On Feb. 27, 2023, the Office of Foreign Assets Control (OFAC) issued Supplemental Guidance for the Provision of Humanitarian Assistance (“2023 Fact Sheet”) to update OFAC’s Guidance Related to the Provision of Humanitarian Assistance by Not-for-Profit Non-Governmental Organizations (“2014 Guidance”).
This new guidance aims to provide clarity on what activities and transactions are authorized under the new and amended general licenses (GLs) the U.S. Treasury Department issued in Dec. 2022. C&SN’s summary and analysis of the 2023 Fact Sheet and how it compares with the 2014 OFAC guidance are highlighted in the below sections.
While increased communication and guidance from OFAC surrounding the new and amended GLs is welcomed by the civil society community, the 2023 Fact Sheet – like the 2014 Guidance – lacks the legal assurances and “force of law” to protect humanitarian and peacebuilding groups operating in sanctioned areas. The 2023 Fact Sheet is also missing the legal assurances necessary for banks and financial institutions to end de-risking practices that impede the important work of non-governmental organizations (NGOs) and international organizations (IOs) operating under sanctions regimes.
OFAC’s Dec. 20, 2022 new and amended general licenses implemented United Nations Security Council Resolution (UNSCR) 2664, which was adopted by the UN Security Council (UNSC) on Dec. 9, 2022 and provided a standing humanitarian exemption to UN sanctions regimes’ asset freeze measures.
On the domestic side, GLs are issued by OFAC to provide the legal authority to engage in otherwise prohibited activities in sanctioned areas. These GLs are “self-executing,” meaning that individuals and organizations that determine their activities fall within the scope of the list of authorized activities included in GLs may proceed with those activities in sanctioned areas without further permission or additional licensing from OFAC.
The new and amended GLs were issued with four accompanying Frequently Asked Questions (FAQs) and – in a precedent-setting shift – expanded protections for life-saving aid, non-commercial development programs, food and medicine, education programs, health services, democracy building, conflict prevention and peacebuilding activities, and natural resources and environmental protection activities.
These FAQs include:
- FAQ 1105 specifies OFAC’s actions on domestic implementation of UNSCR 2664 through issuing the new and amended GLs.
- FAQ 1106 specifies the types of financial transactions and activities that are permitted under the new and amended GLs.
- FAQ 1107 pertains to the GLs that apply to entities and organizations falling under the UN’s “Programmes, Funds, and Other Entities and Bodies, as well as its Specialized Agencies and Related Organizations”. These are referenced as the “international organizations and entities (IO GLs).”
- FAQ 1108 clarifies that OFAC’s new and amended GLs (highlighted in FAQ 1105) place no restrictions on existing OFAC authorizations’ or exemptions’ scope for humanitarian activities. This clarification also applies to sanctions jurisdictions that “have not been amended by” OFAC issuing these new and amended GLs, including Iran, the Crimea Region of Ukraine, and Syria.
OFAC’s 2014 Guidance
Notably, OFAC has not issued general guidance for NGOs operating in sanctioned contexts since 2014, when it issued the Guidance Related to the Provision of Humanitarian Assistance by Not-for-Profit Non-Governmental Organizations.
The 2014 Guidance provided some helpful clarification and extended Treasury’s policy that “[i]n circumstances involving a dangerous and highly unstable environment combined with urgent humanitarian need, OFAC recognizes that some humanitarian assistance may unwittingly end up in the hands of members of a designated group, [and] [s]uch incidental benefits are not a focus for OFAC sanctions enforcement.”
It even went so far as to call economic sanctions imposed on groups or regimes committing violence towards innocent civilians a complementary goal to humanitarian assistance. Lastly, it specified that NGO humanitarian assistance can be carried out without an OFAC license in countries not under comprehensive sanctions regimes, provided these NGOs are not engaging with sanctioned entities or persons.
However, as C&SN has previously noted, the 2014 Guidance was largely a disappointment to civil society at the time, due to, amongst other shortcomings:
- The guidance not having any force of law;
- Being limited only to humanitarian assistance, and excluding crucial activities such as development, human rights defense, philanthropy, and peacebuilding;
- Not addressing or clarifying the State Department’s role in licensing; and
- It “fail[ing] to address fundamental systemic problems with the licensing system, including the need for clear criteria for OFAC decisions, timelines for the process and a requirement that license applicants [receive the] contact information for OFAC staff handling their requests.”
