Order Code RL34254
Executive Order 13,438:
Blocking Property of Certain Persons
Who Threaten Stabilization Efforts in Iraq
November 16, 2007
M. Maureen Murphy
Legislative Attorney
American Law Division

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Executive Order 13,438: Blocking Property
of Certain Persons Who Threaten
Stabilization Efforts in Iraq
Summary
On July 17, 2007, President Bush issued Executive Order No. 13,438, “Blocking
Property of Certain Persons Who Threaten Stabilization Efforts in Iraq.” It is the
latest in a series of executive orders based on the national emergency declared by
President Bush with respect to “the unusual and extraordinary threat to the national
security and foreign policy of the United States posed by obstacles to the orderly
reconstruction of Iraq, the restoration and maintenance of peace and security in that
country, and the development of political, administrative and economic institutions
in Iraq.”
The President’s authority to issue the executive order stems from the
International Emergency Economic Powers Act of 1977 (IEEPA). The executive
order covers financial transactions and authorizes property controls with respect to
three categories of persons: (1) individuals or entities determined “to have
committed, or to pose a significant risk, of committing an act or acts of violence that
have the purpose or effect of ... threatening the peace or stability of Iraq ... “; (2)
individuals or entities determined “to have materially assisted, sponsored, or
provided financial, material, logistical, or technical support for, or goods or services
in support of, such an act or acts of violence or any person whose property and
interests in property are blocked pursuant to this order ... “; and (3) individuals and
entities determined “to be owned or controlled by, or to have acted or purported to
act for or on behalf of, directly or indirectly, any person whose property and interests
in property are blocked pursuant to this order....”
This report provides a brief history of the development of presidential powers
in peacetime. It discusses some of the issues that might be raised in light of the
contrast between the executive order’s broad language and its narrow aim —
supplementation of sanctions applicable to Al-Queda and former Iraq regime officials
to cover terrorists operating in Iraq. It examines the reach of the executive order and
provides legal analyses of some of the constitutional questions raised in the courts
by similar sanctions programs, noting that the broad language of the executive order
is not unprecedented. In view of the fact that there is an expectation that the
Department of the Treasury’s Office of Foreign Assets Control (OFAC) will publish
names of persons designated under the executive order and issue regulations further
refining its terms and applicability, the report examines some of the procedures
available to challenge OFAC sanction regulations and briefly discusses OFAC’s
rules, which may be of concern to attorneys representing individuals and entities
subjected to sanctions or involved in transactions with sanctioned persons.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Statutory Basis: IEEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Executive Order No. 13,438 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Persons Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transactions Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Implementation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Precedents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Attorney-Client Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
OFAC Administrative Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Challenging Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Potential Impact of OFAC Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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Executive Order 13,438: Blocking Property
of Certain Persons Who Threaten
Stabilization Efforts in Iraq
Background
On July 17, 2007, President Bush issued Executive Order No. 13,438, “Blocking
Property of Certain Persons Who Threaten Stabilization Efforts in Iraq.”1 It is the
latest in a series of executive orders based on the national emergency declared by
President Bush with respect to “the unusual and extraordinary threat to the national
security and foreign policy of the United States posed by obstacles to the orderly
reconstruction of Iraq, the restoration and maintenance of peace and security in that
country, and the development of political, administrative and economic institutions
in Iraq.”2 The broad language of this executive order has been the subject of a degree
of criticism as potentially reaching beyond insurgents in Iraq to third parties, such as
U.S. citizens, who may unknowingly be providing support for the insurgency.3
Having declared a national emergency, the President invoked authority available
under the International Emergency Economic Powers Act of 1977 (IEEPA)4 and
1 72 Fed. Reg. 39,719 (July 19, 2007).
2 Exec. Order No. 13,350, 69 Fed. Reg. 46,055 (July 30, 2004) (expanding on the national
emergency declared May 28, 2003 (Exec. Order No. 13,303, 68 Fed. Reg. 3,193), which was
expanded on September 3, 2003 (Exec. Order No. 13,155, 68 Fed. Reg. 52,314).
3 See, e.g., Walter Pincus, “Destabilizing Iraq, Broadly Defined,” Washington Post, A-15
(July 23, 2007) (quoting Bruce Fein as raising questions about whether lawyers who provide
legal assistance for persons listed under the executive order might be subject to asset
freezes); ACLU website, “ACLU Says Executive Order ‘Material Support’ Provision
Sweeps Too Broadly and Will Restrict Humanitarian Efforts in Iraq” (7/27/2007)
[http://www.aclu.org/natsec/warpowers/31113prs20070727.html]; and, CivicActions
website (asking whether the “executive order just criminalize[d] the anti-war movement in
the US, giving the president the power to clean out our bank accounts?”)
[http://www.civicactions.com/blog/executive_order_blocking_property_of_certain_
persons_who_threaten_stabilization_efforts_in_iraq].
4 P.L. 95-223, Tit. II, 91 Stat. 1652, 1626; 50 U.S.C. §§ 1701 et seq. IEEPA authority is
triggered when the President declares a national emergency with respect to “any unusual and
extraordinary threat, which has its source in whole or substantial part outside the United
States, to the national security, foreign policy or economy of the United States.” Other
statutes invoked by the President in issuing the executive order are: the National
Emergencies Act, 50 U.S.C. §§ 1601 et seq (setting procedures for declaring, terminating,
informing Congress about, reporting expenses incurred by national emergencies, and
establishing a joint resolution as the means by which Congress may terminate the national
(continued...)

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ordered the blocking of financial transactions and the institution of property controls
with respect to any property or interests in property of persons determined to fall
within three categories of individuals or entities threatening the stabilization efforts
in Iraq. Implementation of this executive order is the responsibility of the
Department of the Treasury’s Office of Foreign Asset Control (OFAC), which
currently “administers economic and trade sanctions based on US foreign policy and
national security goals against targeted foreign countries, terrorists, international
narcotics traffickers, and those engaged in activities related to the proliferation of
weapons of mass destruction.”5 OFAC has promulgated regulations implementing
sanctions involving: the Balkans, Burma, Cote d’Ivoire (Ivory Coast), Cuba,
diamond trading, Iran, Iraq, Liberia, Libya, narcotics trafficking, weapons of mass
destruction proliferation, North Korea, Sudan, Syria, terrorists, and Zimbabwe.6
Statutory Basis: IEEPA
The July 17, 2007, executive order cites as its authority IEEPA. Under IEEPA,
once the President has declared a national emergency with respect to a threat “to the
national security, foreign policy, or economy of the United States” from a source “in
whole or in substantial part outside the United States,”7 broad authority is available
to the President to impose an economic embargo over transactions and property in
which a foreign nation or foreign person has an interest. Specifically, the statute
authorizes the President to:
(A) investigate, regulate, or prohibit —
(i) any transactions in foreign exchange,
(ii) transfers of credit or payments between, by, or
through, or to any banking institution, to the extent that
such transfers or payments involve any interest of any
foreign country or national thereof; and
(iii) the importing or exporting of currency or securities ...
and
(B) investigate, regulate, direct and compel, nullify, void, prevent or
prohibit, any acquisition, holding, withholding, use, transfer,
withdrawal, transportation, importation or exportation of, or dealing
in, or exercising any right, power, or privilege with respect to, or
transactions involving, any property in which any foreign country or
4 (...continued)
emergency); and section 301 of Title 3, U.S.C. (authorizing agency heads to issue
regulations).
5 U.S. Department of the Treasury, Office of Foreign Assets Control, “Our Mission,”
[http://www.treas.gov/offices/enforcement/ofac/mission.shtml] (last visited, November 7,
2007).
6 Texts of the sanctions regulations, legal documents ordering the sanctions, and guidance
to the various industries required to abide by the sanctions can be found at OFAC’s website:
[http://www.treas.gov/offices/enforcement/ofac/legal/index.shtml].
7 50 U.S.C. § 1701(a).

