1997 Congressional Hearings
Intelligence and Security

EMBARGOED UNTIL 10 A.M. EDT
Text as Prepared for DeliveryM
June 10, 1997

GENERAL BACKGROUND

The Office of Foreign Assets Control (OFAC) administers economic sanctions and embargo programs against specific foreign countries or groups to further U.S. foreign policy and national security objectives. In administering these programs, OFAC generally relies upon Presidential authority contained in the Trading With the Enemy Act (TWEA) or the International Emergency Economic Powers Act (IEEPA), or upon specific legislation, to prohibit or regulate commercial or financial transactions with specific foreign countries or groups.

Examples of current TWEA programs include comprehensive asset freezes and trade embargoes against North Korea and Cuba. Examples of current IEEPA programs include similarly broad sanctions against Libya, Iraq, the Cali Cartel, and certain foreign terrorist groups, as well as comprehensive trade sanctions against Iran.

From time to time, sanctions have been imposed by Congress directly through legislation. Between 1986 and 1991, for example, OFAC administered the trade and investment prohibitions against South Africa mandated by the Comprehensive Anti-Apartheid Act. Similarly, OFAC has been delegated administration of Section 321 of the Antiterrorism and Effective Death Penalty Act of 1996 (the Act), which was signed into law by the President on April 24, 1996.

SECTION 321

Section 321 of the Act prohibits all financial transactions by United States persons with the governments of terrorism-supporting nations designated under section 6(j) of the Export Administration Act, except as provided in regulations issued by the Secretary of Treasury, in

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consultation with the Secretary of State. The Act prohibited all financial transactions by U.S. persons with: North Korea, Cuba, Iran, Libya, Iraq, Syria, and Sudan.

All but Syria and Sudan were the subject of existing comprehensive financial and trade embargoes at the time of enactment. In accordance with foreign policy guidance provided to Treasury by State, existing sanctions programs against North Korea, Cuba, Iran, Libya, and Iraq were continued without change. This permitted the specific policies developed over time with respect to each of these countries to remain in effect, including the exceptions to each embargo dictated by unique humanitarian, diplomatic, news gathering, intellectual property, and other concerns.

New regulations, known as the Terrorism List Governments Sanctions Regulations, were issued August 23, 1996 to impose the prohibitions on financial transactions with respect to Syria and Sudan. While most transactions are currently authorized, the new regulations, drafted in consultation with the Department of State, do prohibit financial transactions which involve transfers from those governments in the form of donations and transfers with respect to which U.S. persons know or have reasonable cause to believe that there is a risk of furthering terrorist acts in the United States.

From a sanctions enforcement perspective, we believe the Act and implementing regulations are important because they provide OFAC with comprehensive jurisdiction over all financial transactions between U.S. persons and the Governments of Syria and Sudan. We now have authority to act to stop or impede any particular suspicious transfer to or from these governments by informing U.S. persons handling the transfer that a reasonable cause exists to believe that the transaction may pose a risk of furthering terrorist activity in the United States. We believe the Act's authority provides a significant new tool to prevent funding of terrorist activities in the U.S.

H.R. 748

H.R. 748 would amend the current law, section 321 of the Antiterrorism Act, to repeal all Executive flexibility in administering the prohibition on financial transactions against terrorism supporting governments, permitting only transactions incident to routine diplomatic relations among countries.

This codification would drastically alter pre-existing sanctions programs against five of the seven terrorism-supporting governments, and seriously infringe the President's ability to conduct foreign policy and use sanctions to respond quickly and flexibly to changing situations in embargoed countries.

OFAC's function is to implement and enforce sanctions programs. For that reason, my comments are addressed to sanctions administration, and the vital role that licensing plays in the successful implementation of our programs. Our sanctions programs on the seven countries designated by the State Department as supporting international terrorism are quite diverse, and carry different foreign policy guidance. Without the ability -- through general and specific licenses -- to tailor sanctions programs to the real world and to wholly unforeseeable situations that arise daily, sanctions' usefulness would be lost as an instrument for the defense of U.S. foreign policy, national security, and economic interests.

In each of our economic sanctions programs on terrorist countries, the scope of the prohibitions and of OFAC licensing policy and practice responds to specific national security, foreign policy or economic conditions. In the case of Iran, we have administered a full blocking of government assets with comprehensive trade sanctions (1979-81), import prohibitions (1987-95), and comprehensive sanctions on trade in goods and services without the blocking of assets (May 1995-date). In sanctions on Cuba (1963-date) and North Korea (1950-date), we have administered comprehensive blocking and trade sanctions applicable both to the governments and all nationals of these countries. With respect to Libya (1986-date) and Iraq (1990-date), comprehensive blocking of government assets and trade sanctions are in place. However, unlike Cuban and North Korean nationals, Libyan and Iraqi nationals' assets are not blocked. Pursuant to United Nations sanctions, transfers to persons in Iraq are prohibited. There are prohibitions against travel transactions to Libya, Iraq, and Cuba, but travel transactions are permitted by general license under the North Korean sanctions, and are exempt by statute for Iran. These variations are not haphazard, but reflect the specific policy contexts in which each program has developed.

In each of these programs, general and specific licensing policies have been adopted to minimize unintended human suffering while accomplishing program goals and to reflect general interests of the United States.

Examples of the former include licenses permitting expenditures related to travel to visit sick and dying relatives in Cuba; permitting participation in amateur and nonpolitical international athletic competitions and people to people exchanges; allowing limited funds to be transferred to close relatives so that they can emigrate from Cuba; authorizing humanitarian relief for the people of North Korea and Iran suffering from natural disasters; permitting husbands, wives, sons and daughters to stay with their immediate families in Tripoli; dispensing U.S. vaccines to combat the outbreak of epidemics; bringing home the remains of Americans who have died overseas and administering decedents estates in target countries; allowing payments for boat repairs when a U.S. vessel has been blown into target country waters during a storm. The list goes on and on.

Among the authorizations serving U.S. interests are licenses permitting travel payments related to journalism; the compensation of successful U.S. claimants in the Iran-U.S. Claims Tribunal in The Hague from Iranian Government funds; reciprocal U.S. and target country intellectual property protection; payments when it is necessary to overfly target country airspace or for emergency landings; the acquisition and sale of publications, information and information materials; and a wide range of humanitarian donations, remittances, family payments, and travel-related transactions.

In removing licensing authority over financial transactions by U.S. persons with the governments of Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria, HR 748 would not only adversely affect the President in his Constitutional responsibility to conduct the foreign affairs of the United States, it would also eliminate OFAC's ability to make rational decisions about very human and often unforeseen events and cause great suffering for unintended and untargetted third parties.

Thank you.

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