Wednesday, December 26, 2012
Enrique Zamora (Attorney at Zamora & Hillman, Adjunct Professor at St. Thomas University School of Law) recently published his article entitled Impact of The Cuban Embargo on Inheritances by Cuban Nationals, 24 St. Thomas L. Rev. 525 (2012). A portion of the article is available below:
Background of OFAC and its Purpose
“The Office of Foreign Assets Control (“OFAC”) administers and enforces economic sanctions, primarily against countries and groups of individuals, such as terrorists and narcotics traffickers.” The sanctions block assets and restrict trade to accomplish foreign policy and national security goals.
The Treasury Department has a long history of dealing with sanctions. For example, prior to the War of 1812, Secretary of the Treasury, Albert Gallatin, imposed sanctions against Great Britain for harassing American sailors. During the Civil War, the Union Congress enacted a law prohibiting transactions titled the Morrill Tariff of 1861 which provided a licensing regime under rules and regulations administered by the Treasury Department and called for the forfeiture of goods involved in transactions with the Confederacy.
OFAC is the successor to the Office of Foreign Funds Control (“FFC” ‘). The FFC was established during World War II following the German invasion of Norway in 1940. The Secretary of the Treasury administered the FFC program throughout World War II. The initial purpose of the FFC was to prevent the Nazi use of the occupied countries' holdings of foreign exchange and securities. It also attempted to prevent the forced return of funds belonging to nationals of those countries. Such controls were further extended to protect the assets of other invaded countries. After the United States formally entered World War II, the FFC played a leading role in economic warfare against the Axis powers by prohibiting foreign trade and financial transactions, and also by blocking enemy assets.
OFAC itself was formally established in December of 1950. It was created after China entered into the Korean War, when President Harry Truman declared a national emergency under the Trading with the Enemy Act of 1917 (“TWEA”). The President had then effectively blocked all Chinese and North Korean assets that were subject to the jurisdiction of the United States.
In 1963, pursuant to TWEA, President John F. Kennedy wrote a memorandum to the Secretary of State. Ultimately, a trade embargo was imposed which ordered the blocking of Cuba's assets and of assets belonging to Cuban nationals. The relevant regulations that implemented these sanctions are found in 31 CFR part 515 [et seq.].
Section 16 of the TWEA provided for corporate criminal penalties of up to $1,000,000 and individual criminal penalties up to $100,000 or ten years in prison, or both, per count. Fines for criminal violations could be increased pursuant to 18 U.S.C. § 3571
. TWEA also provided for the forfeiture of property that is the subject of a violation. TWEA authorized civil penalties up to $50,000 per violation. It also allowed the respondent to request an agency hearing. The respondent also had the right to prehearing discovery, and if the respondent elected this option, the civil penalty could be imposed only after such a hearing.
In 1977, Congress passed the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. §§ 1701
-06. IEEPA replaced TWEA as the statutory authority for a Presidential declaration of a national emergency in peacetime for the purpose of imposing economic sanctions.
Other pre-existing programs continue to be administered under TWEA, but new programs under TWEA may be established only during wartime.
Most recently, sanctions remained in place under TWEA only with respect to (1) comprehensive sanctions against Cuba, (2) a residual blocking of North Korean assets previously blocked, and an ongoing prohibition against the importation of certain goods from North Korea without an OFAC license, and (3) certain offshore trade in strategic goods with the former Soviet Bloc.