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a national thereof has any interest; by any person, or with respect to
any property, subject to the jurisdiction of the United States.8
This language is derived from section 5(b) of the Trading with the Enemy Act
of 1917 (TWEA),9 which grants authority to the President to block and freeze enemy
property and interests in property and to regulate financial transactions involving
enemy countries, their nationals and their allies during a declared war.10 It was first
used in peacetime in 1933, in the midst of the Great Depression, when President
Franklin D. Roosevelt proclaimed a bank holiday and closed banks in the United
States, thereby interfering with both foreign and domestic financial transactions, in
response to what he deemed to be a national banking emergency related to “extensive
speculative activity abroad in foreign exchange ... [resulting] in severe drains on the
Nation’s stocks of gold.”11 Congress immediately ratified this action and amended
TWEA,12 extending the emergency powers granted under the original legislation to
cover both wartime and “any other period of national emergency declared by the
President” and provided the President with authority to regulate purely domestic
transactions.13 President Roosevelt invoked TWEA again in peacetime in 1939, as
Hitler was advancing in Europe, to block assets of Norway and Denmark and their
nationals. Eventually TWEA was used to block assets of the Axis enemies of the
United States.14 A 1940 amendment expanded presidential power under TWEA by
specifically authorizing asset freezes and expanding authority beyond transactions
with enemies or allies of enemies to cover financial transactions in which any foreign
8 50 U.S.C. App. 1702(a)(1).
9 Act of October 6, 1917, ch. 106, § 5, 40 Stat. 411; as amended 12 U.S.C. § 95(a), 50
U.S.C. App. §§ 1 - 44.
10 As enacted, this statute excluded U.S. citizens and corporations incorporated in the
United States from the definition of “enemy.” Id. § 2 , 40 Stat. 441. The current version
continues to exclude “citizens of the United States” and corporations incorporated in the
United States from its definition of “enemy.” 50 U.S.C. App. §§ 2(c) and (a).
11 Proclamation No. 2039, 48 Stat. 1689 (March 6, 1933).
12 Act of March 9, 1933, ch. 1, 48 Stat. 1.
13 Act of March 9, 1933, ch. 1, § 2, 48 Stat. 1. Not only did the 1933 amendment remove
the TWEA requirement for a declared war, it also removed the requirement of a foreign
nexus, authorizing the President “to investigate any transactions in foreign exchange,
transfers of credit between or payments by banking institutions ... and export, hoarding,
melting, or earmarking of gold or silver coin or bullion or currency by any person within the
United States.” Upon enactment of this legislation, President Roosevelt issued an executive
order authorizing the Secretary of the Treasury to permit banks to reopen and to regulate
exports of gold. Exec. Order No. 6073 (March 10, 1933).
14 After Hitler invaded Norway and Denmark, President Roosevelt issued Executive Order
No. 8389 on April 10, 1940, prohibiting foreign exchange transactions involving the
property of Norway or Denmark or any national thereof. Congress confirmed that executive
order and its implementing regulations by Joint Resolution of May 7, 1940, ch. 185, § 2, 54
Stat. 179. Subsequently, this executive order was amended repeatedly to regulate
transactions with over thirty Axis nations, Axis-occupied countries, Axis allies, and other
countries threatened by the Axis powers. See 12 U.S.C. § 95a, note.

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state or foreign national had an interest.15 TWEA, thus, was used to block assets of
friendly nations threatened by Axis occupation. A 1941 amendment to TWEA added
the power to seize and vest16 title to any property of a foreign person or nation.17
This amendment extended the “power of seizure ... to all property of any foreign
country or national so that no innocent appearing device could become a Trojan
horse,” i.e., it was designed “to reach enemy interests which masqueraded under ...
innocent fronts.”18 The Supreme Court upheld the seizing and vesting of property of
a non-enemy alien in wartime19; it also upheld the authority of the Treasury
Department to vest assets of an enemy (Austrian) entity, making them unavailable
to U.S. creditors despite a New York court’s having appointed a temporary receiver
to collect the Austrian concern’s assets and ultimately distribute them to U.S.
creditors.20
15 As amended in 1940, TWEA section 5(b) specifically authorized the President to
“investigate, regulate, or prohibit ... any transfer, withdrawal or exportation of, or dealing
in, any evidences of indebtedness or evidences of ownership of property in which any
foreign state or a national or political subdivision thereof, as defined by the President, has
any interest.” Joint Resolution of May 7, 1940, ch. 185, § 2, 54 Stat., at 179.
16 According to material that Bethany Kohl Hipp, “Defending Expanded Presidential
Authority to Regulate Foreign Assets and Transactions,” 17 Emory Inter’l L. Rev. 1311,
1345 - 1346( 2003)(citations omitted), gleaned from Emergency Controls on International
Economic Transactions: Hearing on H.R. 1560 and H.R. 2382 Before the Subcomm. On
Int’l Econ. Policy & Trade, House Comm. on Int’l Relations & Markup of Trading with the
Enemy Reform Legislation, 93d Cong., 1st Sess., n. 30, at 51 (1977):
Freezing, or blocking, is not taking assets; rather it is a short- or long-term
deprivation of the assets or the usage thereof. Freezing does not involve a
transfer of title. For example, during World War II, both German and Dutch
assets held in the United States were frozen. German assets were subsequently
vested in the United States — title passed from Germany or nationals thereof to
the United States. The Court held that the vesting of German property was not
a compensable taking because the Fifth Amendment does not apply to enemy
property. Conversely, Dutch assets were never vested. The blocking, or
freezing, and vesting of foreign assets have never been held to be
unconstitutional.
17 Act of December 18, 1941, ch. 593, § 301, 55 Stat. 838, 839 - 841, 77th Cong., 1st Sess.
The statute provided, inter alia, that “any property or interest of any foreign country or
national thereof shall vest, when, as, and upon the terms, directed by the President, in such
agency or person as may be designated from time to time by the President, and upon such
terms and conditions as the President may prescribe such interest or property shall be held,
used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the
benefit of the United States.” Id. at 840. Originally, TWEA permitted vesting of “enemy”
property and defined “enemy” in terms of nations at war with the United States and citizens
thereof and entities having a principal place of business therein. 40 Stat. 411, § 2. This
allowed enemy nations to “cloak” their ownership of property by organizing a business
entity under the laws of a friendly nation.
18 Clark v. Uebersee Finanz-Korp., 332 U.S. 480, 48 and 485 (1947).
19 Silesian-American Corporation v. Clark, 332 U.S. 469 (1947).
20 Propper v. Clark, 337 U.S. 472 (1949). The Court, thus, held that the freezing order
nullified any subsequent unlicensed judicial attempt to transfer the assets. The Court stated:
(continued...)

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In the 1970’s, during the Viet Nam war, congressional concern with ways to
oversee presidential use of emergency power led to questioning of the broad
invocation of TWEA in circumstances not directly related to war and not
substantially originating abroad.21 One result was the enactment of the National
Emergencies Act of 1976 (NEA)22 and IEEPA, in 1977. NEA sets forth various
procedures to be followed by the President when declaring a national emergency,
such as Federal Register publication23 and specification of the provisions of law
under which the actions under the national emergency are to be taken.24 It specifies
procedures for terminating national emergencies and provides a role for Congress by
imposing presidential reporting requirements and establishing congressional review
procedures.25 NEA terminated existing national emergencies,26 except for those
invoking section 5(b) of TWEA, therefore, imposing no notice and reporting
requirements on the President when invoking section 5(b). This was changed with
the enactment of IEEPA.27
20 (...continued)
“Through the Trading with the Enemy Act, in its various forms, the nation sought to deprive
enemies, actual or potential, of the opportunity to secure advantages to themselves or to
perpetrate wrongs against the United States or its citizens through the use of assets that
happened to be in this country. To do so has necessitated some inconvenience to our
citizens and others who, as here, are not involved in any actions adverse to the nation’s
interest.” Id. at 481 - 482.
21 See, e.g., Exec. Order No. 8,843, 6 Fed. Reg. 4,020 (August 15, 1940) (issued by President
Roosevelt to regulate consumer installment loans); Exec. Order No. 11,387, 33 Fed. Reg.
47 (January 3, 1968) (issued by President Lyndon Johnson to regulate capital transfers
abroad).
22 See CRS Report 98-50, National Emergency Powers, by Harold C. Relyea (a history of
presidential exercise of emergency powers, a table listing all declared national emergencies
since 1976, and an outline of the background of the enactment of the National Emergencies
Act).
23 50 U.S.C. § 1621(a).
24 50 U.S.C. § 1631.
25 50 U.S.C. § 1622.
26 P.L. 94-412, Tit. V, § 502(a)(1), 90 Stat. 1258.
27 To continue in existence, declarations of national emergencies must be renewed annually.
50 U.S.C. § 1622(d). Other procedural requirements are succinctly summarized as follows:
IEEPA requires the President to consult with Congress, whenever possible
before declaring a national emergency, and while it remains in force. Once a
national emergency goes into effect, the President must submit to Congress a
detailed report explaining and justifying his actions and listing the countries
against which such actions are to be taken, and why. The President is also
required to provide Congress periodic follow up reports every six months with
respect to actions taken since the last report and any change in information
previously reported. H. Comm. on Ways and Means. Overview and Compilation
of U.S. Trade Statutes 209 (Comm. Print 2003 ed.).

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IEEPA was enacted primarily, according to the Senate Report accompanying the
legislation, as a direct response to expanding use of emergency power by Presidents:
The purpose of the bill is to revise and delimit the President’s authority to
regulate international economic transactions during wars or national
emergencies. The bill is a response to two developments: first: extensive use by
Presidents of emergency authority under section 5(b) of the Trading With the
Enemy Act of 1917 to regulate both domestic and international economic
transactions unrelated to a declared state of emergency and, second, passage of
NEA, which provides safeguards for the role of Congress in declaring and
terminating national emergencies, but exempts section 5(b) of the Trading With
the Enemy Act from its coverage.28
By restricting the use of TWEA section 5(b) to wartime, IEEPA draws a
distinction between the power provided Presidents in declaring peacetime national
emergencies having their origin abroad and that available when war has been
declared. Nonetheless, because of the need to provide Presidents with sufficient
flexibility to respond to emergencies,29 the breadth of authority provided in IEEPA
is considerable with respect to affording powers to the President to impose economic
sanctions in peacetime emergencies originating abroad. To use these powers, the
President must declare a national emergency with respect to “any unusual and
extraordinary threat, which has its source in whole or substantial part outside the
United States, to the national security, foreign policy or economy of the United
States.”30 Once such a national emergency has been declared, IEEPA provides the
President with broad power to impose controls over economic transactions involving
transfers abroad and foreign property controls.
1. Under IEEPA, the President may “under such regulations as he may prescribe,
by means of instructions, licenses, or otherwise ... investigate, regulate, or prohibit”
any foreign exchange transaction, any transfers of credit or payments involving any
foreign interest, and the import or export of currency or securities “by any person, or
with respect to any property, subject to the jurisdiction of the United States.”31
2. IEEPA also empowers the President to “investigate, block during pendency
of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any
acquisition, holding, withholding, use, transfer, withdrawal, transportation,
importation or exportation of, or dealing in, or exercising any right, power, or
28 Sen. Rep. 95-466, 95th Cong., 1st Sess 2 (1977).
29 See Note, “The International Emergency Economic Powers Act: A Congressional
Attempt to Control Presidential Emergency Power,” 96 Harvard Law Review 1102, 1106
(1983).
30 50 U.S.C. § 1701(a). The statute emphasizes that “[t]he authorities granted to the
President ... may only be exercised to deal with an unusual and extraordinary threat with
respect to which a national emergency has been declared for purposes of this chapter and
may not be exercised for any other purpose. Any exercise of such authorities to deal with
any new threat shall be based on a new declaration of national emergency which must be
with respect to such threat.” 50 U.S.C. § 1701(b).
31 50 U.S.C. § 1701 (a)(1)(A).

