Executive Order 13438: Blocking Property
of Certain Persons Who Threaten
Stabilization Efforts in Iraq
M. Maureen Murphy
Legislative Attorney
January 14, 2011
Congressional Research Service
7-5700
www.crs.gov
RL34254
CRS Report for Congress
P
repared for Members and Committees of Congress
Executive Order 13438
Summary
On July 17, 2007, President Bush issued Executive Order 13438, 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.” Regulations implementing this Executive Order were issued on September
13, 2010.
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 Qaeda
and former Iraqi 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. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has
published names of persons designated under the executive order and issued 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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Executive Order 13438
Contents
Background ................................................................................................................................ 1
Recent Developments.................................................................................................................. 2
Statutory Basis: IEEPA ............................................................................................................... 3
Executive Order 13438 Coverage.............................................................................................. 10
Persons Covered ................................................................................................................. 10
Objectives........................................................................................................................... 11
Transactions Covered.......................................................................................................... 12
Implementation ................................................................................................................... 12
Reach—Is It Limited to “Foreign” Persons? ........................................................................ 14
Attorney-Client Implications ............................................................................................... 17
OFAC Administrative Procedures.............................................................................................. 19
Challenging Designations.......................................................................................................... 21
Potential Impact of OFAC Designations .................................................................................... 22
Contacts
Author Contact Information ...................................................................................................... 23
Congressional Research Service
Executive Order 13438
Background
On July 17, 2007, President Bush issued Executive Order 13438, 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 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 Assets 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,
Belarus, 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
1 72 Fed. Reg. 39,719 (July 19, 2007). The national emergency has been continued for one-year periods, in accordance
with section 50 U.S.C § 1622(d), the latest of which continues the national emergency for one year beyond May 22,
2010. k75 Fed. Reg. 27399 (May 17, 2010).
2 Exec. Order No. 13350, 69 Fed. Reg. 46,055 (July 30, 2004) (expanding on the national emergency declared May 28,
2003 (Exec. Order No. 13303, 68 Fed. Reg. 3,193), which was expanded on September 3, 2003 (Exec. Order No.
13155, 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
emergency); and section 301 of Title 3, U.S.C. (authorizing agency heads to issue regulations).
5 U.S. Department of the Treasury, Terrorism and Financial Intelligence, Office of Foreign Assets Control (OFAC),
“Mission,” http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-
Control.aspx (last visited December 14, 2010).
6 Texts of the sanctions regulations, legal documents ordering the sanctions, and guidance to the various industries
(continued...)
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Recent Developments
On September 13, 2010,7 OFAC issued regulations implementing Executive Order 13438 as well
as various other Executive Orders issued since 2003 to deal with the situation in Iraq.8 These
regulations, the Iraq Stabilization and Insurgency Sanctions Regulations, 31 C.F.R., Part 576,
elaborate to some extent on the Executive Order. For instance, they specify that the blocking
orders for persons sanctioned under Executive Order 13438 are effective on “the earlier of the
date of actual or constructive notice that such person’s property and interests in property are
blocked,”9 rather than, for example, on the date of publication in the Federal Register of the
person’s designation as a Specially Designated Terrorist. The regulations also declare to be
blocked any property or interests in property of any entity in which the blocked person has,
directly or indirectly, a 50% interest, whether or not that entity has been designated under the
Executive Order.10 Persons whose interests have been blocked may challenge the blocking orders
in two ways. If they can claim “mistaken identity,” they may seek to have the funds or property
released by observing the procedures specified in 31 C.F.R. § 501.806. They also have the
possibility of seeking administrative review of their designation as a Specially Designated
Terrorist by showing that the basis on which they have been designated is “insufficient” or by
proposing “remedial steps” that they could take to “negate the basis for designation.”11
A list of designees added to OFAC’s Special Designated Nationals and Blocked Persons List12
under Executive Order 13438 was issued by Treasury on January 9, 2008.13 It included Ahmed
Fruzandeh, Brigadier General, Commanding Officer of the Iranian Islamic Revolutionary Guard
Corps-Qods Force, Ramazan Corps, who “leads terrorist operations against Coalition Forces and
Iraq Security Forces, and directs assassinations of Iraqi figures.”14 Also included were two Iran-
(...continued)
required to abide by the sanctions can be found at OFAC’s website: http://www.treasury.gov/about/organizational-
structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx. (last visited, December 14, 2010).
