reus International Law Firm - In July 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Brazilian Supreme Court (Supremo Tribunal Federal, STF) Justice Alexandre de Moraes under the Global Magnitsky Human Rights Accountability Act (GLOMAG). Weeks later, the Brazilian Supreme Court issued a binding opinion (in Instituto Brasileiro de Mineração v. Município de Acaiaca et al.) holding that orders issued by foreign authorities are unenforceable in Brazil, except when authorized by Brazilian law or Brazilian courts. 

Under U.S. law, U.S. citizens, permanent residents, U.S. incorporated entities and their foreign branches, must comply with OFAC sanctions. Non-U.S. persons are subject to OFAC sanctions when they cause or conspire to cause U.S. persons or entities to violate sanctions, or when they assist sanctioned persons or entities to evade sanctions.

The STF opinion in Instituto Brasileiro de Mineração shields Justice Moraes from OFAC sanctions because it prohibits the enforcement of any foreign order in Brazil, unless the order is authorized by Brazilian judicial authorities. The STF opinion, therefore, prevents that Moraes’ assets held in financial institutions in Brazilian territory be blocked.

While the conflict between OFAC sanctions and STF opinion in Instituto raises questions as to which laws and regulations should be followed, the best course of action for financial institutions to avoid the risk of liability in the U.S., is a sanctions compliance program that effectively protects the entity from engaging in sanctionable transactions.

Background

In July, during the trial of former president of Brazil Jair Messias Bolsonaro, OFAC sanctioned the trial presiding judge, STF Justice Moraes. Also in July, the U.S. Department of State revoked several Brazilian Supreme Court Justice’s visas, including Morae’s, for alleged unlawful censorship against U.S. persons on U.S. soil.

In August, the STF issued its opinion in an unrelated case (Instituto Brasileiro de Mineração) ruling that foreign administrative orders are not self-executory in Brazil. Under the ruling, the enforcement of foreign orders (judicial or administrative) requires domestication by statute or judiciary.  The Court expressly mentioned as invalid any orders prohibiting financial transactions and blocking bank accounts in Brazil.

In Instituto Brasileiro de Mineração, the STF applied principles of Brazilian law related to instances where the Brazilian legal system rejects the enforcement of foreign orders.  The issue in the case was whether Brazilian municipalities had standing to sue in a foreign country. The court ruled against the municipalities and prohibited the plaintiffs to enforce a United Kingdom’s court injunction, by stating that the foreign court order was not enforceable because it had not been domesticated in Brazil.
OFAC sanctions against STF Justice Moraes and his wife were part of a series of measures taken by the White House in which it accuses the government of Brazil of unfair treatment of the U.S. Indeed, the U.S. Trade Representative (USTR) opened an investigation pursuant to Section 301 of the U.S. Trade Act, into allegations of Brazil’s policies, practices related to digital trade, electronic payment services, unfair, preferential tariffs, among other acts the Department finds to be against the U.S. interests.  Additionally, the U.S. government imposed 40% increase tariffs on certain products from Brazil, based the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.) (NEA), section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), and section 301 of title 3, United States Code. 

The Extraterritorial Reach of OFAC Sanctions

OFAC may sanction foreign individuals and entities (non-U.S. persons), when:

1) They are in the U.S., or conduct business in the U.S.  Transactions conducted through the U.S. financial system to move funds are subject to U.S. jurisdiction.

2) Non-U.S. persons engage in activity that may undermine or violate OFAC sanctions, in which case they are subject to the imposition of secondary sanctions, independently of where they are. This is the case where non-U.S. persons cause or conspire to cause U.S. persons or entities to violate sanctions.

A financial institution can be subject to secondary sanctions when it authorizes a transaction on behalf of a blocked person, or a transaction in which the blocked person has an interest.  This is the case where a foreign non-U.S. bank routes a prohibited transaction through the United States or the U.S. financial system, thereby causing a U.S. financial institution to process the payment in violation of OFAC sanctions.

