When a nonprofit organization (NPO) is listed by the U.S. government as a supporter of terrorism its assets within U.S. jurisdiction are generally frozen – or “blocked.” In order to contest the listing NPOs may need to access funds to pay for legal representation. Since December 2010 the Department of Treasury’s sanctions regulations https://www.gpo.gov/fdsys/pkg/FR-2010-12-07/html/2010-30520.htm permit NPOs and other entities and individuals to obtain free legal services and in some cases, to arrange payment for lawyers without first obtaining a license.
The regulation covers legal representation for groups or people listed under EO 12947 (1995), listing designations for those engaged in violence that threatens the Middle East peace process, EO 13224 (2001), which lists Specially Designated Global Terrorists and Foreign Terrorist Organizations listed by the Secretary of State. The rule can be found in Volume 75 Page 75904 of the Federal Register and in 31 of the Code of Federal Regulations Parts 594, 595, and 597.
No license from Treasury’s Office of Foreign Assets Control (OFAC) is needed to obtain or pay for legal advice in two situations:
Pro bono representation:
When a charity, person or other group is listed, U.S. lawyers can provide legal representation without charge in “any legal, arbitration or administrative proceeding brought before a U.S. federal, state or local court or agency” without getting a license from OFAC.
Payment for legal representation in specific types of cases, using one to two payment methods spelled out in the regulation.
The types of cases that can take advantage of this rule are as follows:
Legal advice and counseling on the requirements of and compliance with U.S. law as long as it does not facilitate transactions in violation of the blocking order;
Representation of persons named as defendants or parties to domestic U.S. legal proceedings, including arbitration or administrative proceedings;
Domestic U.S. legal proceedings to defend interests in property subject to U.S. jurisdiction;
Representation before any federal or state agency regarding enforcement of U.S. sanctions against the client;
- Representation of persons detained within the jurisdiction of the United States, regardless of location, regarding any charges made against them, including, detention, military commission prosecutions and federal court proceedings; and
Any other legal services where U.S. law requires access to legal counsel at public expense. (31 CFR 594.506)
If the legal issue does not fall into these categories, a specific license is still required for payment of attorneys. For information on applying for a specific license see here.
The two approved payment methods are:
Payment from the client’s sources outside the U.S
Payment from a legal defense fund at a U.S. financial institution that is subject to ODFAC reporting requirements.
Legal payments from sources outside the U.S.
The rules allow representation by a “a U.S. person that is an attorney, law from or legal services organization…” when the funds originate outside the U.S., provided that the attorney provide Treasury’s Office of Foreign Assets Control (OFAC) with a letter of engagement or intent to engage that specifies the services to be performed, signed by the client. All funds must come from the client’s sources outside the U.S.
The attorneys working under this regulation must submit quarterly reports to OFAC that identify the sources of the funds, the amounts given, the names of consultants such as expert witnesses or investigators, and a general description of the services provided.
Legal payment from a legal defense fund
The regulations allow attorneys to create legal defense funds in a U.S. financial institution. Before payment can be made the following information must be submitted to OFAC:
- A copy of the engagement letter (or intent to engage) specifying the services to be provided and signed by the client
- The name of the individual or entity setting up the fund
- The name of the financial institution where the fund is located and a contact person there
The account name and number.
U.S. donors may give to the funds, but no listed persons or groups may contribute to it. The fund must notify the financial institution that it can only be used to pay for services relating to legal representation.
Report to OFAC must be filed quarterly, listing the following
- Donors and amounts
- Details of payments made
A general description of the services provided.
Any funds left over at the end of the case or legal representation become the property of the listed group and are blocked unless a license authorizing their release is issued.