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Published online by Cambridge University Press: 20 January 2017
* Ms. Lester, Ms. Moe, and Mr. Szubin did not contribute remarks to the Proceedings.
1 Gary Clyde Hufbauer et al., Economic Sanctions Reconsidered 9 (3d ed. 2007).
2 See, e.g., Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. 107-56, 115 Stat. 272 (2001).
3 A generally accepted working definition is “the deliberate, government-inspired withdrawal, or threat of withdrawal, of customary trade or financial relations” for foreign policy or national security goals. Hufbauer et al., supra note 1, at 3.
Economic sanctions have been used and are used to stop a country’s military adventure, to destabilize its government, or to influence or express disapproval about a range of other foreign policy considerations involving weapons proliferation, human rights, terrorism, drug trafficking, or the environment. See id. at 9–17.
Although the dividing lines are not always clear and motives can be mixed, economic sanctions are generally viewed as measures that are not taken for commercial gain and often come at economic cost to the country imposing the sanctions. Hence, countries might use, or threaten to use, economic measures against another country to obtain normal economic objectives in trade, financial, or other negotiations. This is generally viewed as part of bargaining and is not categorized as an economic sanction. See Carter, Barry E., International Economic Sanctions: Improving the Haphazard Legal Regime 5 (1988)Google Scholar.
4 The state or organization (e.g., the United Nations) that imposes the sanction is sometimes called the sender, and the object of the sanction is sometimes called the target. Hufbauer et al., supra note 1, at 2.
5 See Carter, supra note 3, at 2.
6 See, e.g., Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, Pub. L. 108-175, 117 Stat. 2482, § 5 (2003) (prohibiting the export of certain U.S. goods to Syria); Exec. Order No. 13,572, § 1 (Apr. 29, 2011) (blocking property and interests in property that come within the United States of certain Syrian persons).
7 See, e.g., International Emergency Economic Powers Act (IEEPA), Pub. L. No. 95-223, Tit. II, 91 Stat. 1626 (codified at 50 U.S.C. §§ 1701 et seq.; U.N. Participation Act, 22 U.S.C. § 287 c–d (2010)).
8 See, e.g., Exec. Order No. 13,622, 77 Fed. Reg. 149 (July 30, 2012) (authorizing Iran sanctions based on IEEPA authority).
9 See 31 C.F.R. Ch. V (2012).
10 See, e.g., Exec. Order No. 13,619, 77 Fed. Reg. 135 (July 11, 2012) (authorizing sanctions against “any person determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State” to have threatened the peace in Burma).
11 Office of Foreign Assets Control, Specially Designated Nationals and Blocked Persons list (Feb. 14, 2013), http://www.treasury.gov/sdn [hereinafter SDN List].
12 See 31 C.F.R. Ch. V, App. A.
13 SDN List, supra note 11.
14 Id.
15 Id.
16 Hal S. Scott & Anna Gelpern, International Finance: Transactions, Policy, and Regulation 590 (18th ed. 2011).
17 See U.S. Dep’t of the Treasury Financial Crimes Enforcement Network, Feasibility of a Cross-Border Electronic Funds Transfer Reporting System Under the Bank Secrecy Act app. D, 55 (2007) [hereinafter FinCEN Report].
18 See id. at 55–56.
19 Scott & Gelpern, supra note 16, at 591.
20 Under U.S. law, a “correspondent account” is an account established at a U.S. bank by a foreign financial institution “to receive deposits from, make payments on behalf of [the] foreign financial institution, or handle other financial transactions related to such institution.” See 31 U.S.C. § 5318A(e)(1)(B). More basically, a correspondent relationship is “the provision of banking services by one financial institution to another financial institution.” FinCEN Report, supra note 17, at 56. Related to correspondent accounts are “payable-through accounts,” which are accounts established at U.S. banks by foreign financial institutions to enable foreign customers to access the U.S. banking system. See 31 U.S.C. § 5318A(e)(1)(C). U.S. sanctions regulations generally apply equally to both correspondent accounts and payable-through accounts. See, e.g., Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, Pub. L. 111-195, 124 Stat. 1312, § 104(c) (2010) (directing Treasury to prohibit or restrict the opening of correspondent or payable-through accounts by foreign financial institutions that have engaged in prohibited activities).
