Treasury Should Keep Better Track of Blocked Foreign Assets

ID-81-01: Published: Nov 14, 1980. Publicly Released: Nov 14, 1980.

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The Department of the Treasury, through the Office of Foreign Assets Control (OFAC), regulates commercial and financial transactions with countries hostile to the United States by (1) restricting trade with such countries and their nationals, and (2) blocking their assets which are located in the United States or under U.S. jurisdiction. The restrictions seek to prevent designated hostile countries from acquiring dollar foreign exchange and to deny them the free use of their assets until political differences are resolved and American claims are satisfied. The controls which currently freeze certain foreign assets are based on emergency powers legislation. Treasury officials cite this emergency rationale, a Government policy of noninterference in owner investment discretion, and administrative cost considerations as reasons for not keeping close track of the assets or monitoring asset-holder practices. Under these circumstances, the Treasury cannot ensure that its controls are effective or that the interests of American claimants and the U.S. Government are being adequately protected. Major concerns are whether: (1) the system for implementing blocking controls and the Treasury's monitoring of the controls are adequate to ensure that designated hostile countries are denied the use of their dollar assets and earnings to the maximum practicable extent; (2) blocked assets are properly accounted for and their value preserved; and (3) a reliable basis exists on which to make policy and management decisions regarding the assets and related U.S. interests.

Treasury administrators have not required asset-holders to systematically report the assets they block or receive custody of, nor have they regularly inventoried the assets or monitored the holders to determine how the assets are identified and kept. As a result, the administrators frequently did not know what assets were blocked, who owned them, where they were located, or what they were worth. This lack of asset knowledge and virtually complete dependence on asset-holders made the Treasury unable to fully assess the program's effectiveness, give information on the assets' worth, and provide assurances that they were properly accounted for and managed. Blocked assets are presently turned over to State abandoned property offices as they receive custodial authority, but such transfers unnecessarily jeopardize owner and Treasury interests in the assets. Asset-holders who were contacted by GAO did not appear to possess a clear understanding of Treasury regulations. In addition, the Treasury has shown belated concern in maintaining asset values. U.S. Government claims, which are largely undetermined, do not compete with private claims for compensation generated from settlements negotiated and funded by blocked assets; this weakens the prospects for recovery of Government claims.

Recommendations for Executive Action

  1. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should use asset status reports and activity data to identify potential problem areas requiring followup.

    Agency Affected: Department of the Treasury

  2. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should revoke the licenses which permit the transfer of blocked assets to State administrations and amend the appropriate regulations to reflect this prohibition.

    Agency Affected: Department of the Treasury

  3. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should require the Director of OFAC to follow through on Treasury's prerogative to require asset-holders to periodically report new blockings, dispositions, and status of assets in custody.

    Agency Affected: Department of the Treasury

  4. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should require the Director of OFAC to establish and maintain master control records for blocked assets, based on acquired census data, periodic asset-holder reports, licensing activity, and other sources.

    Agency Affected: Department of the Treasury

  5. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should request the cooperation of Federal and State regulatory agencies to test asset-holder procedures or to verify asset data as necessary to ensure that blocking goals are being met and that asset knowledge is valid.

    Agency Affected: Department of the Treasury

  6. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should supplement OFAC monitoring efforts by obtaining random and timely feedback from asset-holders when new regulations are issued to find out if they are understood and correctly implemented.

    Agency Affected: Department of the Treasury

  7. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should use the data to be obtained on assets and asset-holder practices to determine at what value blocking of assets may be counter-productive and to establish a minimum amount at which assets should be blocked.

    Agency Affected: Department of the Treasury

  8. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should require State offices which already hold or receive blocked foreign assets to report them and to certify that the various asset custodial requirements are being adhered to.

    Agency Affected: Department of the Treasury

  9. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of Agriculture should, as recommended by GAO in October 1976, but rejected by Agriculture, "Include a provision in future Public Law 480 agreements which would permit the Department, under certain conditions, to take title to commodities any time before they arrive in the recipient country."

    Agency Affected: Department of Agriculture

  10. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of State should identify and fix the value of U.S. Government claims against Vietnam and other countries whose assets are blocked and include these claims in any settlement funded with blocked assets.

    Agency Affected: Department of State

  11. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of State should ensure that blocked U.S. Government proceeds originating from its assistance programs are first applied to related program claims against affected countries.

    Agency Affected: Department of State

  12. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of State should support the AID Administrator in recovering the $1.4 million remaining portion of the U.S. contribution to the Exchange Support Fund (ESF). Furthermore, the Secretary of the Treasury and the Attorney General should provide such assistance as the Administrator may require in recovering the funds.

    Agency Affected: Department of Justice

  13. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of State should support the AID Administrator in recovering the $1.4 million remaining portion of the U.S. contribution to the Exchange Support Fund (ESF). Furthermore, the Secretary of the Treasury and the Attorney General should provide such assistance as the Administrator may require in recovering the funds.

    Agency Affected: Department of the Treasury

  14. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of State should support the AID Administrator in recovering the $1.4 million remaining portion of the U.S. contribution to the Exchange Support Fund (ESF). Furthermore, the Secretary of the Treasury and the Attorney General should provide such assistance as the Administrator may require in recovering the funds.

    Agency Affected: Department of State

  15. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Administrator of AID should investigate whether the $1 million transfer came from the ESF and, if so, determine whether it was made in compliance with the working group's direction. If it was not in compliance, the Administrator should seek restoration of the funds and accumulated interest to the ESF and initiate recovery action for the U.S. Government.

    Agency Affected: United States Agency for International Development

  16. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Treasury should require the Director of OFAC to make a comprehensive census of the assets currently blocked pursuant to OFAC regulations.

    Agency Affected: Department of the Treasury

 

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