[Senate Report 110-82]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 199
110th Congress                                                   Report
 1st Session                                                     110-82



                 June 13, 2007.--Ordered to be printed


  Mr. Dodd, from the Committee on Banking, Housing and Urban Affairs, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1612]

    The Committee on Banking, Housing and Urban Affairs, having 
had under consideration an original bill (S. 1612) to amend the 
penalty provisions in the International Emergency Economic 
Powers Act, and for other purposes, reports favorably thereon 
and recommends that the bill do pass.

                               I. PURPOSE

    The International Emergency Economic Powers Act, also known 
as `IEEPA,' codified presidential national emergency powers to 
investigate and impose controls on transactions as well as 
freeze foreign assets under the jurisdiction of the United 
States. The International Emergency Economic Powers Enhancement 
Act (hereafter `the Act') amends Section 206 for the purpose of 
increasing penalties against violators of sanctions law. The 
Act would advance foreign policy objectives and protect the 
national security of the United States by providing the 
Department of the Treasury and other federal agencies greater 
ability to deter wrongful investment and hold violators 
accountable for their actions.

                             II. BACKGROUND

    For thirty years, presidents of the United States have 
widely exercised their authorities under the International 
Emergency Economic Powers Act (50 U.S.C. Chapter 35). Under 
this statute, a president declares a national emergency with 
respect to an ``unusual and extraordinary threat'' posed by a 
country or transnational group. Section 1705 of the law details 
the president's specific authorities to impose economic 
sanctions against these threats, regulating and prohibiting 
foreign exchange transactions, bank payments or credit 
transfers, and the importing or exporting of currency or 
securities, among other powers.
    The Office of Foreign Assets Control (OFAC) at the 
Department of Treasury is principally designated to administer 
and enforce these economic sanctions activities, in 
coordination with agencies at the Departments of State, 
Homeland Security, and Justice. Ultimately, however, as Under 
Secretary of the Treasury for Terrorism and Financial 
Intelligence Stuart Levey pointed out in testimony before the 
Committee on March 21, 2007, the cooperation of private firms 
is critically important in the success of an economic sanctions 
regime. Without their adherence to relevant United States laws 
and regulations, it would be nearly impossible to prevent 
wrongful investment. By and large, according to the Department 
of the Treasury, companies meet their sanctions obligations, 
steering clear of countries and groups designated as threats to 
the United States. But when private industry does not comply, 
OFAC imposes penalties in accordance with Section 1705 of the 
International Emergency Economic Powers Act (IEEPA). Currently, 
penalties applied by OFAC remain relatively low. The original 
penalty amount was set at $10,000 in the IEEPA of 1977. Other 
than an inflation adjustment raising the level to $11,000, 
there were no increases until the renewal of the USA PATRIOT 
Act in 2005 (Public Law 109-177) raised the level to $50,000.

                      III. DESCRIPTION OF THE BILL

    In unanimously approving the International Emergency 
Economic Powers Enhancement Act, the Committee recognized that 
current penalties are neither adequate nor proportionate in 
many cases, for deterring companies from investing in bad 


    The Act would increase civil fines to $250,000 or twice the 
amount of the transaction. Such a change in law would allow the 
United States government to impose a penalty commensurate with 
the scope of the crime. Conversely, today, if a person makes a 
single illegal transaction, he/she will be fined $50,000, 
regardless of the size of the transaction. Rather than impose a 
single fine to fit every violation, the Act would ensure that 
penalties reflect the seriousness of a violation.
    In addition, the Act would increase criminal penalties to 
$1,000,000 with a maximum jail sentence of 20 years. The Act 
further clarifies the purpose of these criminal penalties to be 
imposed on a person who intentionally commits or helps support 
others' violations of certain United States sanctions laws.
    Two recent cases help illustrate the need for these 
increases in penalties. According to OFAC, a large foreign bank 
with a U.S. presence recently processed 42 transactions 
totaling $55 million through the United States, in violation of 
OFAC sanctions against Iran, Sudan and Cuba. Under current law 
the maximum penalty OFAC could impose for these violations 
would be approximately $1.3 million, an apparently 
insignificant amount to a multi-national bank. In another 
example, a U.S. commodities brokerage firm engaged in a single 
transaction involving commodities from Sudan, valued at $1.4 
million. Because only a single transaction was involved, the 
maximum penalty was limited to $11,000 under then-applicable 
law. According to OFAC, even today's maximum penalty of $50,000 
seems disproportionately low for such a violation.
    The Act would update these penalties to improve sanctions 
enforcement. For the foreign bank, penalties could have been 
over $100 million. For the commodities brokerage company, the 
criminal penalty could be as high as $2.8 million based on the 
value of the transactions.

