Office of Foreign Asset Control (OFAC) Definition
The Office of Foreign Asset Control (OFAC) is an agency within the United States Department of the Treasury. It is responsible for gathering Financial intelligence (FININT) about financial entities of interest and enforcing economic and trade sanctions against foreign countries, organizations and individuals or groups of individuals such as terrorists and narcotics traffickers, that are perceived as threats to U.S. national security.
A Little More on What is the Office of Foreign Asset Control (OFAC)
Although the U.S. Department of the Treasury was involved in economic sanctions against foreign nations as far back as the War of 1812, it was only in 1950 that the Division of Foreign Assets Control was formed as a precursor to OFAC. China’s entry into the Korean War led to an emergency situation back in the United States and fueled the formation of the agency as a countermeasure to block all Chinese and North Korean assets within it control. The Division of Foreign Assets Control finally evolved into the Office of Foreign Asset Control (OFAC) via an order of the Treasury Department in 1962.
Mode of operation of OFAC
U.S. foreign and national security policies are essentially the driving force behind OFAC. The agency is primarily concerned with the activities of foreign countries (especially those that proliferate weapons of mass destruction), organizations and individuals (or groups of individuals) such as terrorists, weapons dealers and narcotics traffickers. When such activities are perceived as being particularly detrimental to the national security or economy of the United States, OFAC either takes legally-authorized actions or other measures that are in keeping with the emergency powers granted to the President of the United States. Most of the agency’s actions involve freezing foreign assets that are under the jurisdiction of the United States.
United Nations directives also play a major role in governing OFAC sanctions. These sanctions are, basically, tools of persuasion that the U.S. employs to mount pressure on countries to conform to regulations. However, the agency is expected to cooperate with other allied nations of the UN when formulating and enforcing such sanctions.
Sanctions especially come in handy as tools to restrict sales of certain commodities in the international market, especially ones whose proceeds are known to finance terrorist activities. OFAC sanctions can go a long way in thwarting core activities of terrorist groups such as recruitment and weapon acquisition.
In the event of a hostile nation invading another country or aiding a violent revolution there, the usual OFAC response is to restrict trade activities of the aggressor and freeze its assets. Such sanctions often forces the hostile country to suspend its aggressive activities and agree to participate in a compromise.
The Office of Foreign Asset Control has in the past placed sanctions on belligerents like North Korea, Iran, Cuba and several other hostile nations. It has also penalized individuals or group of individuals such as narcotics traffickers by confiscating their properties within U.S. jurisdiction.
References for Office of Foreign Asset Control
Academic Research for Office of Foreign Assets Control (OFAC)
- • Office of Foreign Assets Control Regulations: Making attorneys choose between compliance and the attorney-client relationship, Troxel, J. M. (2005). Rev. Litig., 24, 637. Troxel’s paper assesses the influence that OFAC had over attorney-client relationships in the period preceding the attacks of September 11, 2001. She concludes that there is perceptible discrepancy between OFAC’s claimed control over attorney-client relationships and the actual authority it was permitted to exert over such relationships by the judiciary.
- • How to Approach a New Office of Foreign Assets Control Sanctions Program, Hoffman, W. B. (1997). Stetson L. Rev., 27, 1413. The author explains the procedure to approach a new Office of Foreign Assets Control to discuss the scope of a sanctions program, and the legal and practical mechanisms involved in such an approach. A sanctions program can pose a serious threat to the wellbeing of a business by affecting existing trade contracts, financial transactions, intellectual property and insurance undertakings.
- • Office of Foreign Assets Control Compliance: Recent Developments, Lee, J. A., & Doody, J. (2011). Banking LJ, 128, 954. This paper scrutinizes two major economic events of the 21st century, along with their repercussions – The economic sanctions imposed on Syria greatly affected its foreign trade relations and rendered the country ineligible to receive U.S. military aid or procure weapons from the U.S. These sanctions highlighted the predictive risk analysis capability of OFAC. The JPMorgan Chase bank settlement resulting from violations of numerous OFAC regulations. This brings to the fore the crisis management capabilities of OFAC.
