Congressional Documents
39 006
105 th Congress
Report
HOUSE OF REPRESENTATIVES
1st Session
105 141
PROHIBITION ON FINANCIAL TRANSACTIONS WITH COUNTRIES SUPPORTING
TERRORISM ACT OF 1997
June 21, 1997.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. McCollum, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 748]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill (H.R.
748) to amend the prohibition of title 18, United States Code, against
financial transactions with terrorists, having considered the same,
report favorably thereon with an amendment and recommend that the bill
as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu thereof
the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Prohibition on Financial Transactions
With Countries Supporting Terrorism Act of 1997''.
SEC. 2. FINANCIAL TRANSACTIONS WITH TERRORISTS.
Section 2332d of title 18, United States Code, (relating to financial
transactions) is amended--
(1) in subsection (a)--
(A) by striking ``Except as provided in regulations issued by the
Secretary of the Treasury, in consultation with the Secretary of State,
whoever'' and inserting ``Whoever''; and
(B) by inserting ``of 1979'' after ``Export Administration Act''; and
(2) in subsection (b)(1), by inserting after ``1956(c)(4)'' the
following: ``, except that such term does not include any transaction
ordinarily incident to--
``(A) routine diplomatic relations among countries;
``(B) an official act by a representative of, or an act which is
authorized by and conducted on behalf of, the United States Government;
``(C) the broadcasting or reporting of news by organizations
regularly engaged in such activity; or
``(D) the provision of assistance intended to relieve human suffering;
``(E) the receipt of emergency medical services;
``(F) any postal, telegraphic, or other personal communication which
does not involve a transfer of anything of value;
``(G) the protection of intellectual property rights of any United
States person;
``(H) the performance of any contract or agreement that was entered
into before June 12, 1997, but not those renewed after such date;
``(I) the provision of hospitality or transportation services; or
``(J) the payment of a claim to any United States person''.
SEC. 3. REPORT ON EFFECTS OF ENACTMENT.
Beginning not later than one year after the date of enactment of this
Act, the Secretary of the Treasury, in consultation with the Secretary
of State, shall issue an annual report to Congress on--
(1) the impact of this prohibition on United States businesses; and
(2) any means by which a negative impact might be ameliorated.
PURPOSE AND SUMMARY
H.R. 748, the ``Prohibition on Financial Transactions With Countries
Supporting Terrorism Act of 1997,'' expands section 321 of the
``Antiterrorism and Effective Death Penalty Act of 1996'' by eliminating
overly permissive regulations promulgated by the Administration last
year and the authority to issue such regulations in the future. It
establishes, in place of the regulations, specific exceptions to the
prohibition, created by section 321, on engaging in financial
transactions with countries that have been designated as sponsors of
terrorism.
The effect of section 321 is to prohibit financial support of U.S.
persons by terrorist countries and all financial transactions by U.S.
persons with these countries, regardless of where these transactions
take place. The provision also authorizes the Department of the
Treasury, in consultation with the State Department, to make specific
exceptions to the ban through regulations.
In August of 1996, the Treasury Department published regulations in
relation to section 321 which essentially reversed the effect of the new
prohibition. The regulations permit all financial transactions with
terrorist list governments, except for transactions otherwise prohibited
by law or which pose a risk of furthering domestic terrorism. The
regulations prohibit U.S. persons from receiving unlicensed donations
and from engaging in financial transactions with respect to which the
U.S. person knows or has reasonable cause to believe that the financial
transaction poses a risk of furthering terrorist acts in the United
States.
H.R. 748 strips the executive branch of its authority to issue
regulations exempting transactions from the prohibition. It establishes
instead a legislative exception only for specified transactions. The
list of permitted activities, and transactions incident thereto,
include: routine diplomatic relations among countries; official acts by
representatives of the U.S. government; news reporting; humanitarian
assistance; emergency medical services; postal and telephone services;
the protection of intellectual property rights; hospitality or
transportation services; the fulfillment of existing contracts; and
payments of a claim to U.S. persons.
BACKGROUND AND NEED FOR THE LEGISLATION
On April 24, 1996, President Clinton signed the ``Antiterrorism and
Effective Death Penalty Act of 1996'' (Pub. L. 104 132). This
comprehensive legislation included reforms to the federal death penalty
laws, provided additional rights to crime victims, and increased
penalties for crimes of terrorism against the United States.
The forces of militant extremism in the Middle East and Africa are
among the greatest international dangers currently facing America and
its allies. The deadly threat posed by international terrorists in this
region of the world must not be underestimated. Yet, confronting this
threat and other terrorist threats around the globe means confronting
the countries which provide desperately needed support to these groups.
A handful of pariah states--Cuba, Libya, North Korea, Iran, Iraq,
Syria and Sudan--have been designated by the State Department, pursuant
to section 6(j) of the Export Administration Act, as terrorist
sponsoring countries or ``Terrorism List Governments.'' No one should
discount the significance of this designation. Without the support of
these countries, terrorists would literally not have a home, much less
the active assistance of government officials.
