By Timothy S. Burgett

Since the terrorism attacks of September 11, 2001, grantmakers and other charitable organizations have become quite familiar with the work of the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) in the area of anti-terrorism concerns. OFAC has been one of the key U.S. government agencies seeking to shut down terrorism funding around the world and, in conducting that activity, has focused considerable attention on charities. Such attention has been controversial and criticized, but undoubtedly has resulted in international charities devoting more efforts to OFAC compliance.

The international sanctions regulations administered by OFAC go far beyond anti-terrorism. Grantmakers involved in international work, as well as U.S.-based charities that operate overseas, must therefore be familiar with the entire range of OFAC programs. The bad news in this area is that even unintentional violations can lead to civil fines (and of course intentional or knowing violations are punishable by criminal penalties).  The good news is that legitimate humanitarian activity almost always will be authorized by exceptions in the regulations or specific licenses issued by OFAC.

The law in this area changes frequently, so the specifics described in this article may change at any time. But, in general, OFAC's sanctions programs can be conveniently divided into two major types: (1) country-based programs, which restrict a broad range of activities in or with a specific country and its government, and (2) list-based programs, which forbid any transactions with specific, named entities and individuals (collectively referred to as "persons").

Looking first at the list-based programs, note that several sanctions programs that are described as targeting certain countries in fact are list-based, as the only prohibitions specified in the regulations are against transactions with designated persons. Examples of these include the sanctions against Belarus, Cote d'Ivoire, Democratic Republic of the Congo, and Zimbabwe. There are therefore no general prohibitions against engaging in transactions in or with such countries, so long as the designated persons are avoided. The list-based programs also include several that do not target any specific country, but rather are directed at persons connected with various types of proscribed activities, including terrorism, narcotics trafficking, illicit diamonds trade, and weapons proliferation.

For all of the list-based programs, compliance consists of ensuring that there are no transactions with the designated persons. Fortunately, the designated persons for all of OFAC's list-based programs are consolidated into a single list of Specially Designated Nationals (SDNs). The SDN list is easily downloaded from OFAC's website (www.treas.gov/ofac), and there are commercial software products that package the list for ease of searching and integration with common business processes, such as accounts payable. Unfortunately, however, the SDN list is huge, names are frequently added or deleted from it, and many of the individuals' names are common and contain little, if any, additional identifying information. Given that use of the SDN list for thorough screening of every transaction is likely to be impractical for most organizations, a common approach is to use a risk-based analysis to assess what are the most likely types of transactions and/or the most likely countries where interaction with an SDN could occur, and focus screening efforts accordingly. For example, a grantmaker desiring to fund a local charity in Belarus or Zimbabwe could search the SDN list just for persons who are located in those countries, and a U.S.-based charity operating in those countries can do the same and institute appropriate safeguards to ensure that their programs in such countries are not engaging in any way with the designated persons.

The other major type of OFAC sanctions program is country-based programs. At the time of this writing, such programs consist of the sanctions against Burma (Myanmar), Cuba, Iran, North Korea, Sudan, and Syria. Any charities or grantmakers desiring to operate or fund operations in such countries will need to review the specific sanctions carefully to determine if the desired activity is prohibited and, if it is, consider applying for a license. The specific prohibitions vary considerably from country to country, with the most extensive prohibitions applying to Cuba, the least extensive applying to North Korea (especially after recent further easing of the sanctions previously in place), and the other countries falling somewhere in between.

Note that exports and re-exports of U.S.-origin equipment or technology to such countries are restricted under separate sanctions administered by a different U.S. government agency, the Commerce Department's Bureau of Industry and Security (BIS). These restrictions apply even to items being "exported" for use by a charity's own employees, such as laptop computers carried into the country. The degree of cooperation between OFAC and BIS has varied from country to country over the years, but with most of the current sanctioned countries, even if an activity is not prohibited under the OFAC regulations or is licensed by OFAC, a separate license from BIS to export specific items of controlled equipment still will be needed. North Korea currently is the most glaring example of an OFAC/BIS dichotomy, as the OFAC restrictions are minimal but the BIS export controls are the strictest of any country. Further details on the export restrictions can be found at the BIS website, www.bis.doc.gov. Note that the export control regulations are highly detailed and extremely complicated and expert advice in this area is recommended.

