International Narcotics Trafficking Sanctions: An Overview

International Narcotics Trafficking Sanctions: An Overview

June 12, 2018
International Narcotics Trafficking Sanctions: An Overview
Overview
E.O. 12978 and the Kingpin Act, Compared
The Office of Foreign Assets Control (OFAC) within the
Although implementation of the two sanctions programs
U.S. Department of the Treasury administers and enforces
remains distinct, E.O. 12978 and the Kingpin Act are
economic sanctions that target foreign entities and persons
designed to achieve the same purpose: to target traffickers
for their activities related to terrorism, narcotics trafficking,
who play a significant role in international narcotics
and other threats to the national security, foreign policy, or
trafficking, those who materially assist or support their
economy of the United States. Two of OFAC’s sanctions
trafficking activities, and persons or entities owned,
programs specifically address drug trafficking. Then-
controlled, or acting on behalf of traffickers. Both sanctions
President Bill Clinton ordered the first in 1995 to target the
programs do this by (1) publicly designating individuals
drug trafficking threat emerging from Colombia. Congress
and entities; (2) blocking their property and interests in
enacted the second in 1999 to expand the scope of drug
property under U.S. jurisdiction; (3) prohibiting U.S.
trafficking sanctions globally. As of June 2018, OFAC lists
persons from entering into transactions related to the
1,209 unique drug trafficking-related individuals and 1,170
property or interests in property of those designated; and (4)
entities for sanction (excluding aliases and removals).
enforcing violations with civil and/or criminal penalties.
Executive Order 12978
Besides the key difference in geographical scope of the two
On October 21, 1995, the President signed Executive Order
programs, they differ most with respect to the severity of
(E.O.) 12978, “Blocking Assets and Prohibiting
civil and criminal penalties associated with each. For
Transactions with Significant Narcotics Traffickers.” E.O.
enforcement of E.O. 12978, the maximum civil penalty per
12978 sought to combat drug trafficking by targeting
violation is prescribed by IEEPA, as adjusted by the Federal
traffickers’ illicit wealth. Based on authorities in the
Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C.
National Emergencies Act (50 U.S.C. 1601 et seq.) and the
2461 note): in mid-2018, the greater of $295,141 or an
International Emergency Economic Powers Act (IEEPA; 50
amount that is twice that of the underlying transaction.
U.S.C. 1701 et seq.), this sanctions program allows the
Under IEEPA, maximum criminal penalties include fines
President to freeze U.S.-based assets of “significant foreign
up to $1 million and imprisonment for up to 20 years.
narcotics traffickers centered in Colombia.”
In contrast, the Kingpin Act prescribes higher penalties. As
Foreign Narcotics Kingpin Designation Act
adjusted by the Federal Civil Penalties Inflation Adjustment
On December 3, 1999, the Foreign Narcotics Kingpin
Act of 1990, the maximum civil penalty is $1,466,485 per
Designation Act was signed into law (Title III of P.L. 106-
violation, as of mid-2018. Under the Kingpin Act,
120, as amended; 21 U.S.C. 1901 et seq.). The Kingpin Act
maximum criminal penalties for corporate officers can
sought to expand E.O. 12978 to apply globally, freezing
reach up to $5 million and 30 years’ imprisonment and for
U.S.-based assets of significant foreign narcotics
corporations up to $10 million. Others may face fines
traffickers, their organizations, and those who support them.
pursuant to Title 18 U.S. Code and up to 10 years in prison.
The act also authorizes the State Department to make
In comparison to E.O. 12978, the Kingpin Act also requires
designated foreign individuals ineligible for U.S. entry,
Treasury to consult with more departments and agencies
pursuant to the Immigration and Nationality Act. As the
when deciding to make new designations. In addition, the
drug trade evolved beyond Colombia, the Kingpin Act has
scope of authorized or exempt transactions described in the
become the primary authority for applying U.S. sanctions to
implementing regulations for each of the two sanctions
combat international drug trafficking.
programs differ slightly (31 C.F.R. Part 536 for E.O. 12978
and Part 598 for the Kingpin Act).
Figure 1. Kingpin Act Trends: 2000-June 5, 2018
Developments in 2018
Since January 1, 2018, OFAC has designated 69 individuals
and entities pursuant to the Kingpin Act and none pursuant
to E.O. 12978. Notable Kingpin Act designations in 2018
include the following:
 Colombians linked to La Oficina de Envigado. On
February 14, OFAC continued its pressure against La
Oficina, a Medellin-based criminal organization
involved in narcotics trafficking, money laundering,
extortion, and murder for hire, by designating several

