The legal authority for the Department of Treasury to designate a person or organization as a Specially Designated Global Terrorists (SDGT) (or freeze assets “pending investigation”) is based on laws providing for economic sanctions against foreign nations, going back to the Trading With the Enemy Act in 1917 and ending with the Patriot Act.
In 1977 Congress amended the Trading With the Enemy Act by passing the International Emergency Economic Powers Act (IEEPA), at 50 USC 1701-06) which authorizes the President to declare an emergency relating to “any unusual and extraordinary threat, which has its source in whole or in part outside the United States, to the national security, foreign policy or economy of the United States.”
IEEPA is the legal authority for Executive Order (EO) 13224, issued by President George W. Bush on Sept. 24, 2001. EO 13224 declared a national emergency based on the 9/11 attacks and directed Treasury, in consultation with the Attorney General and Secretary of State, to designated SDGTs and take action to freeze all assets subject to U.S. jurisdiction. Designation may be of a terrorist organization, or if Treasury finds a group has:
Provided material support to an SDGT
To be “otherwise associated with an SDGT (defined in subsequent regulations as owned or controlled by an SDGT or to act for or on behalf of it).
Al-Haramain Islamic Foundation 1/19/04 (Later designated on 9/9/04)
KindHearts for Charitable and Humanitarian Development, Inc 2/19/06 (In May 2012, a settlement was reached by the charity and Treasury allowing KindHearts to pay its debts and distribute the remaining funds among a list of approved charities before it dissolves. At that point Treasury will remove KindHearts from its terrorist list and pay its attorneys fees. Neither side admitted to any wrongdoing.)