Saturday, August 06, 2016

Obama’s Cash Payment to Iran Was More Than a Ransom — It Broke Criminal Law

The president hoped to camouflage what he knew to be against the law.

By Andrew C. McCarthy — August 6, 2016
NOT HOSTAGE RANSOM. US President Barack Obama during a press conference in the briefing room at the Pentagon in Arlington, Virginia, USA, 04 August 2016. Photo by Shawn Thew/EPA
President Barack Obama during a press conference in the briefing room at the Pentagon in Arlington, Virginia, USA, 04 August 2016. Photo by Shawn Thew/EPA

Did it ever occur to President Obama to ask why he couldn’t just cut a check to the Iranian regime?

Outrage broke out this week over the revelation that Obama arranged to ship the mullahs piles of cash, worth $400 million and converted into foreign denominations, reportedly in an unmarked cargo plane. The hotly debated question was whether the payment, which the administration attributes to a 37-year-old arms deal, was actually a ransom paid for the release of American hostages Tehran had abducted.

It is a waste of time to debate that point further. The Iranians have bragged that the astonishing cash payment was a ransom — and Obama has been telling us for months that we can trust the Iranians. The hostages were released the same day the cash arrived. One of the hostages has reported that the captives were detained an extra several hours at the airport and told they would not be allowed to leave until the arrival of another plane — inferentially, the unmarked cargo plane ferrying the cash. The reason American policy has always prohibited paying ransoms to terrorists and other abductors is that it only encourages them to take more hostages. And, as night follows day, Iran has abducted more Americans since Obama paid the cash. No matter how energetically the president tries to lawyer the ransom issue, if it looks like a duck, and quacks like a duck . . . 

More worth examining is why the transaction took the bizarre form that it did. To cut to the chase, I believe it was to camouflage — unsuccessfully — the commission of felony law violations.

The Wall Street Journal has reported that the Justice Department strongly objected to the cash payment to Iran. As we shall see, that should come as no surprise. What is surprising is the Journal’s explanation of Justice’s concerns: Department officials, it is said, fretted that the transaction looked like a ransom payment. I don’t buy that. It is not a federal crime to pay a ransom; just to receive one. Our government’s stated disapproval of paying ransoms is a prudent policy, not a legal requirement. The Justice Department’s principal job is to enforce the laws, not to ensure good policy in foreign relations. It seems far more likely that Justice was worried that the transaction was illegal.

If they were, they had good reasons.

At a press conference Thursday, Obama remarkably explained, “The reason that we had to give them cash is precisely because we are so strict in maintaining sanctions and we do not have a banking relationship with Iran.” Really Mr. President? The whole point of sanctions is to prohibit and punish certain behavior. If you — especially you, Mr. President — do the precise thing that the sanctions prohibit, that is a strange way of being “so strict in maintaining” them.

Now, the sanctions at issue exclude Iran from the U.S. financial system by, among other things, prohibiting Americans and financial institutions from engaging in currency transactions that involve Iran’s government. Contrary to the nuclear sanctions that Obama’s Iran deal (the “Joint Comprehensive Plan of Action” or JCPOA) attempts to undo, the sanctions pertinent here were imposed primarily as a result of Iran’s support for terrorism. That is significant. In pleading with Congress not to disapprove the JCPOA, Obama promised lawmakers that the terrorism sanctions would remain in force.

Terrorism-related sanctions against Iran trace back to the early 1980s, shortly after the jihadist regime overthrew the shah, stormed the American embassy, took hostages, and triggered Hezbollah’s killing sprees. But the sanctions most relevant for present purposes stem from President Clinton’s 1995 invocation of federal laws that deal with national emergencies caused by foreign aggression.

Clinton concluded that Iran had caused such an emergency by, among other things, “its support for international terrorism.” Note that this was even before Iran killed 19 members of the U.S. Air Force in the 1996 Khobar Towers bombing in Saudi Arabia.

To this day, Iran remains on our government’s list of state sponsors of terrorism. Clinton’s state-of-emergency declaration has been annually renewed ever since. Let that sink in: Notwithstanding Obama’s often shocking appeasement of Tehran, he has been renewing the state of emergency since 2009 — most recently, just five months ago. Indeed, it is worth noting what the Obama State Department’s latest report on “State Sponsors of Terrorism” has to say about Iran. This is from the first paragraph:
Designated as a State Sponsor of Terrorism in 1984, Iran continued its terrorist-related activity in 2015, including support for [Hezbollah], Palestinian terrorist groups in Gaza, and various groups in Iraq and throughout the Middle East. In 2015, Iran increased its assistance to Iraqi Shia terrorist groups[.] . . . Iran used the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) to implement foreign policy goals, provide cover for intelligence operations, and create instability in the Middle East. The IRGC-QF is Iran’s primary mechanism for cultivating and supporting terrorists abroad.
It is due to this atrocious record that Congress pressed Obama to maintain and enforce anti-terrorism sanctions, which the administration repeatedly committed to do. This commitment was reaffirmed by Obama’s Treasury Department on January 16, 2016, the “Implementation Day” of the JCPOA. Treasury’s published guidance regarding Iran states that, in general, “the clearing of U.S. dollar- or other currency-denominated transactions through the U.S. financial system or involving a U.S. person remain prohibited[.]” (See here, p.17, sec. C.14.) I’ve added italics to highlight that it is not just U.S. dollar transactions that are prohibited; foreign currency is also barred. Obama’s cash payment, of course, involved both — a fact we’ll be revisiting shortly.

