June 01, 2008
OFAC loses a rare round
Posted by David Zaring

Complying with those regulations in the war on terror designed to cut of financing to the bad guys has proved to be really quite burdensome for both the banks who have to investigate all of their customers and the Treasury Department, which now receives millions of forms a year detailing possibly - albeit not probably - suspicious transactions.  The new workload hasn't generally deterred Treasury, which has embraced its rather implausible repurposing as a front line defense against the terrorists.  Elena Baylis and I wrote a piece about the problems with this regulatory innovation here. 

But Treasury just lost a round in its terrorism efforts.  A court reviewing a denial of reimbursement to a contracting party with an alleged bad guy recently decided that Treasury's OFAC agency had failed to explain what it was doing when it seized money, had failed to distinguish between the statutory authority given it to effect those seizures, and that, moreover, it wasn't doing a great job of explaining what it was doing with the money it sequestered and why it had the legal authority to do anything with it: "any explanation by OFAC that protecting the rights of any potential and unknown creditors has any connection to the aims of the Kingpin act is so implausible that it could not be ascribed to a difference in view or a product of agency expertise." (unavailable online, but check Case No.: 07-CIV-20398 in the Southern District of Florida if you are interested)

Ouch.  Given that the explanation OFAC did submit in the case came from its smart and wise (and former co-worker of your author) director, I'd expect an appeal.  And bemoan the customary difficulties in obtaining published federal opinions reversing agency conduct in the meantime.

HT: Steve Vladeck, tipping me from the land of rain and smoked herring

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