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privilege with respect to, or transactions involving, any property in which any foreign
country or national thereof has any interest by any person, or with respect to any
property, subject to the jurisdiction of the United States.32
3. IEEPA does not provide authority to block international communications,33
information or informational materials.34 Humanitarian aid35 is excepted to the
blocking authority; however, humanitarian aid may be restricted if the President
determines that humanitarian aid “would seriously impair his ability to deal with” the
national emergency; is coerced; or would endanger U.S. armed forces.36
4. Until 2001, IEEPA did not authorize the vesting of property, i.e., taking title
to blocked or frozen property. With the enactment of the USA PATRIOT Act37 in
2001, IEEPA provides authority for the President, during “armed hostilities” or when
the United States has been attacked, to confiscate property of foreign persons,
organizations, or countries he has determined to have “planned, authorized, aided or
engaged in” the armed hostilities or attacks and to vest title in any agency or person
for the benefit of the United States.38 The first and, to date only, use of this power
32 50 U.S.C. § 1701 (a)(1)(B). The USA PATRIOT Act, P.L. 107-56, § 106(1)(B), 115 Stat.
277, added “block during the pendency of an investigation.”
33 50 U.S.C. § 1702(3)(b)(1) specifies that the authority granted to the President does not
include authority to regulate “any postal, telegraphic, telephonic, or other personal
communication, which does not involve a transfer of anything of value.”
34 50 U.S.C. § 1702(b)(2).
35 50 U.S.C. § 1702(b)(3). It has been held that the plain language of the statute does not
include monetary aid within the humanitarian aid exception. Veterans Peace Convoy Inc.
v. Schultz, 722 F. Supp. 1425 (S.D. Tex. 1988); Holy Land Foundation for Relief and
Development v. Aschroft, 219 F. Supp. 2d 57 (D. D.C 2002), aff’d 333 F. 3d 156 (D.C. Cir
2003), cert. denied, 540 U.S. 1218 (2004). OFAC’s refusal of a license to a Quaker wishing
to contribute $2,000 to a Canadian Friends organization to aid North and South Vietnam
non-combatants was upheld in Welch v. Kennedy, 319 F. Supp. 945 (D.D.C. 1970) with the
court noting the possibility that any funds or supplies sent to North Vietnam would be
diverted from civilian purposes to free up funds for military weaponry.
36 50 U.S.C. § 2702(b)(2).
37 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, P.L. 107-56, 115 Stat. 272.
38 The statute reads,
... the President may ... when the United States is engaged in armed hostilities or
has been attacked by a foreign country or foreign nationals, confiscate any
property, subject to the jurisdiction of the United States, of any foreign person,
foreign organization, or foreign country that [the President] determines has
planned, authorized, aided, or engaged in such hostilities or attacks against the
United States; and all right, title, and interest in any property so confiscated shall
vest, when, as, and upon the terms directed by the President, in such agency or
person as the President may designate from time to time, and upon such terms
and conditions as the President may prescribe, such interest or property shall be
held, used, administered, liquidated, sold, or otherwise dealt with in the interest
of and for the benefit of the United States, and such designated agency or person
(continued...)

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under IEEPA occurred on March 20, 2003. On that date, in Executive Order 13, 290,
President Bush ordered the blocked “property of the Government of Iraq and its
agencies, instrumentalities, or controlled entities” to be vested “in the Department of
the Treasury.... [to] be used to assist the Iraqi people and to assist in the
reconstruction of Iraq.”39 A subsequent executive order ordered further blocking and
confiscation of property of former Iraqi officials and their families and the vesting
of title in the Department of the Treasury to be transferred to the Development Fund
for Iraq to be “used to meet the humanitarian needs of the Iraqi people, for the
economic reconstruction and repair of Iraq’s infrastructure, for the continued
disarmament of Iraq, for the cost of Iraqi civilian administration, and for other
purposes benefitting of the Iraqi people.”40
Unlike the language of TWEA, the language of IEEPA appears to withhold
certain powers from the President: (1) IEEPA provides no explicit authority over
purely domestic transactions41; (2) IEEPA provides no explicit authority to regulate
gold and silver bullion42; (3) IEEPA provides no explicit authority to seize records43;
and (4) IEEPA provides no authority to interfere with international
communications.44 Because IEEPA covers “any interest” in property by a foreign
national or government and provides the President with expansive power to issue
38 (...continued)
may perform any and all acts incident to the accomplishment or furtherance of
these purposes. P.L. 107-56, § 106, 115 Stat. 272, 277, 50 U.S.C. §
1702(a)(1)(C).
39 Exec. Order No. 13,290, 68 Fed. Reg. 14,307 (March 24, 2003).
40 Exec. Order No. 13,315, 68 Fed. Reg. 52,315 (September 3, 2003).
41 Section 5(b) of TWEA includes language authorizing the President in wartime to regulate
an array of financial transactions, including inter alia, “transfers of credit or payments
between, by, through, or to any banking institution” “by any person, or with respect to any
property, subject to the jurisdiction of the United States.” 50 U.S.C. App. § 5(b)(1).
IEEPA’s grant of authority over such financial transactions runs only “to the extent that such
transfers or payments involve any interest of any foreign country or a national thereof.” 50
U.S.C. § 1702(a)(1)(A)(ii).
42 Included in the language of section 5(b) of TWEA is the authority to regulate “the
importing, exporting, hoarding, melting, or earmarking of gold or silver coin or bullion.”
50 U.S.C. App. § 5(b)(1)(A).
43 IEEPA provides authority to order recordkeeping and production of records, 50 U.S.C.
§ 1702(a)(2), but does not include authority as included in TWEA to require “if necessary
to the national security or defense, the seizure, of any books of account, records, contracts,
letters, memoranda, or other papers, in the custody or control of” persons required to keep
reports on covered transactions. 50 U.S.C. § 5(b)(B).
44 Section 3 of TWEA includes authority to censor international communications, 50 U.S.C.
App. § 3; IEEPA states that “[t]he authority granted to the President by this section does not
include the authority to regulate or prohibit, directly or indirectly ... any postal, telegraphic,
telephonic, orother personal communication, which does not involve a transfer of any thing
of value.” 50 U.S.C. § 1702(3)(b).

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interpretative regulations,45 there has been some speculation that “any large scale
financial transaction, even if it involved only United States parties, might be subject
to regulation if it affected the economy of a foreign nation.”46

Constitutional challenges to actions taken under IEEPA’s authority to regulate
foreign transactions and property have generally failed. Regulations issued under the
authority of IEEPA placing controls on foreign assets have been upheld against
claims of impermissible delegation and violation of the U.S. Constitution’s Fifth
Amendment.47 The fact that blocked assets are those of a U.S. person and purely
domestic has not been held to place them beyond the reach of the President’s power
to subject them to freeze orders under IEEPA so long as there is an “interest”48 of a
foreign country or national.49 Moreover, provided the executive order declaring the
45 50 U.S.C. § 1703 provides that “[t]he President may issue such regulations, including
regulations prescribing definitions, as may be necessary for the exercise of the authorities
granted by this chapter.”
46 Note, “The International Emergency Economic Powers Act: A Congressional Attempt
to Control Presidential Emergency Power,” 86 Harvard L. Rev. 1102, 1110 - 1111(footnote
omitted) (1983). The author reasoned: “It is unlikely that any significant economic activity
in the United States would not be reached under such a theory of presidential power, given
the current interdependence of the world’s industrial economies.” Id. at 1111.
47 In Sardino v. Federal Reserve Bank of New York, 361 F. 2d 106 (2d Cir. 1966), the
indefinite freezing of a Cuban national’s U.S. bank account pursuant to the Cuban Assets
Control Regulations was upheld against claims of impermissible delegation by Congress to
the President and by the President to the Department of the Treasury. The court also ruled
that the regulations did not constitute a taking both because, without vesting, there was no
transfer of title, hence no taking, and because the regulations were found to have provided
adequate due process protections.
48 “Interest” is defined in OFAC regulations, 31 C.F.R. § 500.311 - .312 to mean “an
interest of any nature whatsoever, direct or indirect.” The Supreme Court has ruled that
“any interest” may be construed as broadly as possible. Regan v. Wald, 468 U.S. 222
(1984).
49 In Global Relief Foundation, Inc. v. O’Neill, 207 F. Supp. 2d 779 (N.D. Ill. 2002), aff’d
315 F. 3d 748 (7th Cir. 2002), cert. denied, 540 U.S. 1003 (2003), the court upheld an order
freezing assets of a U.S. based Muslim charitable organization pending investigation of its
possible links to the September 11 terrorist attack upon the United States. Although the
organization itself was a U.S. person, two of its three directors were resident aliens, i.e.,
foreign nationals, who were directly involved in soliciting funds and distributing them
abroad. The freeze order was based on Executive Order No. 13,224, declaring a national
emergency based on terrorist acts and the threat of further acts of terrorism. In upholding
the freeze order, the court relied on the grant of authority authorized by Congress in the
2001 amendment to IEEPA, which authorized the President to “block during the pendency
of an investigation ... any acquisition, holding, withholding, use, transfer, withdrawal,
transportation, importation or exportation of ... any right, power, or privilege with respect
to ... any property in which any foreign country or a national thereof has any interest by any
person ... subject to the jurisdiction of the United States.” According to the court,
Congress’ decision to use repeatedly the word ‘any’ in this section of the statute
guides our interpretation of the President’s power to block during the pendency
of an investigation. It is clear that Congress intended to provide the President
(continued...)

