International Law Advisory - OFAC Issues Somalia Sanctions Regulations

On May 5, 2010, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) published a final rule adding a new part to its regulations to administer U.S. economic sanctions against persons contributing to the conflict in Somalia.  New Part 551 to Title 31 of the Code of Federal Regulations implements Executive Order 13536 of April 12, 2010, “Blocking Property of Certain Persons Contributing to the Conflict in Somalia.”

OFAC published these regulations in abbreviated form, in order to provide immediate guidance to the public on this sanctions program.  However, the agency intends to supplement this final rule with “a more comprehensive set of regulations, which may include additional interpretive and definitional guidance and additional general licenses and statements of licensing policy.”  Therefore, while the final rule omits many common aspects of other sanctions programs, these differences will likely be resolved in the future.

The final rule is primarily a “blocking” regime.  Rather than list the specific transactions prohibited by the sanctions (as OFAC usually does), section 551.201 simply refers to the transactions prohibited in the Executive Order.  The Executive Order blocks all property and interests in property that are in the United States or within the possession or control of U.S. persons, of the following persons:

(1) Any person listed in the Annex to the Executive Order;

(2) Any person determined by the Secretary of the Treasury, after consultation with the Secretary of State:

(A) to have engaged in acts that directly or indirectly threaten the peace, security, or stability of Somalia, including but not limited to:

(1) acts that threaten the Djibouti Agreement of August 18, 2008, or the political process; or

(2) acts that threaten the Transitional Federal Institutions, the African Union Mission in Somalia (AMISOM), or other international peacekeeping operations related to Somalia;

(B) to have obstructed the delivery of humanitarian assistance to Somalia, or access to, or distribution of, humanitarian assistance in Somalia;

(C) to have directly or indirectly supplied, sold, or transferred to Somalia, or to have been the recipient in the territory of Somalia of, arms or any related materiel, or any technical advice, training, or assistance, including financing and financial assistance, related to military activities;

(D) to have materially assisted, sponsored, or provided financial, material, logistical, or technical support for, or goods or services in support of, the activities described in subsections (2)(A), (2)(B), or (2)(C) of this section or any person whose property and interests in property are blocked pursuant to this order; or

(E) 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.

As noted above, these regulations currently lack many features of other sanctions programs, such as certain interpretations and licensing policies, and information on penalties and reports and records.  While it is not yet clear how OFAC will supplement the final rule in the future, this new regime in its current state contains certain provisions that are worthy of note.

First, this sanctions program does not expressly exempt any categories of transactions.  Most OFAC sanctions regulations include a section exempting certain transactions related to (among other things) personal communications, information or informational materials, and travel.  This final rule does include a section on exempt transactions.  While the International Emergency Economic Powers Act (“IEEPA”) requires that U.S. sanctions programs contain an exemption for information or informational materials, the Somalia sanctions are authorized pursuant to the United Nations Participation Act (“UNPA”) in addition to IEEPA.  In the past, OFAC has not included an informational materials exemption in sanctions programs (i.e., Iraq, Côte d’Ivoire) that are authorized in part by other statutes such as the UNPA.

Second, the final rule includes a section (§ 551.406) explicitly stating that a blocked person has an interest in all property and interests in property of an entity in which it owns, directly or indirectly, a 50 percent or greater interest.  The property and interests in property of that subsidiary entity are blocked regardless of whether it is specifically designated by OFAC or included on the SDN list.  This section continues OFAC’s recent trend of including provisions in sanctions programs to implement its 50 percent rule, which had previously been established only through published guidance.

Third, this rule notes that Section 203 of IEEPA authorizes OFAC to block property and interests of property of a person during the pendency of an investigation.  The names of persons blocked during the pendency of an investigation will be published on the SDN list with the identifier “[BPI-SOMALIA].”  This note, first seen in sanctions regulations issued last year, highlights OFAC’s policy of preemptively blocking the property of certain persons.

Fourth, while the final rule does not mention charitable contributions, the Executive Order prohibits charitable contributions by, to, or for the benefit of blocked parties.  The President determined that such charitable donations would seriously impair his ability to deal with the national emergency. 

If you have any questions about this final rule and its implications, please contact Ed Krauland at 202-429-8083 or Michael Gershberg at 202-429-6208.