International Drug Traffickers and OFAC

The U.S. Department of the Treasury’s Office of Terrorism and Finance Intelligence works to safeguard the nation’s economic interests and financial systems by “marshal[ling] the department’s intelligence and enforcement functions” to combat “rogue nations, terrorist facilitators, weapons of mass destruction (WMD) proliferators, money launderers, drug kingpins, and other national security threats.” Within this infrastructure, the Office of Foreign Assets Control (OFAC) addresses economic sanctions against those identified as international narcotics traffickers.

Engaging in trade and other financial transactions with those involved in drug trafficking is a threat to the national security and the economic stability of the nation. Therefore, through the Narcotics Trafficking Sanctions Regulations, the Foreign Narcotics Kingpin Designation Act and Regulations, and Executive Order 12978, OFAC imposes and enforces economic and trade sanctions against drug kingpins and international drug traffickers in Colombia and around the world.

Here is information on other prohibited transactions.

• Goldpharma Designation

Executive Order 12978

Executive Order 12978, was signed by President Bill Clinton in 1995 acknowledging a state of emergency to address “the actions of significant foreign narcotics traffickers centered in Colombia, and the unparalleled violence, corruption, and harm they cause in the United States and abroad.” The federal government considers the actions of drug kingpins and significant international drug traffickers to be a serious threat against the national security, foreign policy, and economy of the United States.

Blocking Assets and Prohibiting Transactions with Significant Narcotics Traffickers

The Exec. Order prohibits transactions with Specially Designated Nationals, persons listed in the Annex to the order, and other person determined by the Secretary of State and the Attorney General:

• To play a significant role in international drug trafficking centered in Colombia
• To materially assist in narcotics trafficking of designated persons or to provide financial or technological support or goods or services that support such activities or persons
• To be owned or controlled by designated persons or to be acting on behalf of those persons.

Conducting prohibited transactions or conspiring to violate sanctions imposed against persons designated as international drug traffickers can subject a person to significant civil and criminal penalties. Ensuring compliance through proper OFAC licensing and due diligence is critical to engaging in international economic activities.

The Kingpin Act

The Foreign Narcotics Kingpin Designation Act was enacted by Congress to expand the reach of economic sanctions beyond Colombia to a global scale. According to the Kingpin Act, “It shall be the policy of the United States to apply economic and other financial sanctions to significant foreign narcotics traffickers and their organizations worldwide to protect the national security, foreign policy, and economy of the United States.”

The act allows for the public identification of those who are determined to be significant international narcotics traffickers through the OFAC Specially Designated Nationals (SDN) list. It authorizes the blocking of assets of those on the SDN list, and it prohibits United States persons from directly or indirectly engaging in certain transactions with those on the SDN list or entities or interests owned or controlled by such individuals.

Sanctions Regulations

Regulations pertaining to sanctions against international narcotics traffickers are listed in the Code of Federal Regulations under 31 C.F.R. Part 536 and 31 C.F.R. Part 598. Understanding these regulations and maintaining compliance with sanctions against international drug traffickers can help American businesses and organizations to avoid serious civil and criminal penalties associated with violating OFAC sanctions.

Most transactions with a specially designated narcotics trafficker or with respect to blocked interests or property of such a person are prohibited. Conducting financial transactions or transfers that directly or indirectly involve blocked interest can result in frozen assets, blocked accounts, civil penalties, and possibly criminal penalties if the violations were willfully committed.

Penalties for Violation

The two primary authorities imposing sanctions against international narcotics traffickers and the properties and interests owned by identified drug kingpins and Specially Designated Nationals (SDNs) involved in international drug trafficking are Executive Order 12978 and the Kingpin Act.

Violation of E.O. 12978, which imposes sanctions related to the Colombian drug trade, carries a civil penalty of either $250,000 or twice the value of the underlying transaction, whichever is greater. Criminal penalties for willfully violating, attempting to violate, conspiring to violate, or aiding and abetting the commission of a violation of Exec. Order 12978 or IEEPA-based OFAC counter narcotics trafficking regulations include a fine of up to $1,000,000 and a maximum prison sentence of 20 years.

The Kingpin Act carries civil penalties of up to $1,000,000. Willful violations of the Kingpin Act can subject a person to up to 10 years of imprisonment and up to $10,000,000 in fines. Furthermore, any officer, director, or agent of any entity who knowingly participates in a violation of the Kingpin Act faces up to 30 years of imprisonment and $5,000,000 in fines.