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Published on September 11th, 2013 | by Guest1
OFAC’s Summer of Surprises
by Samuel Cutler
The Treasury Department’s Office of Foreign Assets Control (OFAC) is primarily known for its role as the agency charged with enforcing Iran sanctions. This summer, however, the agency came out with a series of actions aimed at mitigating the effect of sanctions on the Iranian people. Most recently, OFAC has issued two new general licenses authorizing certain humanitarian related activities by nongovernmental organizations with Iran, as well athletic exchanges between Iran and the United States. According to the Treasury Department’s press release, the new general licenses, which provide a standing authorization to conduct the activities described therein, are “designed to support longstanding U.S. Government efforts to encourage humanitarian and goodwill activities between the Iranian and American people.”
General License F authorizes “the importation of Iranian origin services into the United States or other dealings in such services, and the exportation or reexportation of services, directly or indirectly, from the United States or by a United States person related to professional and amateur sporting activities and exchanges involving the United States and Iran.” It covers activities such as the sponsorship of players, coaching, refereeing, and training. One caveat is that any payments related to these activities must comply with 31 CFR § 560.516 of the Iranian Transactions and Sanctions Regulations (ITSR), meaning that payments must either be deposited into a third-country bank account or passed through a third-country financial institution before being deposited in an account at certain authorized Iranian financial institutions.
This authorization also reflects the sensitivity of OFAC to allegations that its action have had an adverse effect on matters unrelated to the Iranian government’s illicit activities. Those pushing for the new general license likely received a boost following the recent case where an Iranian tennis referee was initially prevented from participating in the U.S. Open. While some were quick to blame sanctions, the larger problem was that the referee received a visa not covered by § 560.505, which authorizes activities related to certain visa categories. The fact that OFAC felt compelled to respond to an issue that was somewhat inaccurately blamed on U.S. sanctions policies is indicative of the role the agency plays in the public relations war between Iran and the United States.
While General License F is fairly limited in scope, General License E could have a far broader impact. Contained within the license are standing authorizations for a range of humanitarian and human rights-related activities designed to help the Iranian people. These include activities related to humanitarian projects in Iran such as the operation of orphanages, the provision of relief services and non-commercial reconstruction projects related to natural disasters, donations of items intended to relieve human suffering, and activities related to environmental and wildlife conservation projects. Prior to General License E, U.S. persons were required to seek specific licenses on a case-by-case basis from OFAC to conduct the above activities, or in the case of natural disasters such as the August 2012 earthquake in northwest Iran, wait until the release of a time-limited general license.
Most important, however, are the provisions in § (a)(4) of General License E that focus on the activities of NGOs in Iran. These include authorization for activities related to human rights and democracy building projects in Iran such as the sponsorship of and attendance and training at conferences in Iran related to human rights projects, democracy building, efforts to increase access to information and freedom of expression, and public advocacy, public policy advice, polling, or surveys relating to human rights and democracy building. U.S. NGOs that wish to take advantage of this general license are required to file quarterly reports with OFAC, and the transfers of funds by a single U.S. NGO may not exceed $500,000 in aggregate over a 12-month period.
The new license could make it far easier for U.S. NGOs to conduct activities directly benefiting the Iranian people. In particular, the inclusion of “efforts to increase access to information and freedom of expression” builds upon General License D, which authorized the sale of certain goods and services related to personal communications. By opening the doors for NGOs working in Iran to expand awareness of and access to software designed to defeat restrictions on internet access, the new general license has the potential to be a boon to those seeking to defeat government filters and internet censorship. Realizing the full impact of these provisions, however, depends upon U.S. NGOs actively taking advantage of the general license, as well as on Iranian NGOs’ ability to operate without provoking a crackdown by the government.
As noted by Collin Anderson, an independent researcher who works on Iran’s internet censorship, the Treasury’s recent action caps a summer in which OFAC has made a conspicuous effort to dispel perceptions that its coercive actions are targeted at the Iranian people, as well as to lower tensions with Iran. On May 30, OFAC released the above mentioned General License D, while July 25 saw the release of guidance designed to clarify OFAC’s policy regarding payments for humanitarian goods, amid allegations that sanctions have resulted in shortages of these goods, particularly medicine. Furthermore, OFAC has considerably slowed the pace of its Iran-related designations following the June 14 election of Iranian president Hassan Rouhani. A full 94 days have passed between the designations of June 4 and the recent action targeting oil sanctions evaders, making this one of, if not the longest quiet periods in the last 5 years.
Taken together, these actions may signal a change both in how OFAC views its role in administering Iran sanctions and how the U.S. government addresses the tension between preventing certain economic activities while promoting others. During a February symposium at the Georgetown University Law Center, an OFAC attorney-adviser stated that “Generally OFAC’s job is preventing economic activity and even when there is a strong policy favoring certain types of activity, it’s not part of their nature to go out and sort of drum up business for pharmaceutical companies to send medicine to Iran. Maybe it should be.” Setting aside the highly contested issue of pharmaceutical exports, the point holds that OFAC has traditionally viewed enforcement as a far more important priority than promoting activities that support U.S. policy goals. While OFAC is not the only, or even the primary driver of Iran sanctions policy within the U.S. government, these actions are a positive indication that the United States is doing a better job of recognizing the importance of balancing pressure with outreach to the Iranian people.
— Samuel Cutler is a policy adviser at Ferrari & Associates, a Washington, DC boutique law firm specializing in US economic sanctions matters.