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national emergency makes the requisite findings with respect to regulating
humanitarian assistance, a freeze order directed against assets intended for
humanitarian aid is enforceable.50 It has also been held that notice and a pre-seizure
hearing are not constitutionally mandated with respect to freeze orders.51 It has also
withstood challenge on first amendment grounds.52
The Supreme Court has upheld Presidential exercise of authority under IEEPA
on very broad grounds, saying that when “taken pursuant to specific congressional
authorization, it is ‘supported by the strongest presumptions and the widest latitude
of judicial interpretation, and the burden of persuasion would rest heavily upon any
who might attack it.’”53
49 (...continued)
with sweeping power to regulate all relevant property upon his declaration of a
national emergency. Furthermore, if Congress had intended to only authorize the
President to block foreign assets that were located within the United States, it
could have made that intention clear. However, repeated use by Congress of the
word ‘any’ as well as its choice of the phrase ‘any property, subject to the
jurisdiction of the United States,’ without an indication that it meant only foreign
property, compels our conclusion that the powers granted to the President under
IEEPA include the ability to block purely domestic assets of a U.S. person
pending an investigation. Id. at 793 (emphasis in original).
50 Id. at 794 - 796.
51 Global Relief Foundation, Inc. v. O’Neill, 315 F3d 748 (7th Cir. 2002). According to the
court:
[a]lthough pre-seizure hearing is the constitutional norm, postponement is
acceptable in emergencies.... Risks of error rise when hearings are deferred, but
these risks must be balanced against the potential for loss of life if assets should
be put to violent use. Opportunity to obtain recompense under the Tucker Act,
28 U.S.C. § 1491(a), if the blocking turns out to be invalid, provides the private
party with the very remedy that the Constitution names: just compensation. Id.
at 754 (citations omitted).
52 In Holy Land Foundation v. Aschroft, 333 F. 3d 156 (D.C. Cir. 2003). cert. denied, 540
U.S. 1218 (2004), the U.S. Court of Appeals for the District of Columbia stated that “there
is no First Amendment right nor any other constitutional right to support terrorists” and
that a freeze order affecting all the property of a Muslim charity supported by evidence of
original sponsorship by, fund raising on behalf of, meetings with, and funneling money to
Hamas supplied sufficient evidence of supporting terrorists.
53 Dames & Moore v. Regan, 453 U.S. 654, 674 (1981), citing Youngstown Sheet & Tube
Co. v. Sawyer, 343 U.S. 579, 637 (1952). The case involved a plaintiff who had a contract
claim against the Iranian government and had secured a prejudgment attachment pursuant
to a general license issued under the regulations implementing Executive Order No. 12,170.
That executive order invoked IEEPA to declare a national emergency with respect to the
seizure of the U.S. embassy in Tehran and to freeze the assets of the government and the
central bank of Iran. Under the Algiers Accords, an executive agreement with Iran to
secure the release of American hostages held in the embassy, all litigation was terminated;
all interests of U.S. nationals in Iranian assets were nullified; all Iranian assets were to be
transferred to the Federal Reserve Bank of New York for transfer to Iran; and claims against
Iran or against the assets to be transferred to Iran were to be subjected to a binding
(continued...)

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Executive Order No. 13,438 Coverage
Persons Covered. The executive order does not identify particular persons
whose property is to be blocked or frozen; rather it leaves identification of the
particular individuals and entities to the Secretary of the Treasury, in consultation
with the Secretary of State and Secretary of Defense. These individuals are to fall
into three categories provided in the executive order:
1. Individuals or entities determined “to have committed, or to pose a significant
risk, of committing an act or acts of violence that have the purpose or effect of ...
threatening the peace or stability of Iraq or the Government of Iraq ... or ...
undermining the efforts to promote economic reconstruction and political reform in
Iraq or to provide humanitarian assistance to the Iraqi people....”54
2. Persons or entities determined “to have materially assisted, sponsored, or
provided financial, material, logistical, or technical support for, or goods or services
in support of, such an act or acts of violence or any person whose property and
interests in property are blocked pursuant to this order....”55
3. Persons determined “to be owned or controlled by, or to have acted or
purported to act for or on behalf of, directly or indirectly, any person whose property
and interests in property are blocked pursuant to this order....”56
The executive order, moreover, provides that these prohibitions include “the
making of any contribution or provision of funds, goods, or services by, to, or for the
benefit of any person whose property and interests in property are blocked pursuant
to this order, and ... the receipt of any contribution or provision of funds, goods, or
services from any such person.”57 There is also a prohibition covering transactions
by a U.S. person, or within the United States with the purpose of evading the
53 (...continued)
arbitration process — the Iran-United States Claims Tribunal. After executive orders
implementing the Algiers Accords had been issued, the plaintiff secured a final judgment,
which the district court suspended. It also vacated the prejudgment attachment and stayed
further proceedings. Plaintiff sued to prevent enforcement of the executive orders and
implementing Treasury regulations, alleging that they were unconstitutional to the extent
that they affected its litigation. Ultimately, the Supreme Court interpreted the language of
IEEPA to authorize the President’s action, saying, “where, as here, the settlement of claims
has been determined to be a necessary incident to the resolution of a major foreign policy
dispute between our country and another, and where, as here, we can conclude that Congress
acquiesced in the President’s action, we are not prepared to say that the President lacks the
power to settle such claims.” Id. at 688.
54 Exec. Order No. 12,438, Section 1(a)(i).
55 Id., Section 1(a)(ii).
56 Id., Section 1(a)(iii)
57 Id., Section 1(b).

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prohibitions of the executive order; attempts to violate any of the prohibitions, and
conspiracy formed to violate the executive order’s prohibition.58
In issuing the executive order, the President made the requisite finding with
respect to aid and, thus, prohibited humanitarian assistance59; he also made a finding
that for effectiveness sake, no prior notice need be given to those with a
constitutional presence in the United States whose property and interests in property
are to be blocked “because of the ability to transfer funds or other assets
instantaneously.”60
Objectives. Molly Millerwise, spokesperson for the U.S. Department of the
Treasury, has reportedly provided certain information concerning the background and
objectives of the executive order, including a statement that appears to indicate that
one of the desired effects of the order is to motivate foreign financial institutions to
voluntarily comply with these prohibitions.61 She also is reported to have indicated
that the executive order: (1) is needed to supplement current sanctions programs
because these cover elements of the former Saddam Hussein regime62 and Al Queda63
but not insurgent groups now active in Iraq; (2) is intended to apply to “Shia militia
groups linked with Iran, Sunni insurgent groups with sanctuary in Syria and some of
the indigenous Iraqi insurgent groups”; (3) will result in blocking of assets of U.S.
residents and citizens “because they’re actively abetting a panoply of insurgent and
militia groups”; (4) will result in a list that Treasury is compiling of entities and
individuals covered by the order that will be ongoing and made public.64
58 Id., Section 2.
59 Id., Section 4. Under 50 U.S.C. § 1702(b)(2), humanitarian aid may be prohibited if the
President makes a determination “that such donations (A) would seriously impair his ability
to deal with any national emergency declared under section 1701 ..., (B) are in response to
coercion against the proposed recipient or donor, or (C) are in a situation where imminent
involvement in hostilities is clearly indicated by circumstances.”
60 Id., Section 5.
61 Spencer Ackerman, “Treasury: Exec. Order ‘Filling in the Cracks’ of Insurgent
Financing,” [http://www.tpmmuckraker.com/archives/003733.php] (last visited November
7, 2007).
62 Exec. Order No. 13,315 blocks property of the former Iraqi regime, its senior officials and
their family members.
63 On September 23, 2001, President Bush issued an executive order blocking property and
prohibiting transactions with persons who commit, threaten to commit, or support terrorism.
This executive order was based on the President’s declaring a national emergency involving
the “grave acts of terrorism and threats of terrorism committed by foreign terrorists ... and
the immediate threat of continuing further attacks on the United States. Exec. Order No.
13,224, 68 Fed. Reg. 49,079 (September 25, 2001). “Al Qaida/Islamic Army” heads list of
persons and entities initially designated under this executive order and included in an annex
published with it.
64 Spencer Ackerman, “Treasury: Exec. Order ‘Filling in the Cracks’ of Insurgent
Financing,” [http://www.tpmmuckraker.com/archives/003733.php], quotes Ms. Millerwise
as saying: “Be assured that the individuals and entities we add to this list are in full faith
(continued...)