Effective Date

    Under the Act, the changes in penalties would apply to all 
pending enforcement actions as well as those commenced on or 
after the date of the Act's enactment.


    The Committee notes that under Section 1703 of IEEPA the 
president is required in every possible instance to ``consult 
with the Congress before exercising any of the authorities 
granted by this chapter'' and to ``consult regularly with the 
Congress so long as such authorities are exercised.'' In 
addition to ``Periodic follow-up reports'' to Congress every 
six months as stipulated in Section 1704(c) of this statute, 
the president, through his designees shall provide detailed 
reports on the use of IEEPA authorities to the Committee. OFAC 
shall pay particular attention in these reports to the exercise 
of United States foreign policy toward the Islamic Republic of 
Iran and the Republic of Sudan as well as organizations 
affiliated with Al Qaeda, the Islamic Resistance Movement 
(Hamas), Hezbollah, Jemaah Islamiyah, Abu Sayyaf, and the 
Revolutionary Armed Forces of Colombia--People's Army (FARC).

Export Administration

    The Committee recognizes that the International Emergency 
Economic Powers Act has been applied to authorities outside 
this law's principal purpose of establishing a framework for 
the government to impose foreign economic sanctions. 
Specifically, for the last six years, export controls on `dual 
use' technologies have been implemented through the invocation 
    In absence of more robust authorities and penalties 
previously in force by authorization of the Export 
Administration Act (EAA), the Bureau of Industry and Security 
(BIS) at the Department of Commerce has been compelled to 
invoke IEEPA in its execution of investigations and export 
enforcement activities. According to BIS, such practices have 
severely hampered investigations and caused reluctance among 
some prosecutors to bring criminal indictments for export 
control violations. In addition, the ability to lead other 
countries to adopt comprehensive export control legislation, as 
called for by U.N. Security Council Resolution 1540, is 
undercut by the absence of the United States' own EAA 
    As the Congressional Research Service recently reported, 
since 1989, a long-term extension of the Export Administration 
Act has not been enacted. The export control process was 
continued from 1989-1994 by temporary statutory extensions of 
EAA. Thereafter, it was periodically reauthorized for short 
periods of time, most recently expiring in August 2001.
    The Committee does not consider the International Emergency 
Economic Powers Enhancement Act a substitution for legislation 
required to update and renew the Export Administration Act. 
Enacting meaningful export control legislation remains an 
important objective of this Committee to bar highly sensitive 
products and know-how from rogue states and terrorist groups, 
to protect critical technology, and to help curb the 
proliferation of nuclear, biological, and chemical weaponry.
    On March 21, 2007, the Committee on Banking, Housing, and 
Urban Affairs conducted a hearing entitled ``Minimizing 
Potential Threats from Iran: Assessing the Effectiveness of 
Current US Sanctions on Iran.'' In his testimony, Acting Under 
Secretary for the BIS Mark Foulon concurred with this 
assessment, pointing out that the Commerce Department's export 
control investigations of 16 cases under these authorities last 
year led to penalties totaling only $1.6 million in fines.

