On September 12, 2018, President Trump issued an executive order that authorizes sanctions against any foreign individual, entity or government determined to have interfered in US federal elections. In a statement, President Trump said that this action was taken to "protect the integrity of the United States electoral system," and to "swiftly identify and punish any foreign interference" in US elections.1
The US had previously announced sanctions against Russia for alleged cyber interference in the 2016 presidential election, but this new measure targets any foreign individual, entity or government for efforts to obstruct or manipulate the US electoral process. According to National Security Advisor John Bolton, this new executive order is "not country specific" as "threats to the integrity of the election process come from a number of sources."2
The new executive order does not automatically impose sanctions or mandate that the president or the US Department of Treasury sanction any person or government. However, the executive order provides authority to do so. It also establishes a regulatory basis for the US to sanction companies that are licensed or domiciled in a country whose government has engaged in election interference—though, again, the executive order itself does not actually impose such sanctions.
Blocking sanctions against foreign actors
Effective September 12, 2018, the new executive order authorizes the Secretary of Treasury, in consultation with the Secretary of State, Attorney General and Secretary of Homeland Security, to impose blocking sanctions against any person determined:
- "to have directly or indirectly engaged in, sponsored, concealed, or otherwise been complicit in foreign interference in a US election";
- "to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity described above or any person whose property and interests in property are blocked pursuant to" the new executive order; or
- "to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property or interests in property are blocked pursuant to" the new executive order.
The term "foreign interference" includes "any covert, fraudulent, deceptive, or unlawful actions or attempted actions of a foreign government, or of any person acting as an agent of or on behalf of a foreign government, undertaken with the purpose or effect of influencing, undermining confidence in, or altering the result or reported result of, the election, or undermining public confidence in election processes or institutions." Sanctionable election interference activities include not only direct actions, such as hacking election systems or campaign infrastructure, but, as explained by National Security Advisor John Bolton, also include the "distribution of propaganda and disinformation."3
Blocking sanctions freeze (block) all property and interests in property of the sanctioned person within US possession or control. The Treasury Department's Office of Foreign Assets Control (OFAC) maintains a list of blocked persons, who it refers to as "Specially Designated Nationals" (SDNs). US Persons4 generally may not engage in any transaction with blocked persons/SDNs, unless licensed by OFAC. These restrictions also reach—automatically, by operation of law—any entity owned 50 percent or more by a designated person, even if the owned entity is not named expressly on the SDN list.
Framework to investigate potential election interference and impose additional sanctions
The executive order directs US agencies to take action to assess and evaluate information concerning foreign governments or persons acting on their behalf potentially having interfered in US elections. It also provides authorizations under which penalties can be imposed based on the outcome of that assessment and evaluation.
Not later than 45 days after the conclusion of a federal US election, the order directs the Director of National Intelligence to conduct an assessment of any information indicating foreign interference in the election. The Department of Justice and the Department of Homeland Security will then have 45 days to evaluate the validity and impact of the intelligence gathered and report the results of that evaluation to the president, Department of State, Department of Treasury and the Department of Defense.
In addition, the order directs the Director of National Intelligence, the Department of Justice, the Department of Homeland Security, the Department of Treasury, and the Department of State to "develop a framework for the process that will be used" to carry out their respective responsibilities by October 12, 2018 (i.e., 30 days from the issuance of the order). The framework may be classified in whole or in part.
Following the assessments and report described above, the Department of Treasury, in consultation with the Department of State, Department of Justice and the Department of Homeland Security, "shall . . . impose all appropriate" sanctions authorized under the executive order. Depending upon the severity of the interference, the Department of Treasury and the Department of State, in consultation with other agencies, shall also jointly recommend to the president whether additional sanctions should be imposed "including against the largest business entities that are licensed or domiciled" in countries whose governments participated in election interference. The executive order specifies that the types of business entities that may be recommended for sanctions are those that operate in the financial services, defense, energy, technology, transportation or other sectors of "comparable strategic significance" to the foreign country.
The additional sanctions against business entities could include any of the following measures. As noted below, this includes blocking—but also a range of non-blocking restrictions that are substantially similar to the types of "menu-based" penalties found in other US sanctions programs:
- Blocking and prohibiting all transactions in a person's property and interests in property that are subject to US jurisdiction
- Mandatory prior review and approval for export and re-exports of items subject to US export regulations
- "Prohibitions on US financial institutions making loans or providing credit to a person"
- "Restrictions on transactions in foreign exchange in which a person has any interest"
- "Prohibitions on transfers of credit or payments between financial institutions, or by, through, or to any financial institution, for the benefit of a person"
- "Prohibitions on US Persons investing in or purchasing equity or debt of a person"
- Exclusion of an entity's non-US citizen or permanent resident corporate officers from the United States
- Imposition of any of the above-listed sanctions on an entity's non-US citizen or permanent resident principal executive officers
This structure would allow the US to penalize companies licensed or domiciled in countries whose governments participated in election interference, even when these companies have not engaged in any sanctionable activity themselves. However, the executive order does not, itself, actually impose these or any other sanctions.
Looking ahead
How this new sanctions authority will be used - or even how it will be implemented - remains to be seen. National Security Advisor Bolton and Director of National Intelligence Dan Coats signaled in the press briefing accompanying the new executive order that the administration is serious about investigating and punishing foreign election interference with the 2018 midterm elections on the horizon.5 Although the US has not yet announced any designations under this new executive order, non-US companies should monitor the implementation of these new authorities, especially given the potential for significant reach into the private sector.
Footnotes
1. Statement from the President, THE WHITE HOUSE (Sept. 12, 2018), https://www.whitehouse.gov/briefings-statements/statement-from-the-president-3/
2. John Bolton and Dan Coats on US Election Security, C-SPAN (Sept. 13, 2018), https://www.c-span.org/video/?451421-1/john-bolton-dan-coats-us-election-security
3. Id.
4. US Persons means US citizens, permanent residents, entities organized in the US (including foreign branches) and any person in the US.
5. John Bolton and Dan Coats on US Election Security, C-SPAN (Sept. 13, 2018), https://www.c-span.org/video/?451421-1/john-bolton-dan-coats-us-election-security
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