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Transactions Covered. The executive order blocks “all property and
interests in property” of the three categories of persons, supra at 11, provided that the
property or interests in the property is in the United States or comes within the
control of U.S. persons. Although the executive order does not define “property” or
“interest in property,” OFAC regulations define these terms to have a broad reach.
“Interest” when used in connection with property is defined to mean “an interest of
any nature whatsoever, direct or indirect.”65 In defining “property,” the regulations
provide a list of categories but make it clear that the list is “not by way of
limitation.”66
Implementation Process. The executive order leaves the process of
designating specific individuals and entities whose transactions and property are to
be frozen or blocked to the Secretary of the Treasury, in consultation with the
Secretaries of State and Defense.67 Although there is a possibility that blocking
orders will be issued prior to OFAC’s listing of persons to be sanctioned under the
executive order,68 the expectation is that ultimately the names of blocked individuals
64 (...continued)
acting in an aggressive, violent and reckless way in financing the insurgency,” and as stating
that groups making charitable donations to orphans does not seem to be “a valid concern.”
65 31 C.F.R. § 500.312.
66 31 C.F.R. § 500.311. The list is as follows: “money, checks, drafts, bullion, bank
deposits, savings accounts, any debts, indebtedness obligations, notes, debentures, stocks,
bonds, coupons, any other financial securities, bankers’ acceptances, mortgages, pledges,
liens or other right in the nature of security, warehouse receipts, bills of lading, trust
receipts, bills of sale, any other evidences of title, ownership or indebtedness, powers of
attorney, goods, wares, merchandise, chattels, stocks on hand, ships, goods on ships, real
estate mortgages, deeds of trust, vendors’ sales agreements, land contracts, real estate and
any interest therein, leaseholds, ground rents, options, negotiable instruments, trade
acceptances, royalties, book accounts, accounts payable, judgments, patents, trademarks,
copyrights, contracts or licenses affecting or involving patents, trademarks or copyrights,
insurance policies, safe deposit boxes and their contents, annuities, pooling agreements,
contracts of any nature whatsoever, services, and any other property, real, personal, or
mixed, tangible or intangible, or interest or interests therein, present, future, or contingent.”
67 Exec. Order No. 13,438, Sec. 1(a).
68 OFAC apparently has had a practice of blocking accounts prior to formal designation.
After the enactment of the USA PATRIOT Act, IEEPA permits blocking orders pending
investigations. 50 U.S.C. § 1702(a)(1)(B). This authority was lacking in 1998 when OFAC
ordered the freezing of accounts belonging to Salah Idris, owner of the factory bombed
following the terrorist attack on the U.S. embassies in Kenya and Tanzania. After the filing
of a law suit challenging the freeze order, OFAC ordered the accounts unblocked rather than
risk having to disclose intelligence sources. See, Peter L. Fitzgerald, “‘If Property Rights
Were Treated Like Human Rights, They Could Never Get Away With This’: Blacklisting
and Due Process in U.S. Economic Sanctions Programs,” 51 Hastings Law Journal 73, 111 -
113, 134 (1999) (hereinafter, Fitzgerald, Property Rights), citing Vernon Loeb, “A Dirty
Business,” Washington Post, F1 (July 25, 1999); Milt Bearded, “U. S. Should Admit Its
Mistake in Sudan Bombing,” Wall Street Journal, A-20 (May 4, 1999); and David S. Cloud,
“U.S. Unfreezes Accounts in Suit on Sudan Bombing,” Wall Street Journal A-8 (May 4,
1999).

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and entities identified for blocking orders will be publicly disseminated by being
added to OFAC’s Special Designated Nationals and Blocked Persons List.69
The executive order authorizes the Secretary of the Treasury, in consultation
with the Secretaries of State and Defense, to issue regulations.70 Although there is
a possibility that development of implementing regulations will be a slow process,71
the expectation is that implementing regulations will be issued.72 These regulations,
will likely elaborate on the executive order’s prohibition on “the making of any
contribution or provision of funds, goods, or services by, to, or for the benefit of any
person whose property and interests in property are blocked ... and the receipt of any
contribution or provision of funds, goods, or services from any such person.”73 It is
expected that implementing regulations will be issued to elaborate on which
transactions are prohibited. Specifically, the regulations are likely to follow the
general contours of the now-discontinued Libyan sanctions74 and the current
regulatory scheme applicable to global terrorism.75 That means that they are likely to
include broad bans on trade and financial transactions, authorize certain activities
pursuant to a general license, and permit other activities pursuant to a specific
license, issued upon application to OFAC on a case-by-case basis. If the regulations
follow the model of the global terrorism sanctions, they are likely to specify the types
of legal services that may be provided pursuant to a general license but permit
reimbursement only on the basis of a specific license.76 OFAC regulations prescribe
recordkeeping and reporting requirements applicable to all OFAC sanction
programs.77
69 [http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf]. Names of “blocked
persons,” “specially designated nationals,” and “specially designated terrorists,” with whom
U.S. persons may not trade are also published in the Federal Register and in appendices to
31 C.F.R.
70 Exec. Order No. 13,438, Sec. 6.
71 For a list of the time lags between issuance of various executive orders and OFAC’s
implementing regulations, see, Fitzgerald, Property Rights, at 111 - 113.
72 See supra, n. 52 and accompanying text indicating that Treasury will issue regulations
and make public the names of persons and entities included on the list. In the interim,
OFAC may follow its past practices and operate the sanctions program informally or
administratively by issuing unpublished notices and authorizations equivalent to general
licenses, which will later be incorporated into the promulgated regulations when they are
published in the Federal Register. Details of the use of this method are summarized in
Fitzgerald, Property Rights, at 114 - 115.
73 Exec. Order No. 13,438, Section 1(b).
74 31 C.F.R., Part 550 (2004), discontinued by Exec. Order No. 13,357, Termination of
Emergency Declared in Executive Order 12, 543 With Respect to the Policies and Actions
of the Government of Libya and Revocation of Related Executive Orders (September 20,
2004), 69 Fed. Reg. 56, 665 (September 22, 2004).
75 31 C.F.R. Part 594.
76 See e.g., 31 C.F.R. § 594.506.
77 31 C.F.R. Part 501.

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Penalties. Violation of sanctions under Executive Order 13,438 are subject to
the penalties applicable under IEEPA. With the enactment of P.L. 110-96,78 the civil
penalties for IEEPA violations have been raised to the greater of $250,000 or twice
the amount of the transaction on which the penalty is based; criminal penalties have
been raised to $1,000,000 and 20 years imprisonment. Previously, the civil penalty
prescribed was a fine of up to $50,000 for violation of a license, order, or regulation
issued under its authority and criminal penalties of up to $50,000 and twenty years
imprisonment.79
Reach. Executive Order 13,438 covers essentially five categories of
individuals or entities: (1) those committing acts of violence having the effect of
destabilizing Iraq; (2) those committing acts of violence with the purpose of
destabilizing Iraq; (3) those posing a significant risk of committing such acts of
violence; (4) those providing support for such acts of violence and (5) those
providing support for any person whose property has been blocked pursuant to the
executive order. The executive order also forbids transactions by U.S. persons that
evade or have the purpose of evading the prohibitions of the executive order,
attempts to avoid the order, and conspiracies to violate the order. The potential reach
of this executive order is broad. In addition to persons whose property may be
controlled based on an act or risk of violence destabilizing Iraq, persons aiding or
supporting such act of violence or supporting anyone may also be the target of
property controls whether they are U.S. citizens or not and whether the act of
violence occurs in Iraq or elsewhere. Anyone supplying financial, material, logistical,
or technical support or goods and services for such acts of violence or for anyone
whose property is blocked pursuant to the order may also have their property blocked
whether or not they are United States citizens.
How broadly that authority will be applied or interpreted awaits OFAC’s
issuance of implementing regulations and identification of blocked individuals and
entities. For example, although the executive order does not limit potential targets
to “foreign” persons, as some executive orders have done,80 OFAC could produce a
list of blocked persons that includes no U.S. persons. A Treasury Department
spokesperson81 has indicated that the primary focus of any list implementing the
executive order will be on foreigners by saying that the list, when issued,82 will
78 121 Stat. 1101, 50 U.S.C. §1705 (2007).
79 50 U.S.C. § 1705. Other statutes which carry penalties may also apply, e.g., the United
Nations Participation Act (22 U.S.C. § 287c(b) and 18 U.S.C. 3751) authorizes criminal and
civil penalties as well as forfeiture of property concerned in the violation.
80 See, e.g., Exec. Order No. 13224 of September 23, 2001, 66 Fed Reg. 4909, Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or
Support Terrorism.
81 Spencer Ackerman, “Treasury: Exec. Order ‘Filling in the Cracks’ of Insurgent
Financing,” quoting “Treasury Department spokeswoman, Molly Millerwise,”
TPMMUCKRAKER.COM (July 19, 2007) [http://www.tpmmuckraker.com/archives/
003733.php].
82 One commentator has described the OFAC designation process as follows:
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include “Shia militia groups linked with Iran, Sunni insurgent groups with sanctuary
in Syria and some of the indigenous Iraqi insurgent groups.”83 The practice, however,
since September 11, 2001, has been that foreign terrorists have formed the
preponderance of designees on OFAC’s lists, but blocking orders, seizures, and
penalties have been directed against U.S. persons based on allegations that they have
in their possession property or interests in property which is either legally or
beneficially the property of a designated or blocked person, or that they have been
conducting prohibited transactions in blocked property or with blocked persons. The
piggybacking potential of the executive order has also raised questions.84 The issue
is whether the executive order’s application to anyone who provides “support” for
a designated entity might affect U.S. persons inadvertently involved in some form of
assistance, such as arranging transportation for, selling consumer goods to, or
providing routine legal assistance to an entity which becomes blocked under the
executive order. Could such U.S. persons find themselves designated under the
authority of the executive order and thereby have all of their assets subject to
blocking whether or not the assets have any nexus with the transaction with the
blocked entity or with any foreign entity?
Precedents. With respect to those whose property is to be blocked on the
grounds of providing material assistance to those who are designated as committing
82 (...continued)
According to the Administration, ‘a number of U.S. agencies, including the
Treasury, State, Justice, the FBI and the intelligence community, review open
source and confidential information, including tips and leads, about persons and
entities who commit, threaten to commit or support terrorism.’ A ‘subset of
agencies’ is then responsible for developing a file on the entity, which is then
reviewed by a ‘larger group’ before it is forwarded to the National Security
Council. The Security Council ‘convenes a meeting of Deputy Agency heads’
who make a recommendation to the Secretary of the Treasury, who, in
cooperation with the Secretary of State [with respect to Executive Order No.
13,348, Secretary of Defense] and Attorney General, issues a final designation
and a blocking order. This blocking order is implemented by OFAC, pursuant
to the President’s mandate ... [in the executive order] gives the entity no prior
notice that its assets will be frozen. Upon issuance of the blocking order, the
entity is told that its assets have been frozen, its name is published in the Federal
Register, and this information is disseminated to financial institutions.
Nicole Nice-Peterson, “Justice for the ‘Designated’: The Process That Is Due to Alleged
Financiers of Terrorism, 2005 Georgetown Law Journal 1287, 1394 (2005) (footnotes
omitted). (Exec, Order No. 13,348, 69 Fed. Reg. 44,885 (July 27, 2004), blocks property
of certain persons and prohibits the importation of certain goods from Liberia.)
83 Millerwise statement, See supra, n. 60. Ms. Millerwise did not foreclose the possibility
of listing U.S. nationals, but indicated that compiling the list would be an exercise in
precision, saying, “‘Be assured that individual and entities we add to this list are in full
faith acting in an aggressive, violent and reckless way in financing the insurgency.... These
things are strongly vetted, going layers and layers back. (A group) donating money to
orphans getting swept up in this doesn’t seem to be a valid concern.’”
84 See, Pincus, supra n.3, who states that “... the text of the order, if interpreted broadly,
could cast a far bigger net to include not just those who commit violent acts or pose the risk
of doing so in Iraq, but also third parties — such as U.S. citizens in this country — who
knowingly or unknowingly aid or encourage such people.”