7 75 Fed. Reg. 55463 (September 13, 2010).
8 Executive Orders 13303, 13315, 13350, and 13364.
9 31 C.F.R 576.303(b);. 75 Fed. Reg. 55470.
10 31 C.F.R. § 576.412; 75 Fed. Reg. 55472.
11 A blocked “person may seek administrative reconsideration of his, her or its designation … as blocked, or assert that
the circumstances resulting in the designation no longer apply” pursuant to 31 C.F.R. 501.807. Upon receiving a
request for reconsideration, OFAC will review the request and the arguments submitted and provide a written decision.
If the request is denied, the OFAC decision may be challenged in federal court and upheld if the court finds that it is
supported by substantial evidence on the record. See, e.g. Al Haramain Islamic Foundation, Inc. v. U.S. Department of
the Treasury, 585 F. Supp. 2d 1233 (D.Or. 2008). It must be noted, however, that there is one case which treated the
blocking order as a seizure under the Fourth Amendment and required that the government show “exigent
circumstances” to justify its actions. Kind Hearts for Charitable Humanitarian Development, Inc., v. Geithner, 647 F.
Supp. 2d 857 (N.D. Ohio, 2009).
12 The current list, issued on January 6, 2011, can be found at http://www.treasury.gov/ofac/downloads/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. “IRAQ3” is the
designation given to names added pursuant to Executive Order 13438.
13 U.S. Department of the Treasury Press Release HP-859, “Treasury Designates Individuals, Entity Fueling Iraqi
Insurgency.” http://www.treasury.gov/press-center/press-releases/Pages/hp759.aspx.
14 Id. The OFAC notes that the Brigadier General, Commanding Officer of the Iranian Islamic Revolutionary Guard
Corps-Qods Force, Ramazan Corps, is also known as Ahmad Foruzandeh, Ahmad Fruzandah, Ahmad Fayruzi, Jafari
Ahmad Foroozandeh, Abu Shahab, and Abu Ahmad Ishab.
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based Iraqi nationals, and one Syria-based Iraqi national as well as Al-Zawra Television Station,
based in Syria. The Treasury announcement includes a description of the activities of the
designees that have led to the prohibition of transactions between them and any U.S. person and
the freezing of any of their assets that are under the jurisdiction of the United States.
On September 23, 2008, the names of five newly designated individuals and two newly
designated entities were added to the list of blocked persons and entities under the authority of
Executive Order 13438.15 One Iranian national was included,16 as were three Iraqi nationals,17 and
one Syrian national.18 The newly designated entities were both broadcasters operating in Syria:
Al-Ra’y Satellite Television Channel, Near Damascus in the Yaafur area, and Suraqiya for Media
and Broadcasting, Damascus.
On July 16, 2009, OFAC announced the names of one newly designated entity and one newly
designated individual whose property and interests in property are blocked pursuant to Executive
Order 13438.19 On January 5, 2010, OFAC added the following designee to the list of entities and
individuals whose property is blocked pursuant to Executive Order 13438: Jaysh Rijal Al-Tariq
Al-Naqshabandi (a.k.a. Armed Men of the Naqshabandi Order; a.k.a. Naqshabandi Army; a.k.a.
“AMNO”; a.k.a. “JRN”; a.k.a. “JRTN”), Iraq; website: http://www.alnakshabandia-army.org;
http://www.alnakshabandia-army.com [IRAQ3].20
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
15 73 Fed. Reg. 54896.
16Abdul Reza Shahlai.
17 Arkam Abbas Al-Kabi, Harith Sulayman Al-Dari, and Ahmad Hassan Kaka Al-Ubaydi.
18 Raw’a Al-Usta.
19 74 Fed. Reg. 34639. The entire list of blocked individuals and entities, as published on that date, is:
AL-MUHANDIS, ABU MAHDI (a.k.a. AL BASERI, Abu Mahdi; a.k.a. AL-BASARI, Abu
Mahdi; a.k.a. AL-BASRI, Abu-Mahdi al-Mohandis; a.k.a. AL-IBRAHIMI, Jamal; a.k.a. AL-
IBRAHIMI, Jamal Ja’afar Muhammad Ali; a.k.a. AL-IBRAHIMI, Jamal Ja’far; a.k.a. AL-
MADAN, Abu Mahdi; a.k.a. AL-MOHANDAS, Abu-Mahdi; a.k.a. AL-MOHANDESS, Abu
Mehdi; a.k.a. AL-MUHANDES, Abu Mahdi; a.k.a. AL-MUHANDIS, Abu Mahdi al-Basri; a.k.a.
