Drug Lords, Mafiosos, and PacNet? How the Controversial Payment Processor Ended Up on the Naughty List
Business ı By Catherine Davis
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PacNet’s designation stems from Executive Order 13581, called, “Blocking Property of Transnational Criminal Organizations.” The rationale behind the order, issued in 2011 by President Barack Obama, was that many foreign criminal organizations were gaining more power through sophisticated technology, and were becoming a growing threat to the United States.
According to SanctionsAlert.com, the executive order “freezes the property or interests in property of designated individuals or entities (1) within the jurisdiction of the US; (2) within the control or possession of ‘US persons’; or (3) that may come into the possession or control of any US person, including any overseas branch.”
These individuals or entities are further defined as “A foreign person that ‘constitutes a significant transnational criminal organization (TCO);’ Any person that has materially assisted or supported any person whose property interests are blocked pursuant to the EO; Any person ‘owned or controlled’ by, or acts on behalf of, a person or entity whose interests in property are blocked pursuant to the EO.”
Prior to this order, OFAC wasn’t able to use its power on commercial organizations. The ability to place this designation on corporations meant that OFAC could freeze their domestic assets. The US government, of course, cannot force banks and companies in other countries to stop dealing with the companies on OFAC’s list, but this effectively limits these organizations from operating stateside.
In comparison, in 2012, the US government said that HSBC was laundering money (over $800 million dollars). The London-based bank, which in contrast to PacNet, was alleged to be directly engaged in laundering activities. They reached a $1.9 billion settlement to settle the issue and were able to avoid the TCO designation and sanctions that were levied on PacNet.
The sanctions placed on PacNet are controversial, and because the designation rests on the back of an Executive Order, it can be altered. Executive Orders, while subject to judicial review, can bypass Congress, and usually deal with the enforcement of laws and policies. No congressional body has to approve an executive order, and it cannot overturn it. The only thing Congress can do is pass a law to cut funding for that order. A sitting president, however, could veto such a law, making it incredibly difficult for the legislature to overturn an Executive Order.
There are a few examples of the Judicial Branch intervening and overturning executive orders. In 1952, President Truman issued an Executive Order to prevent strikes during the Korean War by placing the US steel mills under federal law. The Supreme Court argued that the order was not valid because it wasn’t clarifying a law, rather, it was trying to make a new one. The only other Executive Order that was successfully overturned by the Judicial Branch was an order by Bill Clinton in 1995. Clinton’s order attempted to prevent the federal government from contracting with organizations that hire replacements for striking workers. The US Court of Appeals said that the Order was regulatory in nature and was superseded by the National Labor Relations Act.
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