In a press conference overshadowed by the abrupt departure of John Bolton as national security advisor, the Trump administration unveiled a new executive order (E.O.) related to terror financing last week. While reporters shouted questions at Secretary of State Mike Pompeo and Secretary of Treasury Steve Mnuchin about the personnel turmoil, the expansion of counterterrorism powers went largely unexamined.
So, what does the new EO do? And what is the backstory to why the administration decided it was needed now?
Background
Ten days after September 11, 2001, President George W. Bush, in a joint congressional session, declared financial war against terrorists. While the Twin Towers and the Pentagon were still smoldering, Bush said, “we will starve the terrorists of funding…and we will pursue nations that provide aid or safe haven to terrorism.”
A few days later, Bush signed Executive Order 13224, which provided expanded legal authorities for the Departments of State and Treasury to designate individuals and organizations as “Specially Designated Global Terrorists” (SDGTs). Since the inception of E.O. 13224, the U.S. government has designated (and in some cases later delisted) more than 1,000 entities and individuals.
Prior to September 25, 2001, the United States used two primary tools to designate terrorists. In 1995, President Bill Clinton issued Executive Order 12947 in an effort to provide the State and Treasury Departments the legal authority to designate terrorist groups who were disrupting the “Middle East Process.” E.O. 12947 was narrowly scoped and did not provide the United States the ability to sanction groups or individuals disconnected from violence in the Middle East. Two years later, Congress passed legislation providing the State Department the ability to designate Foreign Terrorist Organizations (FTOs) pursuant to the Immigration and Nationality Act.
Neither E.O. 12947 nor the FTO legal authorities provided the U.S. government sufficient powers to curb the financing of terrorism. The government cited E.O. 12947 sparingly, with no more than a handful of groups and individuals ultimately being designated. The FTO sanction was inherently limited to organizations and, thus, could not be directed against specific individual terrorist financiers.
Simply put, terrorism designations, much like the threat posed by al-Qaeda, were an afterthought before 9/11. Between the FTO list and E.O. 12947, fewer than 50 individuals and entities were sanctioned as terrorists under U.S. law before September 11, 2001. After 9/11, the U.S. government began aggressively sanctioning terrorists. It had no choice: The 9/11 Commission found that al-Qaeda operatives had abused the formal U.S. financial system when they cashed checks, made bank deposits and ATM transactions as they prepared for their deadly skyjackings.
E.O. 13224, issued in the days after 9/11, represented a practical manifestation of Bush’s rhetoric to starve the terrorists of their financing, but since its adoption, the underlying legal bases for State and Treasury Department designations remained unaltered. As such, E.O. 13224 didn’t adapt to changing legal interpretations or the evolving threat landscape.
That changed last week when President Donald Trump updated E.O. 13224 to expand both State and Treasury’s ability to wield sanctions against terrorists. What are the practical implications related to the president’s recent terrorism finance decision-making?
The New E.O.
First, the termination of E.O. 12947, which transpired at the same time as the E.O. 13224’s revisions, went largely unnoticed. Cynics could argue that the termination of the Middle East-specific terrorism sanctions regime, set up under Clinton, is yet another demonstration of the Trump administration’s failures to kick-start a Middle East Peace process. It has floundered since Jared Kushner assumed diplomatic responsibility from the State Department, and in recent days, appears to be even more adrift with a 30-year-old Kushner aide now in charge of it.
But, in truth, E.O. 12947 had been obsolete for nearly two decades. Its scope, focusing on Middle East terrorist actors, reflected a point in time when Middle East terrorists created the most mayhem. Those days, when the likes of Abu Nidal killed indiscriminately from his Middle East havens, have been surpassed by global jihadist networks. The Trump administration’s decision to terminate E.O. 12947 was the right move because it did away with a bureaucratic artifact.
Second, Trump’s modernization of E.O. 13224 expands the array of targets the State Department can designate. The State Department’s’s role of sanctioning terrorists is often forgotten or, at best, misunderstood. From 2008 to 2018, I directed the department’s efforts to designate FTOs as well as individuals and entities under E.O. 13224. During that time, I either wrote, edited, or reviewed hundreds of dossiers of individuals and groups eventually designated terrorists by Secretaries of State Condoleeza Rice, Hillary Clinton, John Kerry, Rex Tillerson, Mike Pompeo, and all of the acting secretaries in-between. The designations process is laborious and each designation package is crafted as a thesis on a terrorist. Nearly every sentence in the designation dossier cites unclassified or classified sources of information – all of which are vetted by State, Treasury and Justice Department lawyers.
Under previous legal authorities, the State Department had a particularly difficult time designating leaders of groups. Under my watch we were able to designate leaders of terrorist groups like ISIS’ Abu Bakr al-Baghdadi and Jabhat al-Nusrah’s Abu Mohammed al-Jolani, and many others, but what you’d think is straightforward never was. For example, E.O. 13224 required the State Department to demonstrate that the leaders of groups also played an active role in directing operational activities associated with their group. A claim of credit for an attack by a leader by itself would not satisfy the previous requirements of section 1(b) of E.O. 13224, which permitted the secretary of State to designate, “foreign persons who committed, or to pose a significant risk of committing, acts of terrorism.”
The modernization of E.O. 13224 now provides the State Department the explicit authority to designate, “leaders of an entity.” In simple terms, as the State Department’s Counterterrorism Bureau’s Coordinator, Nathan Sales, told the Wall Street Journal recently, the Department would not have to develop elaborate dossiers to designate future leaders of terrorist groups. Another important change for the State Department in the updated E.O. is new language that says the secretary can designate individuals who have, “participated in training to commit acts of terrorism.” These two straightforward and commonsense changes will hopefully streamline and accelerate the State Department’s terrorist designations process.
Third, the Treasury stands to benefit from E.O. 13224 section 1F(b), which gives the secretary of the Treasury, in consultation with the secretary of State, the ability to take action against bankers and account managers that allow their services to be utilized by terrorists. This new language sends a warning to the financial industry that they could lose access to the U.S. dollar if they provide correspondent banking services to bad actors.
The modernization of E.O. 13224 is a natural extension of the financial warfare the United States declared on its enemies nearly two decades ago, and they are welcomed changes.
But terrorist designations still rely on the priorities and choices of the administration in power, and one of today’s most dangerous terrorism threats is not being addressed adequately. None of the two dozen individuals and groups designated terrorists by the Departments of State and Treasury last week were overseas white supremacist groups.
No matter how many underlying changes the U.S. government makes to the underlying E.O. 13224, the true power of U.S. sanctions system will never be realized until State and Treasury target a broader array of targets – including violent white nationalists.