AL-MUHANDIS, Abu-Muhannad; a.k.a. BIHAJ, Jamal Ja’afar Ibrahim al-Mikna; a.k.a.
EBRAHIMI, Jamal Jafaar Mohammed Ali; a.k.a. JAMAL, Ibrahimi; a.k.a. “AL-IBRAHIMI, Jamal
Fa’far ‘Ali”; a.k.a. “AL-TAMIMI, Jamal al-Madan”; a.k.a. “JAAFAR, Jaafar Jamal”; a.k.a.
“MOHAMMED, Jamal Jaafar”), Mehran, Iran; Al Fardoussi Street, Tehran, Iran; Al Maaqal, Al
Basrah, Iraq; Velayat Faqih Base, Kenesht Mountain Pass, Northwest of Kermanshah, Iran; DOB
1953; POB Ma’ghal, Basrah, Iraq; citizen Iran; alt. citizen Iraq; nationality Iraq (individual)
[IRAQ3] KATA’IB HIZBALLAH (a.k.a. HIZBALLAH BRIGADES; a.k.a. HIZBALLAH
BRIGADES IN IRAQ; a.k.a. HIZBALLAH BRIGADES-IRAQ; a.k.a. KATA’IB HEZBOLLAH;
a.k.a. KHATA’IB HEZBOLLAH; a.k.a. KHATA’IB HIZBALLAH; a.k.a. KHATTAB
HEZBALLAH; a.k.a. “HIZBALLAH BRIGADES-IRAQ OF THE ISLAMIC RESISTANCE IN
IRAQ”; a.k.a. “ISLAMIC RESISTANCE IN IRAQ”; a.k.a. “KATA’IB HIZBALLAH FI AL-
IRAQ”; a.k.a. “KATIBAT ABU FATHEL AL A’ABAS”; a.k.a. “KATIBAT ZAYD EBIN ALI”;
a.k.a. “KATIBUT KARBALAH”), Iraq; Najaf, Iraq [FTO] [SDGT] [IRAQ3]
20 75 Fed. Reg. 518.
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United States,”21 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 a national thereof has
any interest; by any person, or with respect to any property, subject to the jurisdiction of the
United States.22
This language is derived from section 5(b) of the Trading with the Enemy Act of 1917 (TWEA),23
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.24 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.”25 Congress immediately ratified this action and amended TWEA,26 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.27 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
21 50 U.S.C. § 1701(a).
22 50 U.S.C. App. 1702(a)(1).
23 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.
24 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).
25 Proclamation No. 2039, 48 Stat. 1689 (March 6, 1933).
26 Act of March 9, 1933, ch. 1, 48 Stat. 1.
27 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).
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States.28 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 state or foreign national had an
interest.29 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 vest30 title to any property
of a foreign person or nation.31 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.”32 The Supreme Court upheld the seizing and vesting of property of a non-enemy alien in
wartime;33 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.34
28 After Hitler invaded Norway and Denmark, President Roosevelt issued Executive Order 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.
29 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.
30 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.
31 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.
32 Clark v. Uebersee Finanz-Korp., 332 U.S. 480, 48 and 485 (1947).
33 Silesian-American Corporation v. Clark, 332 U.S. 469 (1947).
34 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: “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.
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In the 1970s, during the Vietnam 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.35 One result was the
enactment of the National Emergencies Act of 1976 (NEA) and IEEPA, in 1977. NEA sets forth
various procedures to be followed by the President when declaring a national emergency, such as
Federal Register publication36 and specification of the provisions of law under which the actions
under the national emergency are to be taken.37 It specifies procedures for terminating national
emergencies and provides a role for Congress by imposing presidential reporting requirements
and establishing congressional review procedures.38 NEA terminated existing national
emergencies,39 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.40
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.41
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,42 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
35 See, e.g., Exec. Order No. 8843, 6 Fed. Reg. 4,020 (August 15, 1940) (issued by President Roosevelt to regulate
consumer installment loans); Exec. Order No. 11387, 33 Fed. Reg. 47 (January 3, 1968) (issued by President Lyndon
Johnson to regulate capital transfers abroad).