With regard to Sudan specifically, United Nations Ambassador
Richardson recently described this country as follows: ``The Sudanese
Government destabilizes its neighbors, supports terrorists, commits
human rights abuses against its own citizens, and pursues civil war in
the south.'' Clearly, the training and support of terrorists
occurring in Sudan are major contributors to the untold human suffering
caused by religious extremists in this region of the world.
There should be no higher priority for the United States in the
battle against terrorism than the elimination of foreign government
support for terrorists. This is why section 321 of the ``Antiterrorism
and Effective Death Penalty Act of 1996'' is a vital tool in this
battle.
Section 321 of the Antiterrorism Act (18 U.S.C. 2332d)
Section 321, which prohibits financial transactions between U.S.
persons and countries which have been designated as supporters of
terrorism, was drafted with a dual purpose in mind. First, it prohibits
financial support from terrorist countries to U.S. persons, thus
attempting to prevent the long-arm of terrorism from reaching the shores
of the United States through domestic entities. Second, and more
broadly, it prohibits all financial transactions by U.S. persons with
these countries, regardless of where these transactions take place. The
obvious goal of this language is to cut off terrorist sponsoring
governments from the economic benefit of doing business with U.S.
companies. Since five of the seven terrorism list governments are
already subject to economic sanctions as a result of executive order,
the immediate impact of the ban related to Sudan and Syria.
In response to administration concerns that the prohibition could
have unintended consequences, language was included in section 321 which
permitted the Secretary of the Treasury to issue regulations
establishing some exceptions to the prohibition. This broad authority
was mostly intended to cover routine diplomatic and consular relations.
In implementing section 321, the Treasury Department, through its Office
of Foreign Assets Control, issued the ``Terrorism List Governments
Sanctions Regulations,'' 31 CFR Part 596. Under these regulations, any
U.S. person may conduct financial transactions with a terrorist list
country, unless the person ``knows * * * or has reasonable cause to
believe that the transfer poses a risk of furthering terrorist acts in
the United States.'' This broad exception captures a much wider range of
activities than was originally intended.
31 CFR Part 596
In August of last year, the Treasury Department published its
regulations in relation to section 321 which effectively eliminated the
new prohibition. These regulations permit all financial transactions
with Sudan and Syria, other than those which pose a risk of furthering
domestic terrorism. The regulations prohibit U.S. persons from receiving
unlicensed donations and from engaging in financial transactions with
respect to which the United States person knows or has reasonable cause
to believe that the financial transaction poses a risk of furthering
terrorist acts in the United States.
In the view of the original sponsors of section 321, the regulatory
authority provided in the provision should not have been exercised in
this manner. This ``business as usual'' policy represents a step
backwards in the effort to pressure Syria and Sudan, as well as the
other five countries, from severing their ties to terrorist groups.
H.R. 748
H.R. 748 is intended to close the loophole created by the regulations
and to prohibit transactions other than those that are specifically
authorized in statute. The bill strips the executive branch of the
authority to issue regulations exempting transactions from the
prohibition. It establishes instead a list of legislative exceptions for
transactions ordinarily incident to a variety of activities.
HEARINGS
The Committee's Subcommittee on Crime held one (1) day of hearings on
H.R. 748. Testimony was received from six (6) witnesses, representing
the Departments of Treasury and State, World Vision Relief and
Development, ITT Sheraton, Crescent Investment Management, L.P., and the
Washington Institute for Near East Policy.
COMMITTEE CONSIDERATION
On June 12, 1997, the Subcommittee on Crime met in open session and
ordered reported the bill H.R. 748, as amended, by voice vote, a quorum
being present. On June 18, 1997, the Committee met in open session and
ordered reported favorably the bill H.R. 748, with amendment, by voice
vote, a quorum being present.
VOTE OF THE COMMITTEE
There were no recorded votes.
COMMITTEE OVERSIGHT FINDINGS
In compliance with clause 2(l)(3)(A) of rule XI of the Rules of the
House of Representatives, the Committee reports that the findings and
recommendations of the Committee, based on oversight activities under
clause 2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT FINDINGS
No findings or recommendations of the Committee on Government Reform
and Oversight were received as referred to in clause 2(l)(3)(D) of rule
XI of the Rules of the House of Representatives.
NEW BUDGET AUTHORITY AND TAX EXPENDITURES
Clause 2(l)(3)(B) of House rule XI is inapplicable because this
legislation does not provide new budgetary authority or increased tax
expenditures.
COMMITTEE COST ESTIMATE
In compliance with clause 7(a) of rule XIII of the Rules of the House
of Representatives, the Committee believes that the bill will have no
significant impact on the federal budget for fiscal years 1997 2002.
There will not be any significant costs incurred in carrying out H.R.
748.
CONSTITUTIONAL AUTHORITY STATEMENT
Pursuant to rule XI, clause 2(l)(4) of the Rules of the House of
Representatives, the Committee finds the authority for this legislation
in Article I, section 8 of the Constitution.
SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section states that this Act may be cited as the ``Prohibition
on Financial Transactions With Countries Supporting Terrorism Act of
1997.''