Colombians linked to the group.
Source: U.S. Department of the Treasury.
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International Narcotics Trafficking Sanctions: An Overview
 Mexican drug trafficking targets. On March 6, OFAC
trafficking sanctions, remain a congressional foreign policy
designated additional individuals and entities linked to
concern and a subject of hearings in the 115th Congress. As
the Sinaloa-based Ruelas Torres Drug Trafficking
Congress continues its oversight of drug trafficking
Organization (DTO), involved in the manufacture and
deterrence, key questions may include the following:
distribution of heroin to the United States. Additional
sanctions designations on April 6 targeted individuals
What role for sanctions in the current opioids crisis? In
linked to the Cartel de Jalisco Nueva Generación
light of the U.S. opioid overdose epidemic, recent Kingpin
(CJNG) and Los Cuinis DTO.
Act designations have targeted Mexican heroin and Chinese

fentanyl traffickers. Such actions may raise the possibility
Chinese fentanyl trafficker and financial associates.
of further use of sanctions to address the opioids crisis, as
On April 27, OFAC applied sanctions against a Chinese
well as congressional scrutiny over the role of financial
fentanyl trafficking network. This network allegedly
sanctions in broader U.S. counterdrug strategy.
contributed to American opioid-related deaths. The
designated individuals have also been indicted in U.S.
Do sanctions targeting illicit drug trafficking work?
criminal court.
OFAC prepared an “impact report” in 2007 to describe the
 Former Venezuelan official. On May 7, OFAC
effectiveness of sanctions to target narcotics traffickers
continued to target former and current Venezuelan
under E.O. 12978. The Kingpin Act also requires annual
officials purportedly involved in the drug trade by
classified reports to the intelligence committees that detail
designating Pedro Luis Martin Olivares, a former Chief
the status of sanctions imposed. But questions of
of Financial Intelligence for Venezuela’s National
effectiveness remain regarding whether the sanctions
Directorate of Intelligence and Prevention Services.
programs can deter potential traffickers and remove the
financial motivation that drives criminals to engage in drug
 Colombian DTO and emerald mining fronts. On June
trafficking. The House Foreign Affairs Committee raised
5, OFAC identified the Rincon Castillo DTO, its leader,
this issue in a November 2017 hearing on the Kingpin Act,
and several individuals and entities associated with the
and Congress may consider further oversight measures.
DTO’s violent cocaine trafficking and money
laundering operations through the emerald mining
Can unilateral sanctions be leveraged internationally?
industry and other seemingly legitimate enterprises.
E.O. 12978 and the Kingpin Act block assets and prohibit
transactions within U.S. jurisdiction, but designated
To date in calendar year 2018, OFAC has also removed 17
traffickers may continue to operate beyond OFAC’s reach.
individuals and entities previously designated pursuant to
Foreign governments could be encouraged to take
the Kingpin Act, including lifting sanctions off the
comparable domestic actions. While cooperation on
Colombian soccer team Envigado Futbol Club.
sanctions implementation has historically been robust in
some countries, such as Colombia, results have been mixed
Kingpin Act: Relationship to Other
elsewhere.
Sanctions
To date, seven individuals and five entities (Kurdistan
Can sanctions effectively address narco-states? Drug
Workers’ Party, Revolutionary Armed Forces of Colombia,
traffickers often bribe officials to facilitate their illicit
Shining Path [Peru], United Self-Defense Forces of Colombia,
activities. Yet, OFAC rarely designates current public
and Los Zetas [Mexico]) are designated under the Kingpin Act
office holders for sanction. Moreover, the Kingpin Act
as well as for their activities related to international terrorism,
explicitly prohibits the designation of foreign states for
transnational crime, or a country-specific sanctions program.
sanction. OFAC has yet to test whether this prohibition
applies to national or subnational elements of a state.
The ability to designate an individual or entity under more
than one sanctions program has raised questions in Congress
Are there unintended consequences and downstream
about when multiple designations are warranted in some cases
effects of sanctions? Targeted economic sanctions, such as
and why Treasury may decide not to double-list other
those aimed at drug traffickers, are intended to minimize
individuals and entities. In the 115th Congress, for example,
collateral harm. Yet, some designations have been
H.R. 5035 seeks the designation of Hezbol ah, already
associated with significant economic losses and
designated under four U.S. sanctions programs, as a significant
unemployment (when large companies are liquidated in the
foreign narcotics trafficker, pursuant to the Kingpin Act.
process) and upticks in drug trafficking-related violence
In practice, the executive branch exercises some discretion
(when, in combination with law enforcement action, DTOs
with respect to which sanctions program may be used to
are dismantled and competing groups vie for abandoned
target an individual or entity. In some circumstances, Treasury
territory). Policymakers may question how calculations of
may decide to designate an individual or entity pursuant to
harm are balanced with the perceived benefits of sanctions
multiple programs in order to expand the scope of prohibited
designations.
activity or to update known facts about a designated person
or entity. In other circumstances, Treasury may find multiple
Liana W. Rosen, Specialist in International Crime and
designations duplicative.
Narcotics
Foreign Policy Questions for Congress
IF10909
The application and implementation of unilateral economic
sanctions, including oversight of the OFAC’s narcotics
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International Narcotics Trafficking Sanctions: An Overview

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