36 50 U.S.C. § 1621(a).
37 50 U.S.C. § 1631.
38 50 U.S.C. § 1622.
39 P.L. 94-412, Tit. V, § 502(a)(1), 90 Stat. 1258.
40 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.).
41 Sen. Rep. 95-466, 95th Cong., 1st Sess 2 (1977).
42 See Note, “The International Emergency Economic Powers Act: A Congressional Attempt to Control Presidential
Emergency Power,” 96 Harvard Law Review 1102, 1106 (1983).
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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.”43 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.”44
(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 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.”45
(3) IEEPA does not provide authority to block international communications,46 information or
informational materials.47 Humanitarian aid48 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.49
(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 Act50 in 2001, IEEPA provides
authority for the President, during “armed hostilities” or when the United States has been
43 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).
44 50 U.S.C. § 1701 (a)(1)(A).
45 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.”
46 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.”
47 50 U.S.C. § 1702(b)(2).
48 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.
49 50 U.S.C. § 2702(b)(2).
50 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001, P.L. 107-56, 115 Stat. 272.
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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.51 The first and, to date only, use of
this power under IEEPA occurred on March 20, 2003. On that date, in Executive Order 13290,
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.”52 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.”53
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 transactions;54 (2)
IEEPA provides no explicit authority to regulate gold and silver bullion;55 (3) IEEPA provides no
explicit authority to seize records;56 and (4) IEEPA provides no authority to interfere with
international communications.57 Because IEEPA covers “any interest” in property by a foreign
national or government and provides the President with expansive power to issue interpretative
regulations,58 there has been some speculation that “any large scale financial transaction, even if it
51 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 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).
52 Exec. Order No. 13290, 68 Fed. Reg. 14,307 (March 24, 2003).
53 Exec. Order No. 13315, 68 Fed. Reg. 52,315 (September 3, 2003).
54 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).
55 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).
56 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).
57 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).
58 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.”
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involved only United States parties, might be subject to regulation if it affected the economy of a
foreign nation.”59
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.60 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”61
of a foreign country or national.62 Moreover, provided the executive order declaring the national
emergency makes the requisite findings with respect to regulating humanitarian assistance, a
freeze order directed against assets intended for humanitarian aid is enforceable.63 It has also been
held that notice and a pre-seizure hearing are not constitutionally mandated with respect to freeze
orders.64 It has also withstood challenge on First Amendment grounds.65
59 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.
60 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.
61 “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).
62 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 13224, 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 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).
63 Id. at 794 - 796.
64 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,
(continued...)
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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.’”66
Executive Order 13438 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....”67
(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
(...continued)
provides the private party with the very remedy that the Constitution names: just compensation. Id.
at 754 (citations omitted).
65 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.
66 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
12170. 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 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.
67 Exec. Order No. 12438, Section 1(a)(i).
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of violence or any person whose property and interests in property are blocked pursuant to this
order....”68
(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....”69
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.”70 There is also a
prohibition covering transactions by a U.S. person, or within the United States with the purpose
of evading the prohibitions of the executive order; attempts to violate any of the prohibitions, and
conspiracy formed to violate the executive order’s prohibition.71
In issuing the executive order, the President made the requisite finding with respect to aid and,
thus, prohibited humanitarian assistance;72 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.”73
Objectives
In 2007, Molly Millerwise, who was at that time a spokesperson for the U.S. Department of the
Treasury, 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.74 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 regime75 and Al Qaeda,76 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
68 Id., Section 1(a)(ii).
69 Id., Section 1(a)(iii)
70 Id., Section 1(b).
71 Id., Section 2.
72 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.”
73 Id., Section 5.
74 Spencer Ackerman, “Treasury: Exec. Order ‘Filling in the Cracks’ of Insurgent Financing,”
http://www.tpmmuckraker.com/archives/003733.php (last visited November 7, 2007).
75 Exec. Order No. 13315 blocks property of the former Iraqi regime, its senior officials and their family members.
76 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. 13224, 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.
