The United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) has issued general licenses which have expanded the scope of authorized legal services under the Global Terrorism Sanctions Regulations (“GTSR”), the Foreign Terrorist Organizations Sanctions Regulations (“FTOSR”) and the Terrorism Sanctions Regulations (“TSR”). These new general licenses authorize payments from funds originating outside the United States for certain legal services to or on behalf of blocked persons, as well as the formation of legal defense funds to gather donations and dispense funds in connection with payments for such legal services.

The three sanctions programs amended as a result of these general licenses all relate to terrorists and terrorist organizations. Through the general licenses OFAC is revising sections within these programs that authorize the provision of certain legal services. As part of this effort OFAC is adding new sections to the GTSR, TSR, and FTOSR authorizing U.S. persons to receive specified types of payment for certain authorized legal services. OFAC is also expanding the scope of these general licenses by adding to the authorized legal services the initiation and conduct of legal, arbitration, or administrative proceedings before any U.S. federal, state, or local court or agency for or on behalf of persons whose property and interests in property are blocked under the GTSR or TSR.

The FTOSR traditionally prohibits financial transactions involving assets, within the possession or control of U.S. financial
institutions, in which a designated foreign terrorist organization or its agent has an interest. Although the FTOSR, therefore, do not prohibit U.S. persons from providing legal services to designated foreign terrorist organizations or agents thereof, traditionally any payment for such services through a U.S. financial institution is prohibited. However, the FTOSR did provide that OFAC may issue specific licenses, on a case-by-case basis, authorizing the receipt of payment of professional fees and reimbursement of incurred expenses through a U.S. financial institution for certain legal services provided by U.S. persons to designated foreign terrorist organizations or agents thereof.

Traditionally there have been two methods through which OFAC has issued specific licenses for payment to U.S. persons for authorized legal services provided on behalf of blocked persons. First, OFAC has issued specific licenses authorizing payment when such funds originated outside the United States and do not come from a U.S. person or any person, other than the person on whose behalf the authorized legal services are provided, whose property and interests in property are blocked. Second, OFAC has issued specific licenses authorizing the establishment of legal defense funds that collect donations from persons who are neither designated nor blocked to pay legal fees and reimburse expenses incurred in connection with authorized legal services rendered on behalf of blocked persons. As a result of the new licenses OFAC now generally authorizes these forms of payment. As such, specific licenses to obtain payment for authorized legal services under the GTSR, the FTOSR, or the TSR are no longer required.

This is a huge development for lawyers handling SDN cases. Often times it takes months for a specific license to be issued. During this time the designated parties seeking the assistance of counsel has to wait for the specific license to be issued before counsel can be paid and commence work. During that time, the designated party continues to feel the weight and severe consequences of the designation. In some cases, I have seen clients lose access to funds they would have otherwise used for representation because those funds were blocked in accounts that they had access to immediately following their designation but not months after when the specific license was issued.

It remains to be seen if this type of general license will be added to the Foreign Narcotics Kingpin Sanctions Regulations (“Kingpin Sanctions”). This type of general license would be most useful under the Kingpin sanctions program, as it it is the one most frequently utilized to designate parties. Moreover, there is a trend of foreign banks blocking the assets of those parties designated pursuant to the Kingpin Sanctions. The issuance of a general license under the Kingpin Sanctions similar to the one issued for the terrorism sanctions programs would permit those parties blocked pursuant to it to immediately retain counsel to assist in the removal of the designation. At a minimum, this would greatly expedite the process for such parties and mitigate the consequences suffered as a result of erroneous or mistaken designation.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.