Q+A-How U.S. financial sanctions on Libya might work

Written by Reuters

( February 26, Washington DC, Sri Lanka Guardian) The United States on Friday imposed sanctions on the Libyan government, targeting its longtime leader Muammar Gaddafi, his family and other senior officials.

President Barack Obama signed an executive order freezing any financial assets tied to Gaddafi's government that were held by U.S. banks and institutions throughout the world. [ID:nN25111201]

Following are some questions and answers on how the United States imposes and enforces sanctions, and what legal authorities would be required.

CAN THE U.S. TREASURY FREEZE LIBYAN ASSETS?

Obama's executive order clears the way for the sanctions to be imposed. Various executive orders exist targeting governments that are accused of oppressing their people or that are seen as security threats to the United States, including Iran, Sudan, Zimbabwe and Myanmar. Other executive orders target behaviors such as financing of terrorism, proliferation of weapons of mass destruction or narcotics trafficking.

HOW CAN OBAMA IMPOSE AN EXECUTIVE ORDER?

Based on an assessment of the situation or threat, he has declared a "national emergency" under authorities granted by the National Emergencies Act and the International Emergency Economic Powers Act. This allows an executive order blocking transactions with targeted parties and freezing their assets.

In addition, if the U.N. Security Council were to issue a resolution ordering sanctions on a country, Obama could issue an executive order to implement those sanctions, allowing the Treasury to act.

HOW DO FINANCIAL SANCTIONS WORK?

Once an order is issued, the Treasury's Office of Foreign Assets Control identifies individuals, companies and other entities linked to the targeted regime or that show evidence of engaging in the targeted behaviors. It puts them on a list of "specially designated nationals," which blocks Americans from engaging in transactions with them. Assets they may have under U.S. jurisdiction are frozen. Financial institutions are notified to scrutinize transactions for possible links to the blacklisted individuals or entities. The aim is to deny them access to the international financial system.

HOW EFFECTIVE ARE FINANCIAL SANCTIONS

They have been effective in closing off access to the financial system for certain entities, such as accused terrorist financing networks, but it not clear whether they are effective in changing governments' policies or behavior.

In 2005, the blacklisting of Macau's Banco Delta Asia shut down North Korea's main conduit to the international financial system. Both U.S. and foreign banks declined transactions with the bank, and the action became a major issue in nuclear talks with Pyongyang.

The strengthening of sanctions against Iran last year over its nuclear and missile programs has hurt Iran's economy, cutting off access to imported materials. But there is little evidence it has had any effect on Tehran's nuclear program. Iran has also been adept at creating new shell companies to conceal transactions, Treasury officials say.

But others argue that U.S. sanctions on Libya helped push Gaddafi to renounce his country's programs to develop weapons of mass destruction and open Libyan territory to international weapons inspectors. Washington lifted those sanctions in 2004.

COULD THE U.S. GOVERNMENT SEIZE LIBYAN ASSETS IN COURT?

Yes. The U.S. Justice Department could go to federal court to try to seize any assets, such as money or property, that the government believes are the proceeds from alleged illegal activity. It can be a particularly lengthy process to seize assets, as it is subject to challenges by the owners and appeals. The process, known as civil asset forfeiture, can be undertaken if the funds from illicit activity overseas are found in the United States, either in bank accounts or in the form of property.

( For example, the Justice Department has sought to seize two properties, including a luxury Manhattan apartment, that are believed to have ties to alleged corrupt activities by the former president of Taiwan and his family. )

(Reporting by David Lawder, Jeremy Pelofsky and Alister Bull)