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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.77
Transactions Covered
The executive order blocks “all property and interests in property” of the three categories of
persons, supra at footnote 22, provided that the property or interests in the property are in the
United States or come within the control of U.S. persons. Although the executive order does not
define “property” or “interests 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.”78 In defining “property,” the regulations provide a list of
categories, but make it clear that the list is “not by way of limitation.”79
Implementation
Executive Order 13438 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 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.80 A list of designees added to OFAC’s
Special Designated Nationals and Blocked Persons List81 under this executive order was issued
77 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 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.”
78 31 C.F.R. § 500.312.
79 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.”
80 Exec. Order No. 13438, Sec. 1(a).
81 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. “IRAQ3” is the designation given to names added pursuant to
(continued...)
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by Treasury on January 9, 2008.82 The Treasury announcement includes a description of the
activities of the designees that have led to the prohibition of transactions between them and any
U.S person and the freezing of any of their assets that are under the jurisdiction of the United
States. There is authority for the issuance of blocking orders prior to OFAC’s listing of persons to
be sanctioned under the executive order.83 The expectation, however, is that ultimately the names
of blocked individuals and entities identified for blocking orders will be publicly disseminated by
being added to OFAC’s Special Designated Nationals and Blocked Persons List.84
The executive order authorizes the Secretary of the Treasury, in consultation with the Secretaries
of State and Defense, to issue regulations.85 Regulations were issued on September 2, 2010.86
They use broad definitions of “property,” and “transfer” to block the transfer of property of any
kind.87 There is one blanket exception: the blocking orders do not apply to property and interests
in property “controlled by the military forces of the United States and their coalition partners
present in Iraq and acting under the command or operational control of the commander of the
United States Central Command.”88 The regulations include extensive bans on trade and financial
transactions,89 authorize certain activities pursuant to a general license,90 and permit other
(...continued)
Executive Order 13438.
82 http://www.treasury.gov/press-center/press-releases/Pages/hp759.aspx. “Treasury Designates Individuals, Entity
Fueling Iraqi Insurgency.”
83 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 lawsuit
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 Bearden, “U.S. Should Admit Its Mistake in Sudan Bombing,” Wall Street Journal, A-20 (May
20, 1999); and David S. Cloud, “U.S. Unfreezes Accounts in Suit on Sudan Bombing,” Wall Street Journal A-8 (May
4, 1999).
84 It appears that this has been the case. Subsequent designations occurred on September 23, 2008, 73 Fed. Reg. 54896;
July 16, 2009, 74 Fed. Reg. 34639; and January 5, 2010, 75 Fed. Reg. 518. For the entire list see supra, footnotes 14
and 15.
85 Exec. Order No. 13438, Sec. 6.
86 73 Fed. Reg. 55463 (September 13, 2010). This regulation promulgates 31 C.F.R., Part 576; subsequent references
will be made to the C.F.R. citation.
87 The regulation blocks “[a]ll property and interests in property that are in the United States, that hereafter come within
the United States, or that are or hereafter come within the possession or control of U.S. persons, including their
overseas branches.” As used in this regulation, “interest” is broadly defined to mean “an interest of any nature
whatsoever, direct or indirect.” 31 C.F.R. § 576.307. “Property” is defined broadly, specifically including “letters of
credit.” 31 C.F.R. § 576.312.
88 31 C.F.R. § 576.511.
89 The regulation declares that the blocked property and interests in property “may not be transferred, paid, exported,
withdrawn, or otherwise dealt in.” 31 C.F.R. § 576.201(a). It specifies that the prohibitions include “[t]he 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] [t]he receipt of any contribution or provision of funds, goods, or services
from any person whose property and interests in property are blocked….” 31 C.F.R. § 576.201(c).
90 General licenses are available for a transfer of funds or credit by a U.S. financial institution between blocked
accounts in its branches or offices in the United States held in the same name; for normal service charges; for
investment and reinvestment of funds; and for provision of certain legal services. 31 C.F.R. §§ 576.504 - 507. OFAC
has authority to make exclusions relative to any license. 31 C.F.R. § 576.503.
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activities pursuant to a specific license,91 issued upon application to OFAC on a case-by-case
basis. The regulations 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.92 The
regulations93 incorporate by reference the recordkeeping and reporting requirements applicable to
all OFAC sanction programs.94
Under the regulations,95 violation of sanctions under Executive Order 13438 are subject to the
penalties applicable under IEEPA. With the enactment of P.L. 110-96,96 civil penalties for IEEPA
violations are defined in terms of the greater of $250,000 or twice the amount of the transaction
on which the penalty is based; criminal penalties are $1 million and 20 years’ imprisonment.97
Included in the regulations are requirements for the issuance of a pre-penalty notice and
procedures for responses and for settlement.98
Reach—Is It Limited to “Foreign” Persons?