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or posing a significant risk of committing acts of violence, the scope covered by the
executive order has raised an array of questions such as: (1) To what extent are
peaceful demonstrations or demonstrations that include limited violence and public
criticism of U.S. policy in Iraq potentially subject to the executive order? (2) To
what extent are lawyers representing persons and entities on the list subject to the
order? (3) To what extent are donors to various U.S. charities operating
internationally subject to the order?
These and other questions raised by the executive order, itself, are likely to be
further clarified when regulations are issued by OFAC. Such regulations, moreover,
are likely to be similar to those issued in other situations. An example of how OFAC
implements financial transaction and property controls imposed under executive
orders invoking IEEPA is illustrative. The Global Terrorist Sanctions Program85
implements Executive Order 13,224 of September 23, 2001.86 That executive order
declared a national emergency with respect to “grave acts of terrorism and threats of
terrorism committed by foreign terrorists.” It contained a list of foreign terrorist
persons and provided authority for administrative designations of various categories
of persons, some of which need not be confined to foreign persons.87 Subsequently,
some U.S. based charitable organizations were listed on OFAC’s terrorist lists.88
Under the Global Terrorism Regulations, U.S. financial institutions are required to
take precautions lest they engage in prohibited transactions.89 The names of persons
85 31 C.F.R. Part 594.
86 66 Fed. Reg. 49,079. In addition to the Global Terrorists Sanctions, OFAC administers
two other sanctions programs: (1) the Terrorist Sanctions Regulations, 31 C.F.R., Part 595,
implementing Executive Order 12,947 of January 23, 1995, 60 Fed. Reg. 5,079, which
declared a national emergency with respect to “grave acts of violence committed by foreign
terrorists that disrupt the Middle East peace process” and (2) the Foreign Terrorist
Organizations Sanctions Regulations, 31 C.F.R., Part 597, implementing provisions of the
Antiterrorism and Effective Death Penalty Act of 1996, P.L. 104-132, 110 Stat. 1214, 1248 -
1253, 8 U.S.C. § 1189, 18 U.S.C. § 2339B.
87 It authorized designation of (1) “foreign persons determined by the Secretary of State,
in consultation with the Secretary of the Treasury and the Attorney General, to have
committed, or to pose a significant risk of committing, acts of terrorism that threaten, or
pose a significant risk of committing, acts of terrorism that threaten the security of U.S.
nationals or the national security, foreign policy or economy of the United States”; (2)
“persons determined by the Secretary of the Treasury, in consultation with the Secretary of
State and the Attorney General, to be owned or controlled by, or to act for or on behalf of”
persons designated under the executive order; and (3) with certain provisos, “persons
determined by the Secretary of the Treasury, in consultation with the Secretary of State and
the Attorney General (i) to assist in, sponsor, or provide financial, material, or technological
support for, or financial or other services to or in support of, such acts of terrorism” of
persons designated under the executive order, or (ii) “otherwise associated with” designated
persons. Exec. Order. No. 13, 224, section 1, 66 Federal Register 49079 - 49980.
88 See [http://www.treas.gov/offices/enforcement/key-issues/protecting/fto.shtml],
Designated Charities and Potential Fundraising Front Organizations for FTOs (listed by
affiliation and designation date).
89 Exec. Order 13,224, section 2, like Executive Order 13,438, prohibits transactions by U.S.
(continued...)

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whose property is blocked are published both on OFAC’s website and in the Federal
Register.90 The regulations prohibit various transactions and specify procedures to
comply with the prohibitions91and define applicable terms.92 They also specify such
matters as the nullification of property transfers made in violation of the
regulations,93 report and recordkeeping requirements,94 and penalties and penalty
procedures.95
The reach of Executive Order 13,438 is not unprecedented. The language is
similar to at least one other order, Executive Order No. 13,219 of June 25, 2001,
Blocking Property of Persons Who Threaten International Stabilization Efforts in the
Western Balkans.96 That executive order, among other things, authorizes property
and transaction controls with respect to persons designated by the Secretary of the
Treasury in consultation with the Secretary of State as having committed or posing
“a significant risk of committing, acts of violence that have the purpose or effect of
threatening the peace or diminishing the stability or security of any area or state in
the Western Balkans regime, undermining the authority, efforts or objectives of
international organizations or entities present in the region, or endangering the safety
of persons participating in or providing support to the activities of those international
organizations or entities.” Also covered by Executive Order No. 13,219 are persons
determined “to have actively obstructed, or pose a significant risk of actively
obstructing, the Ohrid Framework Agreement of 2001 relating to Macedonia, United
Nations Security Council Resolution 1244 relating to Kosovo or the Dayton Accords
or the Conclusions of the Peace Implementation Conference held in London on
December 8-9, 1995, including the decisions or conclusions of the High
Representative, the Peace Implementation Council or its Steering Board relating to
Bosnia and Herzegovina.”97 The executive order includes an annex listing the names
of blocked individuals and entities, a list which has been expanded and is now found
at the beginning of OFAC’s list of Specially Designated Nationals.98
89 (...continued)
persons in property or interests in property blocked pursuant to the order; transactions by
U.S. persons evading or having the purpose of evading or attempting to violate the
prohibitions of the executive order; and any conspiracy to violate any of the prohibitions of
the executive order.
90 31 C.F.R. § 594.201, note 2 to paragraph (a).
91 31 C.F.R. §§ 594.201 - 594.206.
92 31 C.F.R. §§ 594.311 - 594.315.
93 31 C.F.R. § 594.202.
94 31 C.F.R. § 594.601.
95 31 C.F.R. §§ 594.701 - 594.705.
96 66 Fed. Reg. 3,477, as amended by Executive Order No. 13,304 §§ 3,4, May 28, 2003,
68 Fed. Reg. 32,315.
97 Executive Order No. 13,219, as amended, § 1(B) and (C); 50 U.S.C. § 1701, note.
98 [http://www.treas.gov/offices/enforcement/ofac/sdn/prgrmlst.txt].

