Treasury Official Hopeful About Addressing Sanctions Issues Hindering Aid Efforts

Aid groups and banks have long urged the Office of Foreign Assets Control for more assurances that they won’t face penalties for humanitarian-related transactions, including through comfort letters (see 2109020064). Parets suggested that the agency has looked into those requests and is seeking to improve its exemption procedures and better educate industry about existing authorizations.

“There is this kind of predisposed notion, at least inside of the government, that we’ve been unwilling to take on the potential risk with expanding authorizations or to more aggressively tackle this issue,” Parets said. He said that notion is “contrary to the risk-based approach” that the agency often preaches should be part of industry compliance programs.

“It assumes that we’re unwilling to take on any risk to expand the positive types of activities that we want to see,” Parets said. “And I think across the government, and with Congress and others, we just need to more effectively educate [everybody] that we can do both of these things at the same time.” He said OFAC “can continue our programs to target bad actors” while “at the same time put in place programs that aid with combatting terrorist radicalization, for example, or otherwise provide services to populations at risk.”

Parets’ comments came after Sue Eckert, a senior fellow with CSIS’s Humanitarian Agenda program, recommended the agency take a host of steps to expand its sanctions exemptions. She said the U.S. should work to establish a “global general license to address gaps in existing humanitarian carve-outs,” an effort already underway at the U.N. She also said Treasury should issue clear guidance to inform banks that any nonprofits that receive funding from the U.S. government are safe to transact with.

If nonprofits receive government funding, then they “have already been screened and have had to meet due-diligence requirements by virtue of the fact the U.S. government is funding them,” Eckert said. “And if that's the case, then the idea is, why do banks have to do a double screening? Have they not already met due-diligence requirements?” She said OFAC should issue "guidelines that actually state that if [a nonprofit] receives money from the U.S. government, it will not bring enforcement action against the financial institution making those payments."

She also said the U.S. should revive efforts to create a safe payment channel for humanitarian-related transactions involving sanctioned jurisdictions. Treasury in 2020 launched a U.S.-Swiss joint mechanism designed to safely export humanitarian goods to Iran (see 2002270017), and Eckert said the U.S. should create a pilot for general humanitarian-related transactions involving other high-risk countries.

“There are places where financial institutions are not going to go because it's either too risky, too expensive and they don't feel comfortable,” she said. “For that, you need to have safe payment channels to develop means for those humanitarian transfers to go through.”

Parets said many of Eckert’s recommendations, “generally speaking,” are “achievable,” pointing to the high priority the Biden administration has placed on sanctions modernization efforts. He specifically referenced the administration's sanctions review published last year, which detailed how the agency planned to avoid the collateral consequences of sanctions on humanitarian aid (see 2110190044).

“This is coming directly from the president, the secretary of the treasury. The commitment is coming from the senior-most levels of the administration,” Parets said. “Because of that, I'm actually quite confident that we're going to continue to make strides on these issues.”