In late September, Senator Ted Cruz (R-TX) introduced the IRGC Terrorist Designation Act, S.2094, which would express the sense of Congress that the Iranian Revolutionary Guards Corps (“IRGC”) should be designated by the Secretary of State as a Foreign Terrorist Organization (“FTO”) under U.S. law.  To give added significance to a mere Sense of Congress, the bill requires the Secretary of State to report his findings as to whether the IRGC meets the designation criteria for a U.S.-designated FTO, thereby exerting pressure on the State Department to make such finding or justify its basis for refusing to do so.  Rep. Michael T. McCaul (R-TX) introduced a companion bill (H.R. 3646) in the House of Representatives on the same day as the Senate measure.

Outside of the U.S. government, there have likewise been numerous advocates for the Obama administration to designate the IRGC as an FTO in the post-nuclear agreement period.  The reasons have long been unclear to me, in consideration of the fact that the IRGC will remain subject to five separate U.S. sanctions programs even after Implementation Day (i.e., when the U.S. lifts its nuclear-related secondary sanctions) – some of which have secondary effect and are much more extensive and punitive than the sanctions implications of a simple FTO designation. Simply put,  an FTO designation of the IRGC will not do much of what its advocates think it will do, while much of what its advocates think it will do is already being done under existing sanctions authorities.

Nonetheless, I think there is an answer as to why an FTO designation of IRGC is being pushed so aggressively.  That answer is not just that an FTO designation will add one further layer to the reputational risk that will already be present in any trade-related dealings with Iranian entities that the IRGC owns or controls.  Instead, the answer is that there is a federal criminal statute that has extraterritorial effect and could theoretically be applied to foreign persons dealing with entities owned or controlled by the IRGC — if and only if the IRGC is designated a Foreign Terrorist Organization.

To see how an FTO designation could play out, one needs to look at the underlying authorities.  Pursuant to 8 U.S.C. § 1189, the Secretary of State is authorized to designate a foreign organization an FTO if he finds that:

• The organization is a foreign organization;
• The organization engages in terrorist activity or terrorism, or retains the capability and intent to engage in terrorist activity or terrorism; and
• The terrorist activity or terrorism of the organization threatens the security of U.S. nationals or the national security of the United States.

The push to designate the IRGC an FTO for purposes of U.S. law seems due, at least in part, to the fact that U.S. law subjects all persons – even non-U.S. persons who engage in activities outside the United States – to a federal criminal statute prohibiting material support to a designated FTO.  In other words, the federal criminal statute – located at 18 U.S.C. § 2339B – is extraterritorial in application and, as such, threatens criminal punishment for U.S. and foreign parties engaged in trade-related activities with the IRGC or any of its agents or affiliates.

Under 18 U.S.C. § 2339B, the knowing provision of material support or resources to an FTO (as well as any attempt or conspiracy to provide such support or resources) is subject to criminal punishment – either via a fine, a term of imprisonment not to surpass 20 years, or both.  For purposes of 18 U.S.C. § 2339B, “material support or resources” is defined broadly to include:

[A]ny property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials…

Moreover, the criminal prohibition is extra-territorial in application.  As 18 U.S.C. § 2339B states, there is jurisdiction over an offense if, after the conduct required for the offense occurs, an offender is brought into or found in the United States, even if the conduct required for the offense occurs outside the United States itself.

Not that this extraterritorial application of 18 U.S.C. § 2339B has gone unchallenged.  In U.S. v. Ahmed, the defendants argued that the extraterritorial application of the statute violated the Due Process Clause of the Fifth Amendment, insofar as the defendants were given no notice and lacked any reason to believe that their conduct would subject them to U.S. law.  In this case, the defendants were non-U.S. persons, Somalis by birth, who engaged in conduct outside the U.S., in support of the activities of al-Shabaab – a U.S.-designated FTO.  The court rejected their claim, stating that the U.S. had alleged that the defendants were engaged in clearly unlawful conduct that was intended to “cause harm inside the United States or to U.S. citizens or interests.” Such allegation sufficed for the ‘fair warning’ standard that some courts have adopted in determining whether a Due Process Clause claim could stand.

As such, non-U.S. persons engaged in otherwise permissible dealings outside the United States with the IRGC or any of its agents or affiliates could be subject to criminal punishment under current U.S. law – should the IRGC be identified as a Foreign Terrorist Organization under 8 U.S.C. § 1189.  Presumably, the idea is that this threat of criminal prosecution will be strong enough to ward off foreign trade with Iran in the wake of the nuclear agreement, as the risks would not merely be reputational but would instead also involve potential criminal liabilities.  Certainly, this is a stretch of traditional theories of liability, but nonetheless one that 18 U.S.C. § 2339B explicitly permits.

Under current authorities, foreign persons “causing” a violation of U.S. sanctions regulations are likewise subject to civil and criminal penalties. But the extraterritorial application of U.S. criminal law is far more extensive under 18 U.S.C. § 2339B and could subject to criminal punishment a far greater range of activities.

The likelihood of an FTO designation, however, is small.  Pursuant to 18 U.S.C. § 2339B, the FTO designation authority resides with the Secretary of State, and it is hard to believe that the U.S. State Department, which has taken the lead in negotiating the nuclear agreement with Iran, would take any steps to compromise Iran’s implementation of the nuclear deal by undertaking such a high-profile designation.  Especially in a case where the designation would largely be gratuitous, in consideration of the fact that the IRGC remains subject to five separate U.S. sanctions programs (program tags: HRIT-IR, IFSR, IRAN-HR, IRGC, and NPWMD).