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Given the concern that Executive Order 13,438 might place lawyers providing
legal assistance to targets of the freeze orders at risk, it might be helpful to note that
on July 9, 2003, OFAC issued a general license to permit U.S. persons to provide
professional legal services relating to the representation of persons whose property
is blocked in matters pending before the International Criminal Tribunal for the
former Yugoslavia.99

Attorney-Client Implications. The potential impact of OFAC regulations
on attorney-client relationships has been the focus of some litigation and commentary
in legal journals.100 The one federal case that has dealt with the issue is American
Airways Charters, Inc. v. Regan.101 It held that, under the Cuban sanctions, OFAC
had authority to require a license for payment of legal fees from blocked assets, but
not to “condition the bare formation of an attorney-client relationship on advance
government approval.”102 The holding does not rest on constitutional grounds, but
rather on the court’s analysis of whether preventing a designated entity from
obtaining counsel could be said to further the purposes for which the particular
provision of TWEA on which OFAC relied had been enacted. By concluding that
the basic intent of Congress was to deny an enemy nation use of economic resources,
the court found that access to legal services, without access to any blocked funds, was
not within the coverage contemplated by TWEA. Language in the opinion suggests
that OFAC’s exercise of the power to prevent a designated person from consulting
an attorney might raise due process concerns as tantamount to denying the person the
right to a meaningful challenge of the designation.
Despite the American Airways ruling, OFAC’s regulations continue to include
bans on the provision of legal services. Some of the recent regulations differ both in
purpose and scope from those at issue in American Airways. Whether the differences
will be sufficient for courts to find that OFAC’s reach extends to the formation of
lawyer-client relationships with blocked persons is a question that remains
unanswered until a proper case is presented. OFAC’s Global Terrorism Sanctions
Regulations, promulgated after the September 11, 2001 terrorist attacks, which
might form the model for regulations to be issued under Executive Order 13,438,
differ from the sanctions at issue in American Airways. They rely on the authority
99 [http://www.treas.gov/offices/enforcement/ofac/programs/balkans/gls/balkans_gl1.pdf],
General License No. 1, Legal Representation in Matters Pending before the International
Criminal Tribunal for the former Yugoslavia.
100 Two courts have found OFAC without authority to prevent the mere formation of an
attorney-client relationship: American Airways Charters, Inc. v. Regan, 746 F. 2d 865 (D.C.
Cir. 1984); Looper v. Morgan, 1995 U.S. Dist. LEXIS 10241 (S.D. Tex. 1995). Others have
found that an attorney’s lack of an OFAC license is not a bar to court jurisdiction; Comet
Enterprises Ltd. v. Air-A-Plane Corp., 128 F. 3d 855 (4th Cir. 1997); Dean Witter Reynolds,
Inc. v. Fernandez, 741 F. 2d 355 (11th Cir. 1984); National Oil Corp. v. Libyan Sun Oil Co.,
733 F. Supp. 800 (D. Del. 1990). See also Jill M. Troxel, “Office of Foreign Assets Control
Regulations: Making Attorneys Choose Between Compliance and the Attorney-Client
Relationship, 24 Review of Litigation 637 (2005); Michael P. Malloy, “Economic Sanctions
and Retention of Counsel,” 9 Admin. L. J. Am. U. 515 (1995).
101 746 F. 2d 865 (D.C. Cir. 1984).
102 Id,. at 866 - 867.

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of IEEPA rather than TWEA and focus on private individuals and entities rather than
on a particular foreign nation. Moreover, they coincide with the changed
congressional focus reflected in the post September 11, 2001 IEEPA amendments
and the tendency of the courts to uphold OFAC’s authority in the face of
constitutional challenges.103
Many of the OFAC regulations prohibit the provision of services, including
legal services, to designated persons or blocked entities and require a specific license
for all but a limited list of legal services for which a general license104 is provided in
the regulations.105 For reimbursement for any legal services, application must be
made to OFAC for a specific license.106
OFAC’s Global Terrorism Sanctions Regulations illustrate this framework.
Under 31 C.F.R. § 594.406, “U.S. persons107 may not, except as authorized by or
pursuant to this part, provide legal ... services to a person whose property or interests
in property are blocked pursuant to § 594.201(a).”108 Under 31 C.F.R. § 594.506,
five types of legal services are authorized “provided that all receipts of payment of
professional fees and reimbursement of incurred expenses must be specifically
licensed.”109 Other legal services must be specifically licensed.110 The types of legal
services which may be provided without a specific license are:
103 Troxel, supra n. 99, at 662 - 666.
104 “General license” is defined in 31 C.F.R. § 500.317; licensing procedures are set forth
in 31 C.F.R. § 501.801. In addition to general licenses specified in regulations, general
licenses may be issued for sanction programs not yet codified in regulations.
105 See, e.g., 31 C.F.R. § 594.406, which is the provision of services provision of the Global
Terrorism Sanctions Regulations. It also might be noted that there is always the possibility
that OFAC will require documentation or reports in connection with a general license.
Under 31 C.F.R. § 501.801(a), “persons availing themselves of certain general licenses may
be required to file reports and statements in accordance with the instructions specified in
those licenses.”
106 See, e.g., 31 C.F.R. § 515.212 (Cuba); 31 C.F.R. § 536.506 (Narcotics Trafficking); 31
C.F.R. §537.507 (Burma); 31 C.F.R. § 538.505 (Sudan); 31 C.F.R. 541.507 (Zimbawe); 31
C.F.R. § 542.507 (Syria); 31 C.F.R. § 545.513 (Taliban); 31 C.F.R. § 560.525 (Iran —
general license authorizes a longer list of legal services and payment of fees and
reimbursement of costs for all listed legal services); 31 C.F.R. § 586.509 (Kosovo); 31
C.F.R. § 587.507 (Yugoslavia — Milosevic); 31 C.F.R. § 588.507 (Yugoslavia — Kosovo);
31 C.F.R. § 594.506 (Global Terrorism); 31 C.F.R. § 595.506 (Terrorism); and 31 C.F.R.
§ 598.507 (Foreign Narcotics Kingpin).
107 “United States person” is defined for purposes of the Global Terrorism Sanctions
Program as “any United States citizen, permanent resident alien, entity organized under the
laws of the United States (including foreign branches), or any person in the United States.”
31 C.F.R. § 594.404.
108 31 C.F.R. § 201(a) defines those persons whose property has been blocked under the
executive orders covering global terrorism.
109 The procedures for specific licenses are detailed in 31 C.F.R. § 801(b).
110 31 C.F.R. § 594.506(b).

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CRS-21
(1) Provision of legal advice and counseling on the requirements of and
compliance with the laws of any jurisdiction within the United States, provided
that such advice and counseling are not provided to facilitate transactions in
violation of this part;
(2) Representation of persons when named as defendants in or otherwise made
parties to domestic U.S. legal, arbitration, or administrative proceedings;
(3) Initiation and conduct of domestic U.S. legal, arbitration, or administrative
proceedings in defense of property interests subject to U.S. jurisdiction;
(4) Representation of persons before any federal or state agency with respect to
the imposition, administration, or enforcement of U.S. sanctions against such
persons; and
(5) Provision of legal services in any other context in which prevailing U.S. law
requires access to legal counsel at public expense.111
The descriptions of legal services permitted under the general license have been
criticized as ambiguous and narrow.112 For example, the first one authorizes
providing legal counsel to comply with U.S. laws. but not to facilitate prohibited
transactions without any elaboration on how to distinguish what is allowed from what
may cross the line and subject the lawyer to liability.113 This might mean that any
prudent lawyer will decide not to provide any legal services regarding attempted
transactions without securing a specific license. The fact that OFAC’s list is ever-
growing with names added frequently also means that lawyers providing legal
services to clients involved in business transactions with designated persons or
entities prior to their designation likely must apply for a specific license to continue
the legal services since the general licenses apply only to legal services provided to
or on behalf of blocked persons, not to individuals and entities involved in
transactions with them.114
111 31 C.F.R. § 594.506(a)(1) - (5).
112 See, Troxel, supra n. 99, at 648 - 650.
113 Since the Global Terrorism Sanctions Regulations prohibit “any transaction by any U.S.
person or within the United States on or after the effective date that evades or avoids, has
the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth.”
31 C.F.R. § 594.205.
114 See, e.g., 31 C.F.R. § 594.506(a) (Global Terrorism Sanctions Regulations). The
implications of an OFAC requirement for a specific license to maintain an existing attorney-
client relationship is explored within the context of representing a defendant before the
International Criminal Tribunal for the Former Yugoslavia (ICTY) in Anne Back and Sylvia
Tonova, “No Legal Representation Without Governmental ‘Interposition,’” 17 Georgetown
Journal of Legal Ethics 597 (2004). Exec. Order No. 13,304, 68 Fed. Reg. 32,315 (May 28,
2003), added to the designees under the Western Balkans Stabilization Regulations
(Yugoslavia), names of individuals under indictment by the ICTY. Responding to an
inquiry, OFAC informed the attorneys that their activity was not covered by the general
license, thereby, prompting some of them to seek suspension of the case rather than face the
prospect of OFAC penalties. Subsequently, OFAC revised its position and granted a general
(continued...)