21 See FinCEN Report, supra note 17, at 56–57. In this case, upon the originator’s instruction, the originator’s bank debits the originator’s account and credits the correspondent account of the beneficiary’s bank. The beneficiary’s bank then credits the beneficiary’s account. See also Scott & Gelpern, supra note 16, at 592.
22 See Scott & Gelpern, supra note 16, at 593. Here, upon receiving the payment instruction, the intermediary bank debits the correspondent account of the originator’s bank and credits the correspondent account of the beneficiary’s bank to undertake the transaction. See id.
23 See id. at 593–95.
24 See id. at 595–97.
25 Federal Reserve Bank of New York, Fedwire® and National Settlement Services, http://www.newyor-kfed.org/aboutthefed/fedpoint/fed43.html (last visited Feb. 15, 2013).
26 FinCEN Report, supra note 17, at 61–62.
27 See id.
28 See id. at 62–63.
29 See id.
30 See id. at 63–64.
31 From 2004 to 2006, FRBNY did implement the Fedwire Integrity Pilot Program, in which FRBNY compared a sample list of SDNs against a four-year moving history of transactions in the Fedwire database. Of 305 transactions identified as containing potential matches to the SDN List, OFAC concluded that only one transaction constituted a violation and issued a cautionary letter to the financial institution in question. OFAC officials treated the program as sensitive because its public disclosure would lead to its termination and would damage OFAC’s relationship with the Federal Reserve. See U.S. Dep’t of the Treasury Office of Inspector General, Foreign Assets Control: OFAC Should Have Better and More Timely Documented Its Review of Potential Sanctions Violations, OIG-10-045, at 10 (Sept. 1, 2010), available at http://www.treasury.gov/about/organizational-struc-ture/ig/Documents/OIG10045%20%28Fedwire%29-Not%20SBU%20%282%29.pdf.
OFAC’s concern with public disclosure of the program was likely informed by the public outcry that arose in Europe upon the revelation of the Terrorist Finance Tracking Program (TFTP) by the New York Times in June 2006. See Eric Lichtblau & Risen, James, Bank Data Is Sifted by U.S. in Secret to Block Terror, N.Y. Times, June 22, 2006 Google Scholar; Brand, Constant, Belgian PM: Data Transfer Broke Rules, Wash. Post, Sept. 28, 2006 Google Scholar. Treasury initiated the TFTP after the attacks of September 11, 2001, in order to identify and track the financing of terrorism. Under the program, which remains in place, Treasury issues subpoenas to SWIFT or other designated providers seeking information on financial transactions by suspected terrorists. Some in Europe forcefully condemned the program as a breach of EU privacy laws. Nevertheless, the EU approved a 2010 agreement that essentially codifies the practices involved in the TFTP. See Agreement Between the European Union and the United States of America on the Processing and Transfer of Financial Messaging Data from the European Union to the United States for the Purposes of the Terrorist Finance Tracking Programme, E.U.-U.S., L 195/5 (July 27, 2010), available at eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0005:0014:EN:PDF.
32 See, e.g., 31 C.F.R. Subt. B, Ch. V, Pt. 535, Subp. B.
33 See 31 C.F.R. §§ 501.602–603.
34 The market for such software is robust. See Office of Foreign Assets Control, Frequently Asked Questions and Answers, http://www.treasury.gOv/resource-center/faqs/Sanctions/Pages/answer.aspx#29 (Sept. 10, 2002) (“31. What are the features and benefits that banks should be looking for when selecting an OFAC compliance software package?” “There are a wide variety of software packages available to the financial community. The size and needs of each institutions help to determine what to look for in a package ….”).
35 See 31 C.F.R. Pt. 501, App. A—Economic Sanctions Enforcement Guidelines.
36 See id.
37 See, e.g., Settlement Agreement Between the U.S. Department of the Treasury’s Office of Foreign Assets Control and HSBC Holdings PLC, http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/121211_HSBC_Settlement.pdf (Dec. 11, 2012).
38 See Federal Reserve Bank of New York, CHIPS, http://www.newyorkfed.org/aboutthefed/fedpoint/fed36.html (last visited Feb. 13, 2013).
39 USA PATRIOT Act of 2001, supra note 2, at §311 (codified at 31 U.S.C. § 5318A).
40 See 31 U.S.C. § 5318A(a), (c).
41 See id. § 5318A(b).
42 U.S. Dep’t of the Treasury, Treasury Designates Banco Delta Asia as Primary Money Laundering Concern Under USA PATRIOT Act, http://www.treasury.gov/press-center/press-releases/Pages/js2720.aspx (Sept. 19, 2005); 31 C.F.R. § 1010.655 (Mar. 1, 2011).