                              IV. HEARINGS

    The Committee on Banking, Housing, and Urban Affairs held 
the following public hearing on United States sanctions policy:
    On March 21, 2007: Minimizing Potential Threats from Iran: 
Assessing the Effectiveness of Current U.S. Sanctions on Iran. 
Witnesses: Ambassador R. Nicholas Burns, Under Secretary for 
Political Affairs, Department of State; Honorable Stuart Levey, 
Under Secretary for Terrorism and Financial Intelligence, 
Department of the Treasury; Mr. Mark Foulon, Acting Under 
Secretary for the Bureau of Industry and Security, Department 
of Commerce


    The Department of the Treasury submitted the following 
letter of endorsement for the Act.

                                                      May 15, 2007.
Hon. Christopher J. Dodd,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Department of the Treasury strongly 
supports the International Emergency Economic Powers 
Enhancement Act of 2007 and appreciates the leadership of the 
Chairman and Ranking Member in proposing legislation that 
significantly enhances the enforcement and deterrent effects of 
the International Emergency Economic Powers Act (IEEPA) 
    Through IEEPA, the President may respond to unusual and 
extraordinary threats originating in substantial part outside 
the United States by, among other things, prohibiting 
transactions associated with the identified threat. The current 
penalties under IEEPA do not constitute an effective deterrent 
to entities that violate IEEPA by engaging in prohibited 
transactions. This legislation will remedy that problem.
    IEEPA is an important tool in the effort to combat 
terrorist financing and other illicit activity such as WMD 
proliferation. The Department urges the Committee to approve 
this critical improvement to IEEPA.
    The Office of Management and Budget has advised there is no 
objection from the standpoint of the President to the language 
submitted to the Committee by the Department of the Treasury.
                                   Kevin I. Fromer,
               Assistant Secretary for Legislative Affairs,
                                        Department of the Treasury.


    Section 11(b) of the Standing Rules of the Senate, and 
Section 403 of the Congressional Budget Impoundment and Control 
Act, require that each committee report on a bill contain a 
statement estimating the cost of the proposed legislation. The 
Congressional Budget Office has provided the following cost 
estimate and estimate of costs of private-sector mandates.

                                                     June 13, 2007.
Hon. Christopher J. Dodd,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the International 
Emergency Economic Powers Enhancement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Daniel 
                                                   Peter R. Orszag.

International Emergency Economic Powers Enhancement Act

    The bill would amend the International Emergency Economic 
Powers Act (IEEPA) to increase the maximum civil and criminal 
penalties that may result from violations of that act. IEEPA 
authorizes the President to investigate, regulate, and prohibit 
certain financial transactions following a declaration of an 
``unusual and extraordinary threat'' originating outside the 
United States. Under current law, individuals and entities that 
violate regulations promulgated under IEEPA are subject to 
civil penalties of up to $10,000, and criminal penalties of up 
to $250,000 and 10 years' imprisonment. Under this legislation, 
the maximum penalty would be increased to $250,000 for civil 
violations and $1 million and 20 years' imprisonment for 
criminal violations.
    Enacting this bill could increase federal revenues as a 
result of the collection of additional civil and criminal 
penalties assessed for violations of IEEPA regulations. Civil 
penalties are typically assessed by the Office of Foreign 
Assets Control (OFAC) of the U.S. Treasury, while criminal 
penalties are assessed in the federal courts. Amounts collected 
from civil penalties are recorded in the budget as revenues and 
are deposited into the General Fund of the Treasury. Criminal 
fines are recorded as revenues, then deposited in the Crime 
Victims Fund, and later spent. Based on information from OFAC 
and the Administrative Office of the United States Courts, CBO 
expects that the increases proposed by this legislation would 
affect relatively few cases per year. As such, we estimate that 
enacting this bill would probably have an insignificant effect 
on the federal budget over the next 10 years.
    This bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
    The CBO staff contact for this estimate is Daniel Hoople. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                      VII. COMMITTEE CONSIDERATION

    The Committee on Banking, Housing, and Urban Affairs met in 
open session on May 16, 2007, and ordered the bill reported, as