In late September, President Trump issued an executive order designating “Antifa” as a “Domestic Terrorist Organization.”¹  As we have described in a previous client alert, the President soon thereafter also issued a National Security Presidential Memorandum titled “Countering Domestic Terrorism and Organized Political Violence” as well as an accompanying fact sheet.² On October 8, the President convened a roundtable at the White House, attended by several senior Trump Administration officials, to discuss violence allegedly perpetrated by Antifa. In one notable exchange, a reporter asked the President whether he would take the further step of designating Antifa as a “Foreign Terrorist Organization.” The President answered, “Let’s get it done,” and directed Secretary of State Marco Rubio to “take care of it.” At least one member of Congress, Sen. Eric Schmitt (R-MO), has sent Secretary Rubio a letter urging him to do so.

These actions and announcements underscore that US government efforts to implement the recent executive order, National Security Presidential Memorandum and more will focus on a widely defined set of organizations perceived as being on the political left. Given the wide-ranging investigatory and other steps potentially underway or forthcoming against individuals and entities characterized as part of or supporting violent actions, entities perceived as linked to progressive causes (including foundations, other nonprofits and for-profit businesses) could face a range of government actions. These include the government designating these entities as terrorist organizations, blocking their assets, revoking their tax-exempt status, and potentially even criminally investigating the entities and possibly their staff and board members.

This client alert summarizes the most salient terrorist designation regimes and their consequences. The potential targets of government action and their closely associated third parties should be aware of the various designations the Administration could employ to suspend tax-exempt status, de facto or de jure block assets, and predicate criminal investigations.

Foreign Terrorist Organization (FTO), Specially Designated Global Terrorist (SDGT) and Specially Designated National (SDN) Designations

FTO. The Secretary of State has authority under the Immigration and Nationality Act (INA) to designate an organization as an FTO if the organization meets three criteria: the suspected terrorist group must (1) be a foreign organization; (2) engage in “terrorist activity” or “terrorism,” or retain the capability and intent to engage in terrorist activity or terrorism; and (3) threaten the security of US nationals or the national defense, foreign relations, or economic interests of the United States.³  An FTO designation carries several possible repercussions—both for the designated organization and for third parties—as we outline below and have explained in depth in a recent client alert related to the Trump Administration’s designations of several drug cartels as FTOs earlier this year. The provision of the INA authorizing the FTO designation regime imports the definition of “terrorist activity” from 8 U.S.C. § 1182(a)(3)(B)(iii) and the definition of “terrorism” in 22 U.S.C. § 2656f(d)(2).⁴

SDN/SDGT. Under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701 et seq., and Executive Order 13224 (as subsequently amended),⁵ the Secretaries of State and Treasury can designate certain entities as Specially Designated Global Terrorists (SDGTs), and thereby add them to the Office of Foreign Assets Control