Again, any grantmaker or U.S.-based operational charity interested in activity in one of the sanctioned countries should carefully review the current state of the law with OFAC or with knowledgeable legal counsel, and also review BIS issues regarding any exports of equipment or technology. With that caveat, in general, normal humanitarian operations are not currently restricted by OFAC in North Korea or Syria (be cautious, however, about extensive BIS controls on taking equipment into Syria). In Burma, Iran, and Sudan, simple shipments of donated humanitarian goods generally can be made without a license. However, other types of humanitarian activity, such as an on-the-ground presence, which would require payments for building leases, paying local staff, opening local bank accounts, etc., would require an OFAC license. The exception is certain defined areas of southern Sudan and Darfur, although even in such areas transactions with the Sudanese government are prohibited. For Cuba, except for limited authorizations for simple shipments of certain types of donated goods, any type of humanitarian activity will require an OFAC license.

There is no standard license application format used by OFAC. Generally, application consists of writing a letter explaining what the grantmaker or charity would like to do. Some very general guidance on what type of information is needed is provided in the OFAC regulations at 31 CFR Section 501.801. But, in another example of inconsistency across the various sanctions programs, a few programs or types of licenses have very specific detailed application requirements. These include applying for an "NGO registration" to operate in Sudan (the term "registration" is used instead of "license" only for the Sudan program). See 31 CFR Section 538.521, which points to the list of information specified in Section 501.801(c), and note that the list in 501.801(c) is relevant only for Sudan. Similar details are required to apply for a "license" to engage in humanitarian activity, to the extent that it is otherwise prohibited, in Burma (31 CFR Section 537.523). OFAC also has specific forms for use in certain types of specialized license applications, such as for financial institutions to release a blocked payment and for travel to Cuba to visit a family member. OFAC has an internet portal that allows one to fill out forms for the latter online.

Licenses for engaging in humanitarian activity sometimes will include authorization to engage in transactions with blocked parties. The "NGO registrations" that OFAC issues for Sudan, for example, typically will authorize the use of blocked Sudanese banks for in-country transfers. Likewise, licenses have been issued authorizing NGOs operating in Zimbabwe to deal with blocked parties there.

When making a grant to an NGO operating in a sanctioned country, a U.S. grantmaker should not need its own license if the recipient NGO has its own OFAC license for that country, which any U.S.-based NGO likely would. If the operational NGO does not have its own OFAC license, which would normally be the case for non-U.S. NGOs, then the grantmaker generally will need to apply for its own OFAC license to authorize the grant.

OFAC's website does provide a great deal of information on its various sanctions programs, but, unfortunately the usefulness of the information varies considerably across the programs. Some of the "program summaries" merely contain a copy of the dense legalese-filled executive order that imposed the sanctions, with no easy-to-read summary for a layperson. The OFAC website also includes contact information for various OFAC functions, including the Licensing Division (202-622-2480), but it can be quite difficult to get through the automated menus and speak with a real person.

This article is intended to provide a general overview of how OFAC sanctions programs affect international humanitarian activity. The good news for humanitarian organizations and grantmakers is that humanitarian activity usually will be licensed. But the sanctions programs can be quite complex and inconsistent in their prohibitions and authorizations, so any charitable organization that desires to operate in sanctioned countries should consult legal counsel and/or OFAC to review the specifics of the desired operations.

Timothy S. Burgett is a Legal Counsel for World Vision International. Embargo-related legal issues arise frequently in connection with the humanitarian work carried out by World Vision in approximately 90 countries around the world.