The Biden Administration on February 16, 2021 removed Ansarallah (aka the Houthis) from two U.S. terrorist lists, less than three weeks after the group was added to the lists by the outgoing Trump administration. At the same time, it revoked five General Licenses that permitted certain humanitarian and other activities under the designation.
On the final day of the Trump administration, the U.S. State Department designated the Houthis in Yemen as a Foreign Terrorist Organization (FTO) under Section 219 of the Immigration and Nationality Act and a Specially Designated Global Terrorist (SDGT) under the authority of Executive Order 13224. Simultaneous with the designation, which was opposed by both nonprofit organizations (NPOs) operating programs in Yemen and elected officials and government professionals from across the political spectrum, U.S. Treasury’s Office of Foreign Asset Control (OFAC) issued four General Licenses (GLs) to permit certain activities in and exports to the country.
On his first day as Secretary of State, Antony Blinken announced that the reversal of the terrorist designation would be a top priority for his office. A spokesman noted the reason for the reversal was “the profound humanitarian implications of this designation.” In announcing the move, a State Department spokesman said this “has nothing to do with our view of the Houthis and their reprehensible conduct, including attacks against civilians and the kidnapping of American citizens.”
Last-minute Designation Followed by Outcry
In a statement from the State Department on January 10, 2021, Secretary of State Mike Pompeo notified Congress of his intent to issue the designations. Experts argued that the designation would do little to alter Houthi behavior and could strengthen their ties with Iran, while condemning millions to greater starvation and health risks. Moreover, it will undermine the fragile peace process being cultivated there. NPOs with programs in Yemen were instrumental in conveying the dire humanitarian impact of the designations as they pushed the Biden administration to reverse them.
The Charity & Security Network (C&SN) issued a statement January 12 opposing the designations. In it, C&SN noted that the civilian population in Yemen, some 29 million people, have endured nearly six years of civil war, natural disasters and dire economic and resource conditions. The UN World Food Program has called their situation a “countdown to catastrophe” with roughly 80 percent of the population dependent on aid for survival and aid funding cut back significantly.
While C&SN continued to oppose the designations and worked to push the Biden Administration to reverse them, the General Licenses issued were significant and meaningful to humanitarian and peacekeeping operations. In an effort to help NPOs understand the flexibility they offer, but also provide guidance on where there may still be legal risks, C&SN noted that it was important to understand them fully.
The summary below describes each license, the effect on funds transfers, supplemental information in FAQs released by Treasury and the impact of the material support prohibition on licensed activities.
General Licenses with Wide Applicability
Concurrent with the FTO and SDGT designations, on Jan. 19, 2021, Treasury issued General License 9, “Official Business of the United States Government,” General License 10, “Official Activities of Certain International Organizations, General License 11, “Certain Transactions in Support of Nongovernmental Organizations’ Activities in Yemen,” and General License 12, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components or Software Updates.”
Less than one week later, on January 25, 2021, U.S. Treasury issued General License 13, which permits all transactions with the Houthis that were previously prohibited, until 12:01 a.m. eastern standard time on February 26, 2021. The new license notes that it does not permit the unblocking of any funds previously blocked.
All five of these General Licenses were revoked when the terrorist designation of Ansarallah was reversed on February 16, 2021.
While the designation of the Houthis as a terrorist entity was a setback to NPOs operating programs in Yemen, the new GL 13 appeared to put a pause on the prohibitions that come with such a designation. The first four licenses issued represented a big step forward in Treasury’s thinking about humanitarian access in these contexts and its willingness to help facilitate that work. The newest license goes much further, allowing humanitarian aid to flow for a period of time.
OFAC licenses create an exemption, permitting certain activity that would otherwise be prohibited under the sanctions or designation program that the license addresses. General Licenses can be used by anyone. For activities not covered by a General License, NPOs and others may apply to OFAC for a specific license.
While GLs 9 and 10 allow certain transactions with the Houthis by U.S. government employees, grantees, or contractors, as well as certain international organizations, including the United Nations and the Red Cross, GL 11 concerns transactions in support of nongovernmental organizations’ activities in Yemen. That license permits all transactions and activities involving Ansarallah, or any entity in which Ansarallah owns, directly or indirectly, a 50 percent or greater interest, “that are ordinarily incident and necessary to the activities described in paragraph (b) by nongovernmental organizations are authorized, including processing and transfer of funds, payment of taxes, fees, and import duties, and purchase or receipt of permits, licenses, or public utility services.”
Paragraph (b) of the GL 11 permits activities to support humanitarian projects to meet basic human needs, democracy building, education, non-commercial development projects, and environmental protection. Specifically, it permits:
- Activities to support humanitarian projects to meet basic human needs in Yemen, including drought and flood relief; food, nutrition, and medicine distribution; the provision of health services; assistance for vulnerable populations, including individuals with disabilities and the elderly; and environmental programs;
- Activities to support democracy building in Yemen, including activities to support rule of law, citizen participation, government accountability, universal human rights and fundamental freedoms, access to information, and civil society development projects;
- Activities to support education in Yemen, including combating illiteracy, increasing access to education, international exchanges, and assisting education reform projects;
- Activities to support non-commercial development projects directly benefiting the Yemeni people, including preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance; and
- Activities to support environmental protection in Yemen, including the preservation and protection of threatened or endangered species and the remediation of pollution or other environmental damage.