Neither the executive order nor the regulations limits potential targets to “foreign” persons, as
some executive orders have done.99 So far, the list of blocked persons under the regulations
includes no U.S. person. At the time the executive order was issued, there was some indication
that the primary focus was foreigners. A Treasury Department spokesperson100 said at that time
that the list, when issued,101 would include “Shia militia groups linked with Iran, Sunni insurgent
91 Special licenses may be issued to provide emergency medical services in the United States to persons whose property
is blocked. 31 C.F.R. § 576.509.
92 The list of legal services for which a special license may be authorized under the Iraq sanctions, 31 C.F.R. § 576.507,
is more limited than those available under the Global Terrorism Sanctions Regulations, 31 C.F.R. § 594.506.
93 31 C.F.R. § 576.601.
94 31 C.F.R. Part 501, Subpart C.
95 31 C.F.R. § 576.701.
96 121 Stat. 1101, 50 U.S.C. §1705 (2007).
97 The penalties may be adjusted pursuant to 28 U.S.C. § 2461, note (adjustment of civil penalties for inflation); 18
U.S.C. § 3571 (alternative criminal fine based on gain or loss).
98 31 C.F.R. § 576.702.
99 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.
100 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.
101 One commentator has described the OFAC designation process as follows:
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 13348, 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
(continued...)
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groups with sanctuary in Syria and some of the indigenous Iraqi insurgent groups.”102 Since
September 11, 2001, the practice seems to have 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 are 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.
Prior to the issuance of the regulations, the piggybacking potential of the executive order raised
questions.103 One issue was 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? With respect to those whose
property is to be blocked on the grounds of providing material assistance to those who are
designated as committing or posing a significant risk of committing acts of violence, the scope
covered by the executive order raised an array of questions including: (1) To what extent are
lawyers representing persons and entities on the list subject to the order? (2) To what extent are
donors to various U.S. charities operating internationally subject to the order?
There is some clarification of these issues in the licensing sections of the regulations. For
example, one provision of the regulations blocks charitable contributions for blocked persons
unless specifically authorized.104 Another provides general license authority for the provision of
specified legal services to blocked persons and blocks all other types of legal services unless a
special license is obtained.105
An example of how OFAC implements financial transaction and property controls imposed under
executive orders invoking IEEPA is illustrative of the reach of such sanction regulations. The
Global Terrorist Sanctions Program106 implements Executive Order 13224 of September 23,
2001.107 That executive order declared a national emergency with respect to “grave acts of
(...continued)
Georgetown Law Journal 1287, 1394 (2005) (footnotes omitted). (Exec. Order No. 13348, 69 Fed. Reg. 44,885 (July
27, 2004), blocks property of certain persons and prohibits the importation of certain goods from Liberia.)
102 Millerwise statement, see supra, footnote 74. 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.’”
103 See, Pincus, supra footnote 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.”
104 31 C.F.R. § 576.409.
105 31 C.F.R. § 576.507.
106 31 C.F.R. Part 594.
107 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 12947 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
(continued...)
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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.108 Subsequently, some U.S.
based charitable organizations were listed on OFAC’s terrorist lists.109 Under the Global
Terrorism Regulations, U.S. financial institutions are required to take precautions lest they engage
in prohibited transactions.110 The names of persons whose property is blocked are published both
on OFAC’s website and in the Federal Register.111 The regulations prohibit various transactions,
specify procedures to comply with the prohibitions,112and define applicable terms.113 They also
specify such matters as the nullification of property transfers made in violation of the
regulations,114 report and recordkeeping requirements,115 and penalties and penalty procedures.116
The reach of Executive Order 13438 is not unprecedented. The language is similar to at least one
other order, Executive Order 13219 of June 25, 2001, Blocking Property of Persons Who
Threaten International Stabilization Efforts in the Western Balkans.117 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 13219 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
(...continued)
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.
108 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.
109 See http://www.treasury.gov/resource-center/terrorist-illicit-finance/Pages/protecting-fto.aspx, Designated Charities
and Potential Fundraising Front Organizations for FTOs (listed by affiliation and designation date).
