OFAC’s War on Right to Counsel Continues

Posted by Clif Burns at 9:39 pm on July 27, 2010
Category: OFAC

The Department of Treasury’s Office of Foreign Assets Control (“OFAC”) last week revised its rules on the use of blocked funds to pay attorneys’ fees to challenge OFAC’s blocking order. Perhaps the single most odious practice OFAC is its use of these rules to interfere with the right of blocked parties to obtain counsel. It’s obviously much easier to deprive people of property if you simultaneously impose limits on their ability to hire counsel to protest that deprivation. And although the revised rules do make it somewhat easier to use blocked funds to pay attorneys’ fees, they do not go far enough to end this shameful agency practice.

If a person has his or her assets blocked by OFAC, that person has no money to pay attorneys to challenge the blocking order unless some of the assets are unblocked. OFAC rules permit funds to be blocked but only in the case of U.S. citizens. And even then, the amounts that can be unblocked under the rules are unreasonably low and clearly designed to hinder the right of the victim of the agency action to hire competent counsel.

The rules limit payments to attorneys to a maximum of $125 per hour up to a limit of $14,000 for administrative proceedings, $14,000 for district court litigation, and $10,000 for appellate court litigation. OFAC is straightforward in admitting that these amounts are not intended to compensate counsel fairly and are intended simply to make it difficult for blocked parties to obtain counsel and challenge agency action:

This policy is not intended to ensure complete compensation to counsel. Limitations on the amount of funds released to a Blocked Party are necessary to preserve the President’s authority and leverage in the conduct of foreign policy.

Seriously. OFAC actually said that. If someone can ever find counsel willing to challenge these limits, this statement will certainly come back to haunt the agency.

The newly revised rules liberalize these limits in cases involving U.S. citizens whose assets have only been provisionally blocked by OFAC. In such cases, the total monetary caps will be lifted even though the $125 per hour limit on fees will remain in place. Upon imposition of a final order by OFAC blocking the assets in question, the monetary caps will apply again.

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Copyright © 2010 Clif Burns. All Rights Reserved.
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One Comment:

“This policy is not intended to ensure complete compensation to counsel.”

When I saw this the other day, I literally thought my mind was playing tricks on me. I still can’t believe they said that.

However, what’s most disturbing about OFAC’s policy to me is the disparate impact it has on blocked U.S. parties who have been blocked vs. blocked foreign parties. The guidance points out that this new policy only applies to blocked parties who are also U.S. persons. Those are the same parties who are likely to have most of their funds in accounts subject to under U.S. jurisdiction, which in turn, makes the blocking of those funds more likely in the event of an SDN designation.

I represent a number of foreign parties in the SDN designation administrative reconsideration process. Rarely do I see their access to funds limited due to an OFAC blocking action. Typically, the bulk of their funds and assets are not impacted by the designation or blocking, as they are in accounts not subject to U.S. jurisdiction. Therefore, they usually have access to funds to hire adequate counsel despite the blocking action.

The result here is that blocked U.S. parties are more likely to be hamstrung by this policy, as there is a higher likelihood that their funds were held in accounts subject to U.S. jurisdiction. As such, they would be subject to the caps imposed by this policy when needing access those funds to pay for legal representation during the designation reconsideration/review process. On the other hand, foreign blocked parties seeking reconsideration/review are more likely to have access to funds because such funds were not held in accounts subject to U.S. jurisdiction. Therefore, the foreign blocked parties are less likely to be impacted by the caps imposed, as they can draw upon funds from unblocked sources.

In sum, OFAC’s policy has the unintended (perhaps?) disparate impact of making the reconsideration/review process more difficult for blocked persons who are U.S. citizens, since they are more likely to have their funds blocked than their foreign counterparts.

As any attorney who has worked on these matters can tell you, the designation reconsideration process is a long, time intensive, expensive process. The caps being imposed by OFAC on the release of blocked funds for representation in such matters, not only fail to ensure complete compensation; they barely ensure nominal compensation.