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CRS-22
OFAC Administrative Procedures
OFAC regulations specify procedures for imposing and challenging penalties
imposed under TWEA115 and for each of the sanctions programs operating under
authority of IEEPA.116 Among the rights provided in connection with TWEA
sanctions are: right to receive a prepenalty notice,117 right to provide a written
response to the prepenalty notice,118 right to request a hearing on the record119 before
an administrative law judge for any penalty assessed,120 right to discovery in
preparation for the hearing (subject to various privileges),121 and, an opportunity —
after the hearing — to file proposed findings and conclusions of law.122 There is also
the possibility of an OFAC review of the administrative law judge’s conclusion.123
The regulations also include an appendix detailing OFAC’s procedures for
enforcement of sanctions as they relate to banking institutions supervised by one of
the federal banking regulators.124 Among its highlights are annexes providing “Risk
Matrices,” which banking institutions may use to evaluate their compliance
114 (...continued)
license by letter entitled, “31 C.F.R. Part 588 General License No. 1, authorizing legal
representation of ICTY defendants named in the Executive Order.” Although the general
license covered provision of legal services, it did not extend to payment from any source
other than the ICTY.
115 31 C.F.R. §§ 501.701 - 501.747.
116 Procedures for each sanction program, other than those imposed under the authority of
TWEA, are detailed separately within the regulations applicable to each sanctions programs.
The procedures applicable to OFAC’s imposition of penalties under the Global Terrorism
Sanctions Regulations are found at 31 C.F.R., Part 594. They include notice of the potential
penalties which may be imposed under the various statutes (IEEPA, the United Nations
Participation Act, and 18 U.S.C. § 1001), and the right to a prepenalty notice. Also
specified are: the right to respond to the prepenalty notice; the right to a written notice
imposing a penalty; and the right to be notified that imposition of a penalty is final agency
action, appealable to a federal district court.
117 31 C.F.R. § 501.706.
118 31 C.F.R. §§ 501.706(b)(2) and 501.707.
119 31 C.F.R. § 501.739.
120 31 C.F.R. 501.711.
121 31 C.F.R. § 501.723.
122 31 C.F.R. § 501.735.
123 31 C.F.R § 501.741. This is not a right, but a request for a review is a prerequisite for
federal court review of the agency’s decision under the federal Administrative Procedure
Act, 5 U.S.C. § 704.
124 These are: the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the National Credit Union Administration, and the Office of Thrift
Supervision.

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programs,125 and an outline of “Sound Banking Institution OFAC Compliance
Programs.”126 The enforcement procedures cover such issues as: (1) the effect of
voluntary disclosure by an institution with respect to a violation of the sanctions127;
(2) OFAC’s policy of acting promptly in the face of significant violations, leaving
other apparent violations for inclusion in periodic reviews scheduled according to an
institution’s “risk profile.”128; and (3) OFAC coordination with the banking
regulators in determining use of enforcement tools.129 The civil enforcement tools
which OFAC may use against a banking institution include administrative subpoenas,
cease and desist orders, evaluation letters, civil penalty proceedings, and suspension
or revocation of OFAC licenses.130 OFAC may refer potential criminal violations to
the Department of Justice and also pursue civil penalties.131 There is also a list of
factors which OFAC will consider in determining whether to impose any civil
penalties. It includes such factors as the institution’s history of sanctions violations,
its compliance programs, the size of the institution in relation to number of
violations, and whether the violations are atypical. Also included are the following
considerations: whether there has been a voluntary disclosure by the institution or
an effort to conceal, the harm attributable to the violation, whether the institution has
undertaken actions to correct the situation, and OFAC’s evaluation of the potential
deterrent effect of a sanction.132
125 31 C.F.R., Part 501, Appendix A, Annex A. Both of the risk matrices are taken from the
Federal Financial Institutions Examination Council’s Bank Secrecy Act Anti-Money
Laundering Examination (2005).
126 31 C.F.R., Part 501, Annex B. The major components which OFAC includes in its
outline of sound compliance programs are: identifying high risk business areas; maintaining
internal controls; conducting testing; identifying responsible individuals; and providing
appropriate training.
127 31 C.F.R., Part 501, Annex A, I (D).
128 31 C.F.R., Part 501, Appendix A, II (B).
129 31 C.F.R., Part 501, Appendix A, II (A).
130 31 C.F.R., Part 501, Appendix A, II (A).
131 31 C.F.R., Part 501, Appendix A, II (C).
132 31 C.F.R., Part 501, Appendix A, IV.

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Challenging Designations
OFAC regulations include provisions governing availability of information,133
procedures to have funds unblocked on grounds of mistaken identity,134 and
procedures for removing names from OFAC’s lists of designated persons.135 With
respect to release of information, the regulation covers only: public information
available under the Freedom of Information Act136; information which the Privacy
Act137 requires to be made available to individuals; OFAC forms; and information
on civil penalties.138 The regulations specify that OFAC must release certain
information on its website with respect to the civil penalties which it has imposed,
including the name and address of the entity penalized; the sanctions program
involved; a description of the violation; whether there was voluntary disclosure; and,
whether there is a settlement or imposition of penalty. Names of individuals may not
be released, and OFAC may choose to disclose more information than required.139
There is no indication of the extent to which OFAC must or may disclose any
information concerning the evidence relied on for making a designation under a
sanctions program or for blocking transactions and property. Challenges to IEEPA
designations confront the prospect that the evidence on which the government has
based its designation is classified and may be presented to the court ex parte and in
camera.140
The OFAC regulations also include general provisions permitting challenges to
blocking orders on the grounds of mistaken identity. Under 31 C.F.R. § 501.806, a
person whose funds have been blocked who believes that there has been mistaken
identity may challenge the order by following the prescribed procedures. These
require a written request to OFAC containing various information about the
transaction being blocked and the basis on which the applicant believes the blocking
to have resulted from mistaken identity.
OFAC’s regulations provide procedures to: (1) have funds unblocked that have
been blocked through mistaken identity141 and (2) have a designation reconsidered
133 31 C.F.R. § 501.805.
134 31 C.F.R. § 501.806.
135 31 C.F.R. § 501.807.
136 5 U.S.C. § 552.
137 5 U.S.C. § 552a
138 31 C.F.R. §§ 501.805 (a), (b)and (d).
139 31 C.F.R. § 501.806.
140 50 U.S.C. § 1702(c) provides that “[i]n any judicial review of a determination made
under this section, if the determination was based on classified information ... such
information may be submitted to the reviewing court ex parte and in camera.”
141 31 C.F.R. § 501.806.

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or to assert that changed circumstances have rendered a designation inapplicable.142
Persons named to one of the terrorists lists may challenge the designation by
presenting arguments or evidence that there is an insufficient basis for the
designation.143 The same officer responsible for making the designation, OFAC’s
director, is responsible for reviewing the challenge to the designation. The
regulations contain no specifications with respect to the review process, such as
requirements for a written record, a hearing on the record, or specified time line for
consideration of the challenge to the designation. Without a full written record, for
a federal court challenge to an OFAC designation to succeed, the plaintiff must
convince the court that OFAC’s designation is arbitrary and capricious; were a full
record available, the issue might be whether the designation was based on substantial
evidence in the record.144
In mistaken identity applications, any party to a transaction in which funds have
been blocked may direct a written request to OFAC for the release of the funds. That
request must include various types of specific information and documentation, such
as: the identity of the requester, the nature of the transaction and of the applicant’s
interest in the transaction, the amount in question, and why the applicant believes that
the transaction has been blocked due to mistaken identity.145 Upon receipt of this
information, OFAC may require the applicant to provide more documentation.146
There have been instances in which listed persons have been able to have their names
removed from OFAC’s lists by showing that OFAC has made a mistake. In 1989,
for example, an OFAC list of specially designated Cuban nationals included the
Spanish government’s tobacco monopoly, Tabacalera; a month later the company
was removed from the list.147
142 31 C.F.R. § 807.
143 31 C.F.R. § 501.807.
144 In its Final Report to Congress, the Judicial Review Commission on Foreign Asset
Control, 113-116 (2001), mentioned this possible consequence of what it had identified as
deficiencies in OFAC’s administrative process: lack of an appeal process, inability to review
the record on which OFAC based its decision, lack of a right to a prompt post- or pre-
designation hearing, and lack of requirements for a written record.
145 A list of requirements is contained in 31 C.F.R. §§ 501.806(b) - (d).
146 31 C.F.R. § 806(e) references 31 C.F.R. § 501.602, which authorizes OFAC to require
production under oath of reports and records of any transaction subject to OFAC’s
regulations, including “the production of any books of account, letters or other papers
connected with any such transaction or property, in the custody or control of the persons
required to make such reports.” The regulation also authorizes OFAC to issue subpoenas
to require attendance and testimony of witness and production of documents relating to any
matter under investigation.
147 54 Fed. Reg. 49,258, 24,259 (November 29, 1989); 55 Fed.Reg. 2, 644, 2,645 (January
26, 1990).

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Potential Impact of OFAC Designations
OFAC designations have repercussions both in the United States and in terms
of the international banking system. OFAC has characterized its anti-terrorism
economic sanctions programs as a “wide-ranging assault on international terrorism
and its supporters and financiers,” and reported that these programs have resulted in
the blocking, as of December 31, 2006, of $16 million in terrorist assets of which $7
million is that of Al-Qaida.148 The total dollar amount of terrorist assets which have
been blocked does not represent the total effect of the economic sanctions. When
OFAC designates an organization or an individual under its terrorists’ programs, the
impact may extend beyond assets frozen by the United States. Not only does the
international banking community have to provide transparency in its transactions
with U.S. financial institutions to prevent them from unknowingly handling
prohibited transactions, but the designation of an international terrorist may inspire
international cooperation. OFAC reports that “banks and other private institutions
around the world voluntarily consult OFAC’s [terrorist] list[s] and routinely report
denying access to their institutions.”149
148 U.S. Department of the Treasury, Office of Foreign Assets Control, Terrorist Assets
Report: Calendar Year 2006, 1 - 2 and 8. The Report notes that the $16 million figure
“does not include amounts reported to OFAC as blocked where the appropriateness of the
blocking is under review.” Id. at 2.
149 Id. at 10.

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