After the events of Sept. 11, 2001, the U.S. government quickly imposed economic sanctions against its "enemies" throughout the world.
The most important law it used for this purpose is a little-known statute called the International Emergency Economic Powers Act (IEEPA). President Bush has used it on numerous occasions; in particular, to add names to a "terrorist watchlist" maintained by an obscure Treasury Department bureaucracy called the Office of Foreign Assets Control (OFAC). The watchlist is over 250 pages long and includes more than 6,000 names.
If you live or do business in the United States, you're supposed to check this watchlist before you conduct any type of business with anyone. If you fail to do so, you become subject to the civil and criminal provisions of the IEEPA. There is no minimum threshold. If you sell a glass of lemonade to someone on this watchlist, you've violated the law.
And the penalties for such violations just increased—substantially. On October 16, 2007, President Bush signed into law the International Emergency Economic Powers Enhancement Act. This law increases civil penalties for IEEPA violations from US$50,000 to US$250,000 per violation, or up to twice the amount of the violating transaction. It also increases criminal penalties to US$1 million per violation. The maximum prison term of 20 years per IEEPA violation remains unchanged.
The law applies retroactively, which means that alleged violations that occurred prior to Oct. 16, 2007 are subject to the higher penalties.
IEEPA also contains draconian civil forfeiture provisions.
"Ordinary" civil forfeiture is bad enough. Based on the flimsiest imaginable evidence (perhaps provided by a "confidential informant"), police can seize your bank accounts, security accounts, your vehicle—even your home—if your property is allegedly purchased with, connected to, or "facilitates" any one of more than 300 crimes.
In an ordinary civil forfeiture, the government—eventually—is supposed to prove its case before a judge. But in an IEEPA civil forfeiture, the government seizes your assets administratively, without a court hearing. If you want it back, you must prove that your property isn't subject to confiscation. And you don't make your case before a court, but an OFAC tribunal.
OFAC's decision is final. You have no right to appeal its decision in court. After all, it's a "national emergency," so the government's determination must be correct…right?
Well, it may be right…or not. Numerous examples exist of the United States accusing someone of being a terrorist or terrorist sympathizer, and then changing its mind. And don't forget that the definition of an "enemy" can change at the drop of a hat. Saddam Hussein was an important American ally until 1991, when he instantly became an "enemy of the state."
IEEPA's provisions cut through any asset protection device in existence, whether it's an offshore trust, offshore LLC, etc. However, numerous countries have been reluctant to enforce IEEPA forders due to the perceived lack of due process.
I hope that no one reading this blog ever come face-to-face with an IEEPA prosecution or forfeiture. But if you do, any assets you have in the United States will be subject to the unreviewable discretion of unaccountable bureaucrats at the U.S. Treasury Department.
I can't think of a better argument to relocate whatever assets you can offshore—the sooner, the better.
Copyright © 2007 by Mark Nestmann
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