Treasury’s guidance cites to what’s known as the ITSR (Iranian Transactions and Sanctions Regulations), the part of the Code of Federal Regulations that implements anti-terrorism sanctions initiated by President Clinton under federal law. The specific provision cited is Section 560.204, which states:
The exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran or the Government of Iran is prohibited. [Emphasis added.]
The regulation goes on to stress that this prohibition may not be circumvented by exporting things of value “to a person in a third country” when one has “knowledge or reason to know that” such things are “intended specifically for supply, transshipment, or reexportation, directly or indirectly, to Iran or the Government of Iran.

To summarize, the anti-terrorism sanctions are still in effect, a fact the administration has touted many times. Obama conceded at his press conference both that these sanctions are still in effect and that they applied directly to his $400 million pay-out to our terrorist enemies. But here’s the president’s problem: While he is correct that the sanctions barred him from sending Iran a check or wire transfer, that is not all they forbid — not by a long shot. They also make it illegal to do what he did.

As noted above, the sanctions prohibit transactions with Iran that touch the U.S. financial system, whether they are carried out in dollars or foreign currencies. The claim by administration officials, widely repeated in the press, that Iran had to be paid in euros and francs because dollar-transactions are forbidden is nonsense; Americans are also forbidden to engage in foreign currency transactions with Iran.

Obama had our financial system issue U.S. assets that were then converted to foreign currencies for delivery to Iran. Both steps flouted the regulations, which prohibit the clearing of currency of any kind if Iran is even minimally involved in the deal; here, Iran is the beneficiary of the deal.

The regs further prohibit supplying things of value to Iran, regardless of whether it is done “directly or indirectly.” Expressly included in the “indirect” category are transfers of assets to another country with knowledge that the other country will then forward the assets, in some form, to Iran. That’s exactly what happened here, with Obama pressing the Swiss and Dutch into service as intermediaries.

Although these regulations leave no room for doubt that their point is to prevent and criminalize things like sending $400 million in cash to the world’s leading sponsor of terrorism, the ITSR adds another reg for good measure. Section 560.203 states:
Evasions; attempts; causing violations; conspiracies: . . . Any transaction . . . that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this part is prohibited. . . . Any conspiracy formed to violate any of the prohibitions set forth in this part is prohibited.
By his own account, President Obama engaged in the complex cash transfer in order to end-run sanctions that prohibit the U.S. from having “a banking relationship with Iran.” The point of the sanctions is not to preventbanking with Iran; it is to prevent Iran from getting value from or through our financial system — the banking prohibition is a corollary. And the point of sanctions, if you happen to be the president of the United States sworn to execute the laws faithfully, is to follow them — not pat yourself on the back for keeping them in place while you willfully evade them. The president’s press conference is better understood as a confession than an explanation.

Oh, and there is also Section 560.701, which makes clear that willful violations of the regulations constitute serious felony offenses under federal criminal law — punishable by up to 20 years’ imprisonment.

I hope you’re not lawed out, because there are a couple of other criminal statutes to consider.
The first is the law against providing material support to terrorists, Section 2339A of the federal penal code. It says that anyone who provides resources — including “currency or monetary instruments” — to a person or entity with knowledge that they are to be used in the preparation or carrying out of terrorism offenses is guilty of a serious felony. I’ve italicized “knowledge” to underscore that intent is not required; to be guilty, you just need to know.

As we note above, the Obama administration has just reaffirmed that Iran remains a state sponsor of terrorism. Moreover, as our editors recounted in Friday’s National Review editorial:
[Secretary of State] John Kerry even admitted in January that funds channeled to Iran as part of the nuclear deal would “end up in the hands of the IRGC [Iran’s Revolutionary Guard Corps] or other entities, some of which are labeled terrorists.”
No doubt: The IRGC’s Quds Force is a formally designated terrorist organization, as, of course, is Hezbollah, Iran’s forward jihadist militia with which the IRGC colludes. And as Tom Joscelyn recently pointed out, Iran continues to harbor members of al-Qaeda (three of whom were just formally designated as terrorists).

In sum, the Obama administration has provided Iran with $400 million under circumstances in which it well knows that at least some of this cash will be used for terrorism. Indeed, as the editors point out, by providing the money in cash, Obama makes it more likely that it will be used for terrorism: Iran likes to deny its complicity in jihadist acts; so now, flush with cash, it can fund atrocities without leaving a paper trail.

The second law involves money laundering, criminalized by Congress in Section 1956 of the penal code. There are several prohibited varieties of money laundering. It can be a crime, for example, to conduct a financial transaction involving money used to facilitate unlawful activity. And if money is transferred outside the United States, it can be illegal to use it to promote criminal activity.

As we’ve seen, both currency transmissions to Iran and the provision of material support to terrorism are unlawful activities. The administration has conducted a financial transaction (in fact, several transactions: the issuance of the assets, their conversion into foreign currency, and the transmission to Iran) which facilitated both currency transfers to Iran and Iran’s certain use of the money to support terrorism. Plus, the money was shipped outside the United States before being transferred to Iran and before Iran will use it to promote terrorism. Money-laundering cases often boil down to proof of intent; but there clearly are multiple grounds on which to investigate whether the laws have been transgressed.

The circumstances of Obama’s enormous cash transfer to our terrorist enemies raise serious questions about whether American policy against paying ransoms to terrorists has been flouted. But that should not obscure a more fundamental issue: The president has violated the law.

— Andrew C. McCarthy is as senior policy fellow at the National Review Institute and a contributing editor of National Review.

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