43 Gaylord, Mark S., The Banco Delta Asia Affair: The USA PATRIOT Act and Allegations of Money Laundering in Macau, 50 Crime, L. & Soc. Change 293, 297–98 (2008)CrossRefGoogle Scholar.
44 Id. at 298.
45 Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, Pub. L. 111-195, 124 Stat. 1312(2010).
46 Press Release, U.S. Dep’t of the Treasury, Finding that the Islamic Republic of Iran is a Jurisdiction of Primary Money Laundering Concern (Nov. 21, 2011), http://www.treasury.gov/press-center/press-releases/Documents/Iran3-HFinding.pdf.
47 National Defense Authorization Act (NDAA) for Fiscal Year 2012, Pub. L. 112-81,125 Stat. 1298, § 1245 (2011).
48 Iran Threat Reduction and Syria Human Rights Act of 2012, Pub. L. 112-158, 126 Stat. 1214 (2012). ITRA included a provision that, while not usually considered a financial sanction, imposed an important and relevant new reporting requirement on U.S. domestic and foreign companies that are required to file reports with the Securities and Exchange Commission (SEC) under Section 13(a) of the Securities and Exchange Act of 1934, as amended. Specifically, ITRA’s Section 219 added a new Section 13(r) to the Exchange Act. It requires that Form 10-K and Form 20-FAnnual Reports, and Form 10-Q Quarterly Reports filed under Section 13(a) of the Exchange Act include the disclosure of contracts, transactions, and “dealings” with Iranian and certain other entities. This requirement became effective with respect to reports due after February 6, 2013.
49 National Defense Authorization Act (NDAA) for Fiscal Year 2013, Pub. L. 112-239, 126 Stat. 1632, §§ 1241–55 (2012).
50 Trade Sanctions Reform and Export Enhancement Act, Pub. L. 106-387, 114 Stat. 1549 (2000).
51 A “general license” authorizes the performance of certain categories of transactions that would otherwise be prohibited. It obviates the need to apply for and obtain a specific license. See U.S. Dep’t of the Treasury, Frequently Asked Questions and Answers, http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.as-px#top (Sept. 30, 2013). E.g., 31 C.F.R. Part 560 (May 20, 2013) (General License D regarding the exportation or re-exportation of certain services, software, and hardware related to personal communications); 31 C.F.R. 560(a)(3) (July 25, 2013) (General License updating the list of basic medical supplies authorized for exportation or re-exportation to Iran); 31 C.F.R. Part 560 (Sept. 10, 2013) (General License E regarding certain services supporting the activities of nongovernmental organizations in Iran and General License F regarding athletic exchanges with Iran).
52 See Burns, Clif, Bye Bye, TSRA?, Exportlawblog (Jan. 24, 2012, 6:34 PM)Google Scholar, http://www.exportlawblog.com/archives/3793.
53 See 31 C.F.R. § 560.215 (2013); 77 Fed. Reg. 75845 (Dec. 26, 2012). An in-depth discussion of the various U.S. sanctions laws and regulations against Iran is beyond the scope of this paper. For such a discussion, see, for example, Rathbone, Meredith, Jeydel, Peter & Lentz, Amy, Sanctions, Sanctions Everywhere: Forging a Path Through Complex Transnational Sanctions Laws, 44 Geo. J. Int’l L. 1055 (2013)Google Scholar.
54 See NDAA for Fiscal Year 2013, Pub. L. 112-239, §§ 1245–19.
55 Id. § 1244(d)(2)–(3).
56 See id. § 1245(c)–(d).
57 See id. § 1246(a).
58 See id. § 1247(a)–(b).
59 See Iran and Libya Sanctions Act of 1996, Pub. L. 104-172, § 6, 110 Stat. 1541 (codified at 50 U.S.C. 1701 note).
60 See id.; see also SNR Denton, Iran Freedom and Counter-Proliferation Act Signed into Law (Jan. 15, 2013).
61 Exec. Order No. 13, 645, 78 Fed. Reg. 108, § 1 (June 5, 2013).
62 Id. at §§ 3(b), 5, & 14(a).
