In order to safeguard the U.S. economy and to prevent acts of terror around the globe, the President, Congress, the State Department, and the Treasury, acting through the Office of Foreign Assets Control (OFAC), impose economic and trade sanctions against terrorist groups, those who provide them material support, and those who transact with them. These OFAC-administered counter terrorism sanctions include various executive orders and federal regulations.
Executive Order 13224, which can be viewed here, blocks terrorist property and prohibits transactions with those who “commit, threaten to commit, or support terrorism.” Originally signed by former President George W. Bush in light of the Sept. 11, 2001 terrorist attacks, the order then included a one page list of designated persons. Today, there are roughly 35 pages of names and entities that have been designated pursuant to Executive Order 13224. The U.S. Government has reasonable cause to believe that these persons are terrorists or supporters of terrorism. As such, U.S. persons located anywhere and persons subject to the jurisdiction of the United States must not only refrain from transacting with such persons, they must also block any property or interests in property in their possession belonging to such persons. Those who fail to block such property are in violation of OFAC-administered Counter Terrorism Sanctions.
That objectives of that order are supported by other, similar executive orders, acts of legislation, and sanctions regulations. These include the Global Terrorism Sanctions Regulations (31 C.F.R. Part 594), Terrorism Sanctions Regulations (31 C.F.R. Part 595), Terrorism List Governments Sanctions Regulations (31 C.F.R. Part 596), and Foreign Terrorist Organizations Sanctions Regulations (31 C.F.R. Part 597). These regulations are promulgated pursuant to statutes such the International Emergency Economic Powers Act (IEEPA), the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), and Section 5 of the United Nations Participation Act of 1945 (UNPA).
The Specially Designation Nationals and Blocked Persons List (SDN List) is extensive. There are approximately 6,000 people, entities, organizations, and groups appearing on that list. To fulfill U.S. foreign policy and national security objectives, U.S. persons are prohibited from carrying out business dealings with these individuals and entities. Even inadvertent, harmless, and accidental transactions with these persons can subject a person to significant civil penalties. This is because OFAC-administered sanctions are considered strict liability offenses. Persons who willfully violate OFAC-administered terrorism sanctions face may also face lengthy prison sentences if convicted.
Responsibility for compliance rests with the individual, business, or charitable organization subject to U.S. law conducting the transaction. Such persons must ensure that they are in full compliance with federal law and not in violation of economic sanctions targeting terrorists and terrorist supporters. Compliance with the law is the only surefire means a U.S. person can protect their business and reputation.
Definition of Terrorism
The Global Terrorism Sanctions Regulations (31 C.F.R. Part 594) defines terrorism as the following:
- Any activity that:
- involves a violent act or an act that is dangerous to human life, property, or infrastructure;
- And appears to be intended:
- To intimidate or coerce a civilian population;
- To influence the policy of a government through intimidation or coercion; or
- To affect the conduct of a government through assassination, kidnapping, hostage-taking, or mass destruction.
Those foreign persons suspected by the U.S. Government of terrorism or supporting terrorism are placed on the SDN List. Upon being designated, U.S. persons are generally prohibited from transacting with the SDN. Furthermore, U.S. persons are obligated to block any property or interests in property belonging to such SDNs. U.S. persons must also report any blockings to OFAC within 10 business days according to 31 C.F.R. Section 501.603(b)(1)(i).
As is specifically delineated in 31 C.F.R. Sections 594.201, 594.204-205, the prohibitions imposed against U.S. persons as a result of these counter terrorism sanctions include:
- Any transaction involving blocked property or that benefits a listed person, including making or receiving contributions of funds, goods or services;
- Any transaction in an attempt to evade or violate sanctions;
- Any conspiracy formed to violate any counter terrorism sanctions; and
- Making specified donations to any designated person.
OFAC-administered sanctions against terrorists and terrorist regimes are an important component of the U.S. Government’s efforts to preserve national security. These sanctions apply to terrorist groups around the globe, not just those located in Iran, Syria, and other Middle Eastern countries. In some instances, those targeted for sanctions have formed entities that operate in Europe and North America. U.S. persons must be alerted to such risks and avoid transacting with such entities. As such, legal and regulatory compliance risks can exist in nearly every cross-border transaction.
General and Specific Licenses
The federal government recognizes that there are certain situations in which transactions prohibited by the counter terrorism sanctions regulations may be legitimate and necessary. In these cases, an American person or person subject to U.S. jurisdiction may qualify for a general license. General licenses appear in Subpart E of 31 C.F.R. Part 594. General licenses not yet written into the C.F.R. may also appear on OFAC’s Counter Terrorism Sanctions website.
A general license is an authorization contained directly in the regulations. They authorize U.S. persons to engage in a transaction that is otherwise prohibited by some other part of the regulations. No license application is necessary to utilize a general license. However, a person utilizing a general license must ensure they are in full compliance with the requirements of that license or they risk violating the law.
Many of the general licenses currently available under OFAC’s counter terrorism sanctions include those dealing with the Palestinian Authority, travel, in-kind donations of medical supplies or services, the provision of legal services, and other authorizations. If a particular transaction is not authorized pursuant to a general license, a person may apply for a specific license from OFAC. Successfully applying for a specific license depends on the particular facts and circumstances of the application. There is no standard application form, and it is up to the applicant to comply with the necessary license requirements. Because there is no standard application, an applicant may also include relevant statements of licensing policy and legal analysis that would support OFAC’s decision to grant a license.