Effective today, April 13, 2010, the United States Government is in the business of maintaining and administering economic sanctions against certainin individuals and persons related to their activities in Somalia. The sanctions are a subject based sanctions program which means that they target specific individuals and entities placed in the Annex to the Executive Order. In other words, individuals and entities designated under the Somalia program will be placed on the Specially Designated Nationals (“SDN”) list administered by the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”).

The purpose behind the President’s issuance of these sanctions is to address the deterioration of the security situation and the persistence of violence in Somalia. The President also indicated concerns regarding the rise of piracy along the Somali coast, as well as violations of the arms embargo imposed by United Nations Security Council Resolution 733.

The effect of this new sanction program is to block the assets of any person, be it an individual or entity, that are subject to U.S. jurisdiction. In addition, U.S. persons are prohibited from donating articles which are generally allowed pursuant to the 50 U.S.C. 1702 (The International Emergency Economic Powers Act or “IEEPA”). Also the sanctions program prohibits transactions relating to funds, goods, or services between U.S. persons and those designated pursuant to this program.

What is striking about this Executive Order is the language used. First, it does not necessarily use the words transaction, export, or import. Those are three words commonly found in the executive orders and regulations governing U.S. economic sanctions programs. Rather, this executive order prohibits, “the making of any contribution or provision of funds, goods, or services” to those designated under this program, as well as prohibiting, “the receipt of any contribution or provision of any goods, funds, or services” to those designated under the program. This is a departure from the language used by other U.S. sanctions programs which generally prohibit the “exportation”, “reexportation”, and/or “importation” of any “goods, services, or technology.” As one can see the issue of funds is one not normally explicitly set out in the regulations, leaving the onus on the banking community to not provide services which allow for the transfers of funds. However, in this program transfer of funds is explicitly prohibited.

Why this change? One school of thought is that the President is trying to take the pressure off the banking industry to a degree by explicity stating that transfers of funds are not allowed. This may facilitate going after the parties transaction more readily then having to wait rely on a bank to block the transaction and report it to OFAC. This is purely speculation, but it may just lead to quicker investigations of such transactions with less paperwork.

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 at 202-351-6161 or ferrari@ferrari-legal.com.