After the 2014 Guidance was issued, C&SN released a statement calling for the Treasury Department to take stronger steps to use its authority to support an enabling environment for civil society to carry out life-saving activities in areas that would most benefit.
The 2023 Fact Sheet: What has changed?
This new 2023 Fact Sheet is meant to update and augment the 2014 Guidance in light of the recently issued Dec. 2022 new and amended baseline GLs, which “add authorizations across U.S. sanctions programs that did not previously have humanitarian exceptions, implementing a new baseline set of authorizations across OFAC-administered programs.”
The 2023 Fact Sheet also lays out “the reach of economic sanctions for persons involved in the conduct of humanitarian-related activities, including the U.S. government (USG); international organizations and entities (IOs); nongovernmental organizations (NGOs); persons involved in the provision of food, other agricultural commodities, medicine, and medical devices (Ag-Med); and financial institutions and other service providers who support or facilitate transactions for such persons.”
Unlike the 2014 Guidance, which was issued only for humanitarian NGOs, it aims to provide clarity surrounding authorized humanitarian activities for NGO, USG, Ag-Med, and IO actors. The 2023 Fact Sheet lists examples of authorized activities for NGOs, defined as “noncommercial activities designed to directly benefit the civilian population” including: “humanitarian activities or activities to meet basic human needs; democracy building; education; noncommercial development projects directly benefiting civilians; environmental and natural resource protection; and disarmament, demobilization, and reintegration programs and peacebuilding.”
The 2023 Fact Sheet notes that in areas under targeted sanctions regimes NGOs can provide humanitarian aid without an OFAC license provided these NGOs “are not knowingly transferring funds to blocked persons.” For transactions that do not have an exemption or are not authorized under a GL in sanctioned contexts, OFAC recommends applying for a specific license to carry out humanitarian aid in these circumstances. Specific licensing applications can be submitted via OFAC’s License Application Page.
The document reiterates that NGOs are not authorized to transfer funds to a blocked person, or any entity that has 50 percent or above ownership by a blocked person(s), in connection with an activity authorized in the Dec. 2022 GLs. However, exceptions to this include: “payments for taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services if ordinarily incident and necessary to activities authorized by the GLs,” meaning these activities are authorized.
Accordingly, for humanitarian actors carrying out activities where there are a high number of sanctioned persons, the only allowed activities in this circumstance are “those that are ordinarily incident and necessary to authorized humanitarian activities.” In keeping with prior guidance, the 2023 Fact Sheet does not define what “ordinarily incident and necessary” actually means, leaving NGOs with precarity and uncertainty for which activities are actually authorized when and in what circumstances.
For example, where an entity is not designated but its leader(s) are, provided the entity does not have 50 percent or above ownership by a blocked person(s), NGO payments, such as “access payments” and “taxes” are authorized in these circumstances. However, OFAC encourages that due diligence measures – which NGOs stringently apply – be carried out to prevent a sanctioned person from “profiting from such transactions beyond permitted receipt of taxes or other fees that are ordinarily incident and necessary to the humanitarian activities.”
As with the 2014 Guidance, the 2023 Guidance extended Treasury’s policy that “[i]n circumstances involving a dangerous and highly unstable environment combined with urgent humanitarian need, OFAC recognizes that some humanitarian assistance may unwittingly end up in the hands of members of a designated group, [and] [s]uch incidental benefits are not a focus for OFAC sanctions enforcement.”
Find further information on authorizations granted for USG, IO, and Ag-Med actors below:
- For the USG GLs: these provide authorization for the USG, including contractors, grantees, and employees, to carry out transactions that are otherwise prohibited, for official USG business. These authorizations include USG-funded activities in assistance awards and third-party funded activities, provided this “funding is included in USG assistance awards as a cost-share or leveraged funds.” NGOs who are engaging in USG-funded activities are covered by authorizations in the USG GLs.