110 Exec. Order 13,224, section 2, like Executive Order 13438, prohibits transactions by U.S. 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.
111 31 C.F.R. § 594.201, note 2 to paragraph (a).
112 31 C.F.R. §§ 594.201 - 594.206.
113 31 C.F.R. §§ 594.311 - 594.315.
114 31 C.F.R. § 594.202.
115 31 C.F.R. § 594.601.
116 31 C.F.R. §§ 594.701 - 594.705.
117 66 Fed. Reg. 3,477, as amended by Executive Order 13304 §§ 3,4, May 28, 2003, 68 Fed. Reg. 32,315.
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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.”118
Given the concern that Executive Order 13438 might place those lawyers who are providing legal
assistance to targets of the freeze orders at risk, it is noteworthy 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.119
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.120 The one federal case that has dealt with the
issue is American Airways Charters, Inc. v. Regan.121 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.”122 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, differ from the
sanctions at issue in American Airways. They rely on the authority of IEEPA rather than TWEA
and focus on private individuals and entities rather than on a particular foreign nation. Moreover,
118 Executive Order 13219, as amended, § 1(B) and (C); 50 U.S.C. § 1701, note.
119 http://www.treasury.gov/resource-center/sanctions/Documents/balkans_gl1.pdf. Office of Foreign Assets Control,
Western Balkans Stabilization Regulations, 31 C.F.R., Part 588, General License No. 1, Legal Representation in
Matters Pending before the International Criminal Tribunal for the Former Yugoslavia (July 9, 2003).
120 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).
121 746 F. 2d 865 (D.C. Cir. 1984).
122 Id., at 866 - 867.
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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.123
The legal services provisions of the Iraq regulations are similar to other OFAC regulations which
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
license124 is provided in the regulations.125 For reimbursement for any legal services, application
must be made to OFAC for a specific license.126
OFAC’s Global Terrorism Sanctions Regulations, which appear to be the model for the Iraq
regulations, illustrate this framework. Under 31 C.F.R. § 594.406, “U.S. persons127 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).”128 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.”129 Other
legal services must be specifically licensed.130 The types of legal services which may be provided
without a specific license are:
(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;
123 Troxel, supra footnote 116, at 662 - 666.
124 “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.
125 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.”
126 31 C.F.R. § 576.507(a). See also, 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 (Zimbabwe); 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).
127 “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.
128 31 C.F.R. § 201(a) defines those persons whose property has been blocked under the executive orders covering
global terrorism.
129 The procedures for specific licenses are detailed in 31 C.F.R. § 801(b).
130 31 C.F.R. § 594.506(b).
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(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.131
The descriptions of legal services permitted under the general license have been criticized as
ambiguous and narrow.132 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.133
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.134
OFAC Administrative Procedures
OFAC regulations specify procedures for imposing and challenging penalties imposed under
TWEA135 and for each of the sanctions programs operating under authority of IEEPA,136
including the Iraq regulations.137 The Iraq regulations address the Pre-Penalty notice and provide
explicit rights to respond, to obtain extensions of the time for response, to representation, and a
right to seek judicial review when a Penalty Notice is finally issued. The explicit rights provided
131 31 C.F.R. § 594.506(a)(1) - (5).
132 See, Troxel, supra footnote 116, at 648 - 650.
133 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.
134 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 Beck
and Sylvia Tonova, “No Legal Representation Without Governmental ‘Interposition,’” 17 Georgetown Journal of Legal
Ethics 597 (2004). Exec. Order No. 13304, 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 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.
135 31 C.F.R. §§ 501.701 - 501.747.
136 Procedures for each sanction program, other than those imposed under the authority of TWEA, are detailed
separately within the regulations applicable to each sanctions program. 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.
137 36 C.F.R. §§ 576.702.