Sec. 2. Financial transactions with terrorists
This section amends 2332d of title 18, United States Code, by
striking the language ``Except as provided in regulations issued by the
Secretary of the Treasury, in consultation with the Secretary of State,
whoever'' and inserting ``Whoever.'' This change removes the broad
authority currently enjoyed by the Departments of State and Treasury to
exempt individuals or corporations from the prohibition on financial
transactions with terrorist list countries.
Subsection (2) of this section lists specific exceptions to the ban
on financial transactions with terrorist countries. This section states
that a financial transaction, ``does not include any transaction
ordinarily incident to--'' (A) routine diplomatic relations among
countries; (B) official acts by representatives of, or acts which are
authorized by and conducted on behalf of, the United States Government;
(C) the broadcasting or reporting of news by organizations regularly
engaged in such activity; (D) the provision of assistance intended to
relieve human suffering; (E) the receipt of emergency medical services;
(F) any postal, telegraphic, or other personal communication which does
not involve a transfer of anything of value; (G) the protection of
intellectual property rights of any United States person; (H) the
performance of any contract or agreement that was entered into before
June 12, 1997, but not those renewed after such date; (I) the provision
of hospitality or transportation services; or (J) the payment of a claim
to any United States person.
The Committee intends by the words ``ordinarily incident to'' to
exclude from the prohibition any financial transaction that is
necessarily connected to or arising from the performance of a particular
activity authorized by this legislation. Such transactions include fees
and travel related expenses. For example, a U.S. government employee
conducting official business in a terrorist list country may incur
expenses relating to air travel, living expenses, and miscellaneous fees
that are unavoidably connected to the government of that country.
Similarly, those involved in the delivery of humanitarian assistance or
news reporting may engage in such transactions if they are related to
the permitted activity. Also, any filing fees required in connection
with the making of a legal claim would not be prohibited. Some
incidental transactions, such as the purchase of postage stamps or the
use of a telephone, are specifically exempted by the legislation.
With regard to the exception for broadcasting or reporting of news,
the Committee notes that this applies only to those whose occupation is
associated with journalism, including editing and technical services.
This exception is not intended to allow any person to engage in a
business transaction with a terrorist list country so long as such
person reports on his experiences.
The Committee expects that a manager's amendment will be adopted by
the full House when it gives consideration to H.R. 748. This amendment
will allow the purchase of humanitarian assistance. The Committee
intends to allow for the transfer of humanitarian assistance, which may
be donated to, or purchased by, the recipient. This assistance may
include medical services, supplies and equipment. While the Committee
intends to permit this assistance to be provided both with or without
charge to the person or entity receiving the assistance, this paragraph
would not permit the entity providing such assistance under this section
to engage in other related commercial activities such as advertising or
manufacturing health care products in the terrorist state.
Paragraph (H) relating to the performance of any contract or
agreement entered into before June 12, 1997, is intended to protect
those contracts that were established prior to the formal consideration
of this legislation. If a party has an option to renew a contract
sometime after June 12, 1997, such renewal should not be considered as a
continuation of the original contract and would not be included in the
exception in section 321. This is true even if the party gave
consideration for such option to renew.
AGENCY VIEWS
There were no agency views received on H.R. 748 other than testimony
that was submitted at the hearing held on June 10, 1997.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3 of rule XIII of the Rules of the House of
Representatives, changes in existing law made by the bill, as reported,
are shown as follows (existing law proposed to be omitted is enclosed in
black brackets, new matter is printed in italic, existing law in which
no change is proposed is shown in roman):
SECTION 2332D OF TITLE 18, UNITED STATES CODE
2332d. Financial transactions
(a) Offense.--Except as provided in regulations issued by the
Secretary of the Treasury, in consultation with the Secretary of State,
whoever Whoever , being a United States person, knowing or having
reasonable cause to know that a country is designated under section 6(j)
of the Export Administration Act of 1979 (50 U.S.C. App. 2405) as a
country supporting international terrorism, engages in a financial
transaction with the government of that country, shall be fined under
this title, imprisoned for not more than 10 years, or both.
(b) Definitions.--As used in this section--
(1) the term ``financial transaction'' has the same meaning as in
section 1956(c)(4) , except that such term does not include any
transaction ordinarily incident to--
(A) routine diplomatic relations among countries;
(B) an official act by a representative of, or an act which is
authorized by and conducted on behalf of, the United States Government;
(C) the broadcasting or reporting of news by organizations regularly
engaged in such activity; or
(D) the provision of assistance intended to relieve human suffering;
(E) the receipt of emergency medical services;
(F) any postal, telegraphic, or other personal communication which
does not involve a transfer of anything of value;
(G) the protection of intellectual property rights of any United
States person;
(H) the performance of any contract or agreement that was entered
into before June 12, 1997, but not those renewed after such date;
(I) the provision of hospitality or transportation services; or
(J) the payment of a claim to any United States person ; and
(2) the term ``United States person'' means any--
(A) United States citizen or national;
(B) permanent resident alien;
(C) juridical person organized under the laws of the United States; or
(D) any person in the United States.
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