U.S. To Use IEEPA To Stop Iranian Banking Domestically

Today, March 29, Under Secretary for Political Affairs, Nicholas Burns, gave a statement to the Senate Foreign Relations Committee on the current state of affairs between the U.S. and Iran.^[1] He was direct in his assertions that “Iran must know that the world is united in our aim to deny it a nuclear weapon…..[and many nations] – including India, Egypt, and Brazil – support [this effort].”^[2]

However the U.S. is not troubled about acting against Iran on our own, under the International Emergency Economic Powers Act (IEEPA), we have sanctioned Iran’s Bank Sepah and cut off state-owned Iranian Bank Saderat from all access to the U.S. financial system. These steps have had a “snowball effect, as banks and businesses worldwide are recognizing the serious risk associated with Iran” and are starting to scale back their activities with Iran.^[3]

Burns asserted that Iran is one of the central bankers of global terrorism, and “the Departments of State and the Treasury have enlisted foreign support in efforts to deny suspect Iranian individuals and entities access to the international financial system.^[4] The termination of Iranian Bank Saderat’s U.S. authorization effectively prohibits one of Iran’s largest banks from conducting business in U.S. dollars.^[5]

The International Emergency Economic Powers Act (IEEPA) is a United States federal law that allows the President to identify any “unusual extraordinary threat” that originates outside the United States and to confiscate property and prohibit transactions in response.^[6] IEEPA falls under the National Emergencies Act, thus if an emergency is declared, under the act it must be renewed annually to remain in effect, and can be terminated by Congressional legislation.

Any authority granted to the President by § 1702 of IEEPA “may be exercised to deal with any unusual and extraordinary threat,^[7] but this may only be exercised to “deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.”^[8] There is no doubt that terrorism and threats to our national security can be declared an emergency or extraordinary threat, thus since the president has the power to prescribe, by means of instructions, licenses, or otherwise investigate, regulate, or prohibit; i) any transactions in foreign exchange;^[9] ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof;^[10] (iii) the importing or exporting of currency or securities, by any person, or with respect to any property, subject to the jurisdiction of the United States.^[11]

The fascinating part of IEEPA is that is has a seldom used (until recently) criminal provision that states, whoever willfully violates, or willfully attempts to violate, any license, order, or regulation issued under this chapter shall, upon conviction, be fined not more than $50,000, or, if a natural person, may be imprisoned for not more than twenty years, or both; and any officer, director, or agent of any corporation who knowingly participates in such violation may be punished by a like fine, imprisonment, or both.^[12] The result of this is that since the President may issue regulations, including “definitions, as may be necessary for the exercise” of IEEPA, he can effectively create federal national security crimes by executive order.^[13]

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^[1] R. Nicholas Burns, Under Secretary for Political Affairs, United States Policy Towards Iran, Testimony Before the Senate Foreign Relations Committee, March 29, 2007, available at http://www.state.gov/p/us/rm/2007/82374.htm (last visited March 29, 2007).
^[2] Id. He continued saying “The governments of Russia, China, Japan and our many European allies are [also] committed to our joint effort to thwart Iran from crossing the nuclear threshold.” These nations are all participating in an effort through the International Atomic Energy Agency.
^[3] Id. In 2006, several leading European banks reduced lending to Iran.
^[4] Id.
^[5] Id.
^[6] International Emergency Economic Powers Act, 50 U.S.C. § 1701 et. seq. (2007).
^[7] Id., at § 1701(a); it state further that the threat must have its “source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”
^[8] Id., at §1701(b)
^[9] Id., at §1702 (a)(1)(A)(i)
^[10] Id., at §1702 (a)(1)(A)(ii)
^[11] Id., at §1702 (a)(1)(A)(iii); §1702 (a)(1)(C) states that "when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes."
^[12] Id at § 1705(b)
^[13] Id., at §1704