- • Freezing Terrorist Finance in Its Tracks: The Fourth Amendment, Due Process, and the Office of Foreign Assets Control after Kindhearts v. Geithner, Davenport, J. N. (2010). Syracuse L. Rev., 61, 173. This study scrutinizes OFAC’s authority to freeze terrorist assets, and provides a detailed analysis of constitutional challenges that have crept up both before and under the Patriot Act. The author contends that there exists a perpetual struggle between assuring security on one side and protecting liberty on the other.
- • Combating the financing of terrorism: A history and assessment of the control of ‘threat finance’, Levi, M. (2010). The British Journal of Criminology, 50(4), 650-669. This paper analyzes international efforts to curb the flow of capital to terrorist organizations. It asserts that despite enthusiastic endeavors of several governments and financial institutions to thwart terrorist activities, including enlisting the assistance of financial intelligence agencies, terror financing mostly continues unabated. The paper concludes that there are three possible causes for agency failure to contain riky capital: Failure in measurement, Failure in speculation, and Failure in implementation.
- • Of Course This Will Hurt Business: Foreign Standing under the Foreign Narcotics Kingpin Designation Act of 1999 and America’s War on Drugs, Duncan, D. T. (2005). Geo. Wash. Int’L L. Rev., 37, 969. This paper scrutinizes America’s war on narcotics and its impact on its international reputation. The author discusses in detail individual incidents of legal action being initiated by the U.S.government against its own citizens for patronizing foreign establishments that it has blacklisted for drug trafficking. Such punitive action has immobilized blacklisted businesses.
- • The executive protection: Freezing the financial assets of alleged terrorists, the constitution, and foreign participation in US financial markets, Selden, R. C. (2003). Fordham J. Corp. & Fin. L., 8, 491. The United States has formulated several laws and signed numerous international treaties so as to try and freeze assets of foreign individuals and groups that it deems a threat to national security. The Executive Branch headed by the U.S. President has been confiscating properties of U.S. citizens that have patronized blacklisted establishments. The author deems such an act “not constitutionally pure”.
- • Foreign Affairs and First Amendment Rights: Office of Foreign Assets Control Prohibits ABC’s Pan American Games Broadcast, Sanford, A. (1991). Ga. J. Int’l & Comp. L., 21, 177. This paper studies in detail the events that led to the prohibition of ABC’s Pan American Games broadcast in the United States by the Office of Foreign Asset Control (OFAC). OFAC had promulgated the Cuban Assets Control Regulations as a countermeasure against Cuban efforts to destabilize Latin American governments. The Regulations explicitly prohibited any undertakings with the Cuban government or Cuban nationals. This prohibition directly affected ABC’s broadcast of the Pan American Games in 1991.
- • Criminal prosecution in sheep’s clothing: The punitive effects of OFAC freezing sanctions, Ortblad, V. (2008). The Journal of Criminal Law and Criminology, 1439-1466. Following the attacks of September 11, 2001, OFAC, was subjected to increasing pressure and bestowed upon with unprecedented jurisdiction to perform as an asset-freezing authority. This, naturally, led the agency to freeze assets of U.S. individuals and organizations even without substantial evidence. It’s actions were decried as acts of utter impunity. Court appeals against OFAC’s high-handedness were deferred, leading the author to prescribe strengthened congressional oversight of the agency as a means to protect the civil liberties of individual and organizations.
- • The Impact of US Control of Foreign Assets on Refugees and Expatriates, Malloy, M. P. (1982). Mich. YBI Legal Stud., 3, 399. Malloy’s paper assesses the effect of the U.S. Treasury Department’s embargo controls on foreign nations and nationals. Embargo controls are emergency measures such as trade sanctions that the U.S. imposes for the purpose of blocking of assets. There are several ways in which an embargo imposed on nations can affects refugees or expatriates: Blocking U.S. assets of foreign nationals until they relocate residence from the blocked country. Indeterminate blocking of U.S. assets of organizations. Selective blocking of U.S. assets to which heirs or legatees can stake claim. Restricting usage of blocked assets of the country of origin (of refugees and expatriates) to settle claims against that country.