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A US nexus is the link that pulls a transaction under US sanctions law. When you understand us nexus sanctions rules, you can see why a deal with no American party can still trigger US enforcement. The nexus is the connection point. It might be a US person, a US dollar payment, or goods made in the United States.
This matters because you do not have to be American to break US sanctions. A company in Singapore or Germany can face penalties if its deal touches the US financial system or US-origin goods. This guide explains what counts as a nexus, how it works, and what you should check before you trade.
What a US Nexus Means
A nexus is simply a connection. In sanctions, it is the fact that brings your transaction inside US jurisdiction. The Office of Foreign Assets Control, or OFAC, enforces most US sanctions programs. You can read the primary source at OFAC. OFAC does not need you to be based in America. It needs a US touchpoint somewhere in the deal.
Three touchpoints come up most often. Each one can put a foreign company on the hook. Once a nexus exists, the transaction must follow US sanctions rules from start to finish.
- US persons. A US citizen, green card holder, or US company touches the deal.
- US dollars. The payment clears through a US bank.
- US-origin goods. The product or its parts were made in the United States.
The Three Main Types of US Nexus
1. A US Person Is Involved
A US person must follow OFAC rules everywhere in the world. The term is broad. It covers more than you might expect.
- US citizens, wherever they live
- Lawful permanent residents, or green card holders
- Any company formed under US law, including its foreign branches
- Anyone physically located inside the United States
If a US person approves, signs, ships, or advises on a deal with a sanctioned party, that creates a nexus. A US employee at a foreign firm can pull the whole transaction into US reach. So can a US-based server or a US director who signs off.
2. The Payment Uses US Dollars
This is the nexus that surprises people most. When you pay in US dollars, the money almost always passes through a US bank. That bank is a US person. So the transaction gains a US nexus even if neither the buyer nor the seller is American.
The US dollar sits at the center of global trade. It is used in a large share of foreign exchange deals and prices oil, metals, and many commodities. A dollar payment routed through New York is enough. OFAC has penalized foreign firms whose only link to the US was the currency.
3. The Goods Are US-Origin
US export rules follow the goods, not the seller. If an item was made in the United States, US jurisdiction can travel with it as it moves between countries. This applies to finished products and to parts inside a larger item.
Foreign-made goods can also qualify. If a product holds more than 25% controlled US-origin content by value, US export controls can still apply. This is the de minimis rule. It means a machine built abroad can carry US jurisdiction because of the American chips or software inside it. For more on this side, see the difference between export controls and sanctions.
US Nexus Triggers at a Glance
| Trigger | What creates the link | Common example |
|---|---|---|
| US person | A citizen, resident, or US company acts in the deal | A US director signs the sales contract |
| US dollars | Payment clears through a US bank | A wire in USD routed through New York |
| US-origin goods | The product or its parts are made in the US | A device with over 25% US content by value |
| US territory | Goods transit or a party sits inside the US | Cargo passing through a US port |
| US software or servers | The deal runs on US-based systems | Email or cloud hosted in the US |
Causing a Violation Without a Direct Nexus
You can also break the rules by causing a US person to do so. Say you hide a sanctioned party’s name so a US bank processes a payment it would have blocked. You caused the bank to violate. OFAC can act against you for that.
This is why stripping information from wire messages is a serious offence. It removes the very facts a US bank needs to screen. Watch for these behaviors, which often signal an attempt to bury a nexus. Many appear in our list of red flags of sanctions evasion.
- A customer asks you to leave names off payment messages
- Routing changes at the last minute to avoid a US bank
- A middleman appears with no clear business reason
- Vague end-use or a buyer who resists normal questions
Primary Versus Secondary Sanctions
A nexus triggers primary sanctions. These are the rules that bind US persons and any deal with a US touchpoint. Break them and you face fines or worse.
Secondary sanctions work differently. They target non-US firms with no US nexus at all. The US does not fine you directly. Instead it can cut you off from the US market or the US banking system as a penalty for dealing with certain sanctioned parties. The threat is loss of access, not a court case.
| Feature | Primary sanctions | Secondary sanctions |
|---|---|---|
| Needs a US nexus | Yes | No |
| Who is bound | US persons and deals with a US link | Foreign firms with no US link |
| Main risk | Fines and enforcement | Loss of US market access |
The 50 Percent Rule and Ownership
A nexus is not the only trap. Ownership can make a party off-limits even if its name is not on any list. If one or more blocked persons own 50% or more of a company, that company is treated as blocked too. This is the 50 percent rule.
So you can screen a buyer, find a clean name, and still be dealing with a blocked entity through its owners. You need to look past the front company to who controls it. Our guide to the 50 percent rule in sanctions screening walks through the detail.
How to Check for a US Nexus
Before you close a deal, walk through the connection points. A short checklist keeps you honest. Do this during customer onboarding and again before payment.
- Ask what currency the payment uses. If it is US dollars, assume a nexus.
- Check where the goods were made and what US parts they hold.
- Confirm no US person signs, ships, or advises on the deal.
- Screen the buyer, the end user, and the banks against sanctions lists.
- Look at ownership for the 50 percent rule.
- Keep records of every check you run.
Running these checks is the core of good denied party screening. If any answer raises a flag, pause and get advice before you move money or goods.
What Happens If You Get It Wrong
OFAC penalties are civil or criminal. Civil fines can reach into the millions per violation. Criminal cases can bring larger fines and prison time for the people involved. OFAC can act even when you did not know, because many sanctions rules apply on a strict liability basis.
A voluntary self-disclosure can cut a penalty if you find a problem and report it. Good records help you prove you tried to comply. For the full picture, see OFAC penalties explained.
Frequently Asked Questions
Does paying in US dollars always create a US nexus?
Almost always. Dollar payments clear through US banks, and those banks are US persons. That routing gives OFAC jurisdiction even when no party is American. If you want to avoid a dollar nexus, you would need to settle in another currency with no US bank in the chain.
Can a non-US company be fined by OFAC?
Yes. If a deal has a US nexus, a foreign firm can face OFAC enforcement. OFAC has penalized companies in Asia and Europe for dollar payments or US-origin goods tied to sanctioned parties. Location outside the US is not a shield.
What is the difference between a nexus and secondary sanctions?
A nexus brings you under primary sanctions, which carry fines. Secondary sanctions need no nexus. They punish foreign firms by cutting off US access for dealing with certain targets. One is a legal violation. The other is a loss of market access.
Do US export rules apply to goods after they leave the US?
Yes. US export controls follow the goods. A US-made item, or a foreign item with more than 25% controlled US content by value, can stay under US jurisdiction as it moves between countries. Re-exports and transfers still need to follow the rules.
Key Takeaways
A US nexus is the link that puts your deal under US sanctions law. It shows up through US persons, US dollar payments, US-origin goods, US territory, or US systems. You do not have to be American to be caught. A dollar wire or a US-made part is enough. Check the currency, the goods, the people, and the ownership before you trade. When a nexus exists, screen carefully and keep your records. If you are unsure whether a deal falls under US reach, contact us for help before you commit.