United States: Executive Order Creates Cybersecurity Sanctions Framework

On April 1, 2015, President Obama issued an Executive Order authorizing the imposition of sanctions against designated individuals or entities found to be engaged in malicious cyber activity, including various forms of commercial espionage and trade secret theft.1 No specific designations or implementing regulations accompanied the Order. Nevertheless, the President's action highlights the increasing importance of cybersecurity in U.S. national security policy and the government's increasing willingness to use creative policy tools, including list-based sanctions, to combat cyber threats to U.S. economic and national security interests.
As with other list-based sanctions programs, the Order highlights the importance of establishing strong internal procedures to conduct transaction screening. An effective screening program ensures that a company's dealings do not involve designated parties or their property interests, including entities that are owned 50 per cent or more (individually or in the aggregate) by such SDNs. Companies should take this opportunity to review their compliance programs generally and be ready to incorporate new requirements as OFAC issues more detailed supporting regulations. It will also be important for companies to monitor the overseas reaction to this Order. Certain EU Member States, for example, are already discussing the possibility of taking similar types of action, and other countries may implement similar policies of their own.   

Targets of the Order

The Order authorizes the imposition of sanctions against two basic categories of designated individuals or entities:
First, those that take part in "cyber-enabled activities" from outside the United States that "are reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States" and that have any of four purposes or effects: (i) "harming, or otherwise significantly compromising the provision of services by, a computer or network of computers that support one or more entities in a critical infrastructure sector"; (ii) "significantly compromising the provision of services by one or more entities in a critical infrastructure sector"; (iii) "causing a significant disruption to the availability of a computer or network of computers"; or (iv) "causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain." There are sixteen critical infrastructure sectors, including chemical, communications, critical manufacturing, defense, energy, financial services, healthcare and agriculture.2

Second, those that are "responsible for or complicit in, or to have engaged in, the receipt or use for commercial or competitive advantage or private financial gain, or by a commercial entity, outside the United States of trade secrets misappropriated through cyber-enabled means, knowing they have been misappropriated, where the misappropriation of such trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States."  

The provision of material assistance, sponsorship, or financial, material, or technological support, or goods or services in support of any of the targeted activities is likewise now grounds for sanctions under the Order.  

Implementing the Order

As with other list-based sanctions, the Order generally prohibits U.S. persons from engaging in any dealings with designated persons, and any property or property interests within U.S. jurisdictions or held by U.S. persons must be blocked. The Order also prohibits transactions designed to evade or avoid the sanctions regime.

We expect that the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) will ultimately promulgate regulations implementing this Order, which will include procedures to designate individuals or entities under the Order. As with other sanctioned parties, these designees will be added to OFAC's list of Specially Designated Nationals and Blocked Persons (SDNs).3

In the meantime, OFAC provided initial guidance in the form of FAQs4 that sets forth a number of important definitions, including the term "malicious cyber-enabled activity":

"deliberate activities accomplished through unauthorized access to a computer system, including by remote access; circumventing one or more protection measures, including by bypassing a firewall; or compromising the security of hardware or software in the supply chain."

OFAC's guidance clarifies that the Order is "not designed to prevent or interfere with legitimate cyber-enabled academic, business, or non-profit activities," and is intended to target only significant, malicious cyber actors that threaten U.S. interests. Normal network administration that incidentally disrupts network access (e.g., blocking online retail access from an office network) does not fall under the scope of the Order.

The Order also constitutes an additional tool for the U.S. government to combat the growing threat of cyber-enabled misappropriation or theft of trade secrets held by U.S. companies. Recently, the U.S. government has increased prosecution of trade secret theft under current authorities, Congress has considered legislation to create a uniform federal civil cause of action and strengthen criminal penalties against trade secret theft, and negotiators have pushed to include the protection of trade secrets in international trade agreements under negotiation. This Order could prove to be a further important new means to deter and punish egregious cases of trade secret theft. The government also clearly hopes to encourage the private sector to increase information sharing on such attacks. "The more information about trade secret theft, the better off we are," John Smith, the acting director of the Treasury Department's Office of Foreign Assets Control, told reporters Wednesday on a conference call. "We would welcome the input from the private sector and others that may have relative information on trade secret theft that might be covered by the executive order."5 However, real questions relating to the more detailed implementation of and procedures applicable to this and other aspects of the Order will remain until OFAC issues accompanying regulations.

The Order represents the third significant deployment of U.S. sanctions law in just the past several months to combat cyber-related malfeasance as a national security threat. Section 1637 of this year's National Defense Authorization Act authorized the President to block the assets of any foreign person who "knowingly requests, engaged in, supports, facilitates, or benefits from the significant appropriation" of U.S. technologies or proprietary information through economic or industrial espionage in cyberspace.6 And, in January, President Obama issued a separate Executive Order imposing new sanctions on North Korea because of "the provocative, destabilizing, and repressive actions and policies of the Government of North Korea, including its destructive, coercive cyber-related actions during November and December 2014."7

1 Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities" (Apr. 1, 2015), available at https://www.whitehouse.gov/the-press-office/2015/04/01/executive-order-blocking-property-certain-persons-engaging-significant-m. Supporting materials are available at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150401.aspx
2 The full list of critical infrastructure sectors is identified in Presidential Policy Directive 21(Feb. 12, 2013) (citing 42 U.S.C. 5195c(e)): chemical, commercial facilities, communications, critical manufacturing, dams, defense industrial base, emergency services, energy, financial services, food and agriculture, government facilities, healthcare and public health, information technology, nuclear reactors, materials and waste, transportation systems, and water and wastewater systems. 
See, OFAC Specially Designated Nationals List, available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx.
4 See, OFAC Frequently Asked Questions #444-52.
5 Philip Ewing, "U.S. hopes cyber rule draws info from vendors," POLITICO (April 1, 2015).
6 Pub. L. No. 113- 291, 128 Stat. 3292.
7 "Imposing Additional Sanctions with Respect to North Korea" (January 2, 2015), available at https://www.whitehouse.gov/the-press-office/2015/01/02/executive-order-imposing-additional-sanctions-respect-north-korea.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Benjamin A. Powell
Jonathan G. Cedarbaum
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.