On April 13, 2010, President Obama signed the Executive Order Blocking Property of Certain Persons Contributing to the Conflict in Somalia.Specifically, through this Order, the President declared a national emergency with respect to the deteriorating security situation and the persistence of violence in Somalia, as well as the acts of piracy and armed robbery at sea off of the coast of Somalia. As a result of this national emergency, the President blocked all property and interests in property of persons listed in the Annex to the Order or later designated by the Secretary of the Treasury. The Somalia sanctions program appears consistent with Office of Foreign Assets Control's (OFAC) focus on "smart" or list-based sanctions and requires little additional diligence by most U.S. persons who are already screening against OFAC's Specially Designated Nationals and Blocked Persons (SDN) list. Nonetheless, those U.S. persons who are the victims of Somali piracy now face additional hurdles in securing the safe return of individuals held captive and in reclaiming their property. The Order also imposes new obligations on the owners of cargo vessels and their insurers, reinsurers and financial institutions in the event they face demands for ransom payments to recover people or property.
Targets of the Sanctions
In addition to targeting those engaged in piracy and armed robbery off of the Somali Coast, Section 1 of the Order calls for the implementation of sanctions on other persons who threaten the peace, security or stability of Somalia. These persons are identified as those who, directly or indirectly:
- Threaten the Djibouti Agreement of August 18, 2008or the corresponding political process;
- Threaten the Transitional Federal Institutions, the African Union Mission in Somalia (AMISOM), or other international peacekeeping operations related to Somalia;
- Obstruct the delivery of humanitarian assistance to Somalia, or access to, or distribution of, humanitarian assistance in Somalia;
- Supply, sell to, or transfer to Somalia arms or related material or technical advice, training or assistance (including financing and financial assistance) relating to military activities;
- Receive arms, related material or technical advice, training or assistance (including financing and financial assistance) relating to military activities;
- Materially assist, sponsor, or provide financial, material, logistical or technical support for, or goods or services in support of, the activities described above.
Consistent with its practice in other programs, OFAC will designate persons (individuals or entities) who meet this criteria.From a practical perspective, however, the compliance challenge lies with those industries affected by Somali piracy. For example, the shipping company whose vessel is captured off of the coast of Somalia, in addition to determining whether to negotiate with the pirates, will also have to determine whether any sanctioned pirates are involved anywhere in the chain of events. Out of an abundance of caution, one would expect that a U.S.-based shipping company would presume an SDN is involved and would work with his insurance company and its financial institution to obtain the necessary authorization from OFAC before dealing with the pirates. One also would expect that OFAC will institute expedited licensing procedures to reflect the danger and urgency of pirate hostage-taking situations. Where a non-U.S. shipper is a victim of piracy but a U.S. insurer, reinsurer or financial institution is involved, the compliance burden is likely to shift to those parties. Compliance with of these sanctions will depend on practical implementing regulations from OFAC.