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in connection with TWEA sanctions are: right to receive a prepenalty notice;138 right to provide a
written response to the prepenalty notice;139 right to request a hearing on the record140 before an
administrative law judge for any penalty assessed;141 right to discovery in preparation for the
hearing (subject to various privileges);142 and an opportunity—after the hearing—to file proposed
findings and conclusions of law.143 There is also the possibility of an OFAC review of the
administrative law judge’s conclusion.144
The general OFAC 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.145 Among its highlights are annexes providing “Risk Matrices,” which
banking institutions may use to evaluate their compliance programs,146 and an outline of “Sound
Banking Institution OFAC Compliance Programs.”147 The enforcement procedures cover such
issues as (1) the effect of voluntary disclosure by an institution with respect to a violation of the
sanctions;148 (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”;149 and (3) OFAC coordination with the banking regulators in determining use of
enforcement tools.150 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.151 OFAC may refer
potential criminal violations to the Department of Justice and also pursue civil penalties.152 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 the number of its 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.153
138 31 C.F.R. § 501.706.
139 31 C.F.R. §§ 501.706(b)(2) and 501.707.
140 31 C.F.R. § 501.739.
141 31 C.F.R. 501.711.
142 31 C.F.R. § 501.723.
143 31 C.F.R. § 501.735.
144 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. § 500.
145 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.
146 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).
147 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.
148 31 C.F.R., Part 501, Annex A, I (D).
149 31 C.F.R., Part 501, Appendix A, II (B).
150 31 C.F.R., Part 501, Appendix A, II (A).
151 31 C.F.R., Part 501, Appendix A, II (A).
152 31 C.F.R., Part 501, Appendix A, II (C).
153 31 C.F.R., Part 501, Appendix A, IV.
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Challenging Designations
Broad-based challenges to OFAC designations have generally been unavailing. There is, however,
one case, KindHearts for Charitable Humanitarian Development, Inc. v. Geithner,154 in which a
federal district court has found an OFAC blocking order freezing the assets of a United States-
based charitable organization to be a seizure within the meaning of the Fourth Amendment to the
U.S. Constitution.155 OFAC regulations include provisions which permit particularized
administrative appeals of OFAC designations on limited grounds.
OFAC regulations include provisions governing availability of information,156 procedures to have
funds unblocked on grounds of mistaken identity,157 and procedures for removing names from
OFAC’s lists of designated persons.158 With respect to release of information, the regulation
covers only public information available under the Freedom of Information Act;159 information
which the Privacy Act160 requires to be made available to individuals; OFAC forms; and
information on civil penalties.161 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.162 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.163
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.
154 647 F. Supp. 2d 857 (N.D. Ohio 2009).
155 The federal district court has also issued an injunction enjoining the Department of the Treasury and OFAC from
designating KindHearts as a Specially Designated Global Terrorist pending the court’s fashioning of a remedy for the
violation of the plaintiff’s constitutional rights. KindHearts for Charitable Humanitarian Development, Inc. v. Geithner,
647 Fed Supp. 2d 857 (N.D. Ohio, 2009).
156 31 C.F.R. § 501.805.
157 31 C.F.R. § 501.806.
158 31 C.F.R. § 501.807.
159 5 U.S.C. § 552.
160 5 U.S.C. § 552a.
161 31 C.F.R. §§ 501.805 (a), (b)and (d).
162 31 C.F.R. § 501.806.
163 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.”
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OFAC’s regulations provide procedures to (1) have funds unblocked that have been blocked
through mistaken identity164 and (2) have a designation reconsidered or to assert that changed
circumstances have rendered a designation inapplicable.165 Persons named to one of the terrorist
lists may challenge the designation by presenting arguments or evidence that there is an
insufficient basis for the designation.166 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.167
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.168
Upon receipt of this information, OFAC may require the applicant to provide more
documentation.169 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.170
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, 2009, of almost $20
million in terrorist assets, of which over $11.2 million is that of Al Qaeda.171 The total dollar
164 31 C.F.R. § 501.806.
165 31 C.F.R. § 807.
166 31 C.F.R. § 501.807.
167 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.
168 A list of requirements is contained in 31 C.F.R. §§ 501.806(b) - (d).
169 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.
170 54 Fed. Reg. 49,258, 24,259 (November 29, 1989); 55 Fed. Reg. 2, 644, 2,645 (January 26, 1990).
171 U.S. Department of the Treasury, Office of Foreign Assets Control, Terrorist Assets Report: Calendar Year 2009, at
1 and 8. http://www.treasury.gov/resource-center/sanctions/Documents/tar2009.pdf.
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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.”172
Author Contact Information
M. Maureen Murphy
Legislative Attorney
mmurphy@crs.loc.gov, 7-6971
172 Id. at 10.
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