The importance of funding sanctions enforcement

Samuel Cutler

Samuel Cutler, policy adviser at Ferrari & Associates, P.C., highlights budgetary struggles of the offices of the Treasury Department responsible for administering sanctions against Iran. These offices, he argues, should receive attention from policymakers to ensure the continued strength of the American sanctions regime.

By Samuel Cutler

Since the signing of the Joint Plan of Action (JPA) on November 24, 2013, a rare outbreak of bipartisan agreement has occurred regarding the need to maintain the leverage provided by economic sanctions against Iran during the interim agreement’s 6-month implementation period. Little attention, however, has been paid to the budgetary needs of the governmental bodies charged with administering the sanctions regime. This inattention masks a critical failure of the current enforcement posture: the agencies responsible for implementing U.S. sanctions are significantly underfunded.

While a variety of federal agencies are involved in the administration of U.S. sanctions programs, the Treasury Department’s Office of Terrorism and Financial Intelligence (TFI) is primarily responsible for what is essentially the regulation of the global economy with regards to sanctioned countries and entities, as well as anti-money laundering and counter-terrorism financing. Within TFI, the Office of Foreign Assets Control (OFAC) is tasked with adding sanctions violators to the list of Specially Designated Nationals and Blocked Persons as well as crafting and providing guidance on the regulations that result from sanctions legislation and executive orders. OFAC is also responsible for issuing licenses authorizing conduct such as the export of humanitarian assistance that, while normally prohibited by sanctions, is critical to differentiating the policy enforcement mechanisms of sanctions against the regime from harm to the public.

Treasury Undersecretary David Cohen testifies on Capitol Hill
October 13, 2011 - Treasury Undersecretary David Cohen testifies before the Senate Banking Committee hearing on Iran sanctions. (AP Photo/Harry Hamburg)

Despite the importance of TFI’s efforts and its exponentially increasing workload due to new sanctions mandates, including managing the implementation of the JPA, funding for TFI has remained virtually unchanged over the last several years. Since FY 2011, TFI’s budget has hovered at approximately $100 million, while the most recent appropriations bill increases this level by only $2 million. This despite the fact that TFI is also a net revenue generator – in 2013, sanctions enforcement actions brought in over $137 million, while in 2012 the total was over $1.1 billion. However proceeds from these settlements are not necessarily reinvested into TFI priorities. This is in contrast to the Manhattan District Attorney’s Office, which was free to create a new cybercrime unit funded with its portion of the multi-million dollar sanctions-related settlements reached with banks, including HSBC and Standard Chartered.

OFAC’s budget meanwhile has gone from $29.2 million in FY2009 to $30.9 million in FY2013. During this same period, the United States has passed four new pieces of sanctions legislation and issued nine new executive orders on Iran alone. Additionally, two entirely new sanctions programs have been added, bringing the total to 23, while others including the Burma, Libya, and Syria programs, have experienced significant changes. Given OFAC’s relatively small staff, members of the Office of Global Targeting (OGT), the unit responsible for designations, are often required to work on multiple sanctions programs. When certain issues, such as Iran, are assigned priority, other programs necessarily suffer, endangering implementation of other foreign policy objectives set out by Congress and the Administration. For instance, Treasury has not issued a designation under the Syria program in over 7 months.

So far, senior Treasury officials have tried to play the good soldier, while dropping hints that available resources are insufficient. During a June 4, 2013 hearing before the Senate Banking Committee, TFI Undersecretary David Cohen was asked point-blank by Sen. Robert Menendez (D-NJ) if he had the resources to fully enforce sanctions on Iran. Cohen’s response was diplomatic, stating “in terms of resources, my team is working flat out…I think we’re doing a good job of it, but my folks are working very, very hard at this.” More recently, OFAC Director Adam Szubin gave a similar assessment, telling the Wall Street Journal that “the staff is working all-out…We’re in overdrive and we like it that way.” Szubin’s bravado aside, it is clear that Treasury is under tremendous pressure to deliver results, without receiving adequate means to do so.    

Fault for this failure to invest in what has become one of the United States’ most important national security tools cannot be placed at any one set of feet. Rather, the Administration, Congress, and various outside groups with an interest in Iran sanctions have all for the most part stayed silent on providing the resources necessary to manage a list of sanctions programs that is constantly growing in both size and complexity. If we are to maintain the aggressive sanctions enforcement posture that has made comprehensive nuclear negotiations with Iran possible, then that silence must be broken.

Samuel Cutler is the policy adviser at Ferrari & Associates, P.C., a Washington, DC-based law firm specializing in U.S. economic sanctions. He tweets at @youbsanctioned.