Primary sanctions bind people within the imposing state’s jurisdiction. Secondary sanctions reach outside it.
The mechanism
A secondary sanctions provision does not tell a foreign bank that it may not deal with a designated party. It says that if it does, it may itself be designated, or lose its US correspondent account.
The conduct remains lawful where it occurs. What changes is the consequence, and the consequence is exclusion rather than prosecution.
Why that works
Because it operates through risk appetite rather than through courts. A foreign institution facing a choice between a single customer relationship and continued access to dollar clearing does not need to be sued to make that decision.
The words “secondary sanctions risk” appearing in a designation entry are a signal aimed precisely at that audience.
The blocking statute problem
Some jurisdictions, notably the EU, have enacted blocking statutes that prohibit their own persons from complying with certain foreign secondary sanctions. That places a company caught by both in a genuine conflict: complying with one regime breaches the other.
This is not a hypothetical, and it is one of the reasons this area generates litigation rather than straightforward compliance.
Secondary sanctions are not the only way US rules reach a company outside the United States. A foreign company can also violate a primary prohibition directly, by causing a US bank to process a prohibited payment or by being owned by a US person. That is a different mechanism with a different consequence, described in how US sanctions reach companies outside the United States.