OFAC may impose secondary sanctions on non-U.S. persons by adding them to the SDN list and blocking their assets, or, by prohibiting them from engaging in transactions with U.S. persons and entities.

Secondary sanctions are a U.S. government tool to prevent the evasion of the primary sanction target. It also forces persons not subject to U.S. jurisdiction to comply with the prohibition to engage in transactions with the target of primary sanctions.

U.S. persons are subject to OFAC sanctions anywhere in the world. They can be sanctioned for conducting prohibited transactions with blocked persons and for facilitating such transactions by other persons in the U.S. or in a foreign country. OFAC prohibits all transactions by U.S. persons, or persons within (or transiting) the U.S., that involve any property or interest in property of sanctioned (blocked) persons. 

The rule for U.S. persons and entities is the prohibition from engaging in trade or financial transactions and other dealings with blocked persons, unless exempted by statute or authorized by OFAC.
OFAC does not seize, but may block all property and interests in property of the sanctioned person or entity that are located in the U.S., or come within the U.S., or are within the possession or control of any U.S. person or entity. 

OFAC sanctions are effective immediately. All assets (tangible and intangible) and real  property of sanctioned persons or entities located in the U.S., or in the possession or control of a U.S. person, are frozen.

Violations of OFAC sanctions may result in civil penalties on U.S. and foreign persons, both individuals and business entities. OFAC can impose civil sanctions on a strict liability basis and refer the matter to the U.S. Department of Justice for criminal prosecution.
U.S. persons, including financial institutions, who have in their possession or control any blocked property, have a duty to report blocked property located outside the U.S. This general rule applies to any real property, or financial property, such as cash, checks, savings accounts, tangible and intangible assets.

OFAC determines the degree of secondary sanctions based on a number of factors, such as whether the non-U.S. person or entity had knowledge, or a significant or material transaction, with the target of the primary sanction.

Limits of OFAC Sanctions in Brazil

In Brazil, the STF ruling in Instituto Brasileiro de Mineração indicates that all entities authorized to transact in Brazil must not block assets or stop transfers of assets of sanctioned persons or entities, when ordered by a foreign authority.

The STF opinion in Instituto specifies that foreign orders lack enforcement power in Brazil when they offend the Brazilian sovereignty and when their enforcement has not been authorized by the Brazilian judiciary. The opinion does not, however, address the consequences to persons and entities who contravene the opinion.

In sum, according to the STF ruling in Instituto, OFAC sanctions, such as assets freeze, require authorization from the Brazilian courts to be enforced in Brazil, without exception. Any foreign orders are subject to this ruling, including OFAC sanctions blocking assets of criminal organizations sanctioned by OFAC that may be located in Brazil (as opposed to being immediately blocked). 

OFAC Sanctions Compliance

When implementing a sanctions compliance program, financial institutions must consider a risk-based approach, including the risk of liability exposure in both countries (Brazil and the U.S.). 

In the United States, financial institutions are particularly at risk of severe secondary sanctions, civil and criminal liability, if they fail to comply with sanctions issued by OFAC, including their designation in the SDN.
In Brazil, contravening the STF opinion in Instituto may result in liability. Until a final judgment in Instituto, financial institutions should remain conscientious of the risks involved in violating OFAC’s sanctions.

U.S. and non-U.S. financial institutions with presence in the U.S., or using U.S. financial system in cross-border transactions, sending and receiving funds, risk exposure to sanctions when they engage in activities that OFAC may perceive to be a violation. But they may request, and OFAC may authorize, certain activities that would otherwise be sanctionable (specific license). 

Sanctions compliance programs should adapt to the nuances of conflicting legal system, following OFAC guidelines for mitigation of risks. Best practice requires the development and implementation of a comprehensive compliance program that includes due diligence, regular checks of SDN list and information on the ultimate beneficial owner of each relevant transaction. The program should include the guidelines suggested by OFAC (management commitment, risk assessment, internal controls, testing and auditing and training) and risk of liability in the various jurisdictions where business transactions are conducted.

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