GL 12 permits transactions related to the exportation or re-exportation of agricultural commodities, medicine, medical devices, replacement parts and components, or software updates for medical devices to Yemen, or to persons in third countries purchasing specifically for resale to Yemen. This license, like GL 11, also permits transactions that are “ordinarily incident and necessary to” the licensed activities.
The transactions outlined in GL 12 may also be subject to compliance with requirements of other federal agencies, including the Department of Commerce’s Bureau of Industry and Security. GL 12 notes that this license does not relieve any exporter from compliance with those requirements.
All four licenses note that they do not authorize any transactions or activities otherwise prohibited by the Global Terrorism Sanctions Regulations, the Foreign Terrorist Organization Sanctions Regulation, “or any other part of 31 C.F.R. chapter V, or E.O. 13224, as amended, or any transactions or activities with any blocked persons other than the blocked persons identified in paragraph (a) of this general license.” This may be understood to mean that persons planning to utilize the license should not infer any additional permissions not explicitly stated in the licenses.
Assurance on Funds Transfers
It is worth noting that the transfer of funds is explicitly permitted in GL 11. NPOs have for many years had difficulty moving program funds overseas, particularly for humanitarian and development programs in conflict zones or in areas where designated terrorist groups are present. Including this language in a General License marks a step forward for Treasury in helping to reverse the trend known as “derisking.”
Two new OFAC Frequently Asked Questions (FAQs) also address funds transfers. FAQ 875 states that funds transfers for these licensed activities are also permitted, and FAQ 876 explains that foreign financial institutions will not be liable for transactions made pursuant to the newly licensed activity.
FAQs Provide Additional Guidance
Treasury has also issued three new FAQs – 875, 876, 877 – to help facilitate the uninterrupted flow of humanitarian assistance, including COVID-19-related assistance, and certain other critical commodities to the people of Yemen that would otherwise be prohibited under the new designations.
FAQ 875 outlines the activities permitted by the four new GLs. Importantly, it explains and restates that funds transfers are permitted by GLs 11 and 12 as “transactions and activities that are ordinarily incident and necessary to the activities authorized by” the licenses.
Additionally, FAQ 875 notes that OFAC may also issue specific licenses “to authorize certain transactions involving U.S. persons or the U.S. financial system that may otherwise be prohibited by OFAC sanctions, provided those transactions are in the foreign policy interests of the United States.”
FAQ 876 addresses the potential risk for non-U.S. persons operating programs in or exporting goods to Yemen. It states that non-U.S. persons may engage in or facilitate transactions authorized under the new GLs without exposure to sanctions under E.O. 13224, if such activity would be authorized under the new GLs “if engaged in by a U.S. person.” If the transaction is authorized in the licenses for a U.S. person, non-U.S. person may also conduct that transaction.
FAQ 876 also addresses secondary sanctions, in which foreign financial institutions can become sanctioned as a result of facilitating a transaction prohibited under a sanctions program. This has become a concern for foreign banks serving as correspondent or payable-through accounts. This FAQ notes that activity authorized for U.S. persons by these new licenses “would not be considered ‘significant’ for the purposes of determining secondary sanctions under E.O. 13224, as amended.” Therefore, foreign financial institutions do not risk exposure to correspondent and payable-through account sanctions under E.O. 13224 “if they knowingly conduct or facilitate a transaction on behalf of Ansarallah, or any entity in which Ansarallah owns, a 50 percent or greater interest,” that would be authorized under the four new licenses, if engaged in by a U.S. person.
FAQ 877 discusses humanitarian assistance in response to the Covid-19 outbreak in Yemen. It states, “GL 12’s authorizations extend to the exportation or re-exportation of items that may be used in the fight against COVID-19, including personal protective equipment and other items such as medical gowns, medical eye shields and goggles, surgical gloves, face shields, respirators and masks such as N95, N99, and N100 masks, oxygen generators, full face mask respirators including Powered Air Purifying Respirators, diagnostic medical imaging equipment, decontamination equipment, and ventilators.”
Material Support Prosecution – Theoretical or Practical?
Legal experts have generally understood that OFAC has traditionally been unwilling to issue licenses that authorized transactions with an FTO because they would run up against the prohibition on material support to terrorism (18 U.S.C. §2339). The material support statute is triggered by any FTO designation. There is no statutory authorization for the executive branch to issue licenses that violate material support statutes. Presumably, OFAC would have had various agencies, including the U.S. Department of Justice (DOJ) sign off on the licenses, which means that DOJ is taking the position that it will not prosecute entities that comply with the terms of the licenses. Legal experts note that while prosecution under the material support statute is a theoretical risk, practically DOJ would not use its discretion to prosecute. At the same time, they note that written assurance on this issue would be helpful. Meantime, NPOs should consult with legal counsel to determine the best course of action for their organization, considering the specific circumstances they confront with their programs.
This article will be updated as new information and interpretations become available.