- For the IO GLs: these provide authorization for entities that are established or administered by UN agencies, including entity and IO activities. The new and amended GLs do not authorize funds transfers if there is knowledge that such transfers are intended for a blocked person(s). However, exceptions to this include “the payment of taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services.” IOs who are engaging in USG-funded activities are covered by authorizations in the USG GLs.
- For the Ag-Med GLs: these provide authorizations surrounding, either indirectly or directly, the provision of agricultural and food commodities, and of medical devices and medicine itself, “to an individual whose property and interests in property are blocked, provided the items are in quantities consistent with personal, non-commercial use.”
The 2023 Fact Sheet reiterates and expands upon the information included in FAQ 1108 regarding prior OFAC authorizations or exemptions related to humanitarian activities – including specific licenses – that were issued before the new and amended GLs.
It once again clarifies that OFAC’s new and amended GLs place no restrictions on existing OFAC authorizations’ or exemptions’ scope for humanitarian activities. This applies to “existing GLs authorizing certain NGO activities” in broad-based sanctioned jurisdictions that “were not amended by this action” including: Iran, the Crimea Region of Ukraine, North Korea, and Syria. Where GLs overlap, OFAC notes acceptability in relying on multiple or one GL to implement activities that are authorized and encourages humanitarian relief actors to utilize the authorizations and exceptions for humanitarian activities.
In regards to the scope of specific licenses, U.S. persons can apply the broader authorizations issued by the new and amended GLs, rather than previous authorizations issued under specific licenses. Likewise, U.S. persons can apply authorizations from prior specific licenses that are broader or different from the new and amended GLs. Once a specific licenses’ authorization period ends, that license must be renewed to continue using authorizations therein. If not renewed, then the previous holder must default to authorizations under applicable GLs.
The Feb. 2023 guidance also specifically addresses authorizations for financial institutions. OFAC states that U.S. financial institutions can operate accounts for those undertaking activities that the Dec. 2022 new and amended GLs authorize, “including processing funds transfers.” Additionally, OFAC states that non-U.S. persons, including foreign financial institutions and NGOs, are not at risk of running afoul of U.S. sanctions for taking part in or “facilitating transactions that are otherwise exempt or authorized for U.S. persons pursuant to these GLs.”
The 2023 Fact Sheet aims to provide clarity around activities that are and are not authorized by the Dec. 2022 new and amended baseline GLs through listing approved activities for NGOs and other actors, affirming that these new and amended GLs do not restrict the scope of any prior authorizations, and restating information regarding the transfer of funds to a blocked person(s) and entities.
Additionally, in a hard-fought win for civil society advocates, the new and amended GLs (and subsequently the 2023 Fact Sheet) include a range of peacebuilding activities, which were not authorized prior to the Dec. 2022 GLs, nor when the 2014 Guidance was issued.
Lastly, OFAC notes that “The December 2022 GLs and accompanying guidance were issued to provide greater consistency and clarity with respect to compliance obligations across U.S. sanctions programs to better facilitate the delivery of lifesaving aid and goods around the world.”
What is OFAC still missing?
This guidance is a welcome step in OFAC providing increased communication materials surrounding authorized activities under the new and amended GLs. However, as with the 2014 Guidance, the 2023 Fact Sheet states explicitly that it lacks legal assurances and that it “does not have the force of law, and does not supersede the actual legal provisions cited.” This means that humanitarian and peacebuilding groups, in addition to other NGOs, IOs, and USG and Ag-Med actors still remain exposed to a number of legal risks, such as liability under the U.S. “material support” statute, associated with operating in sanctioned environments.
Banks and financial institutions, for their part, find little meaning in guidance alone without the “force of law”; absent moving beyond guidance to being actually legally binding, this and the previous guidance are little more than words on paper. In reality, this does almost nothing to provide the legal reassurances needed to support banks in applying the risk-based approach (RBA), to end banks’ suffocating de-risking practices, and to enable NGOs and IOs to carry out their work unimpeded, uninterrupted, and unfettered under new and existing sanctions regimes.
OFAC must provide guidance that carries the force of law and protects humanitarian and peacebuilding groups. Additionally, this legally binding guidance would support banks and financial institutions in addressing the issues mentioned above and in addressing overly burdensome compliance measures. Short of this, we will continue to see GLs issued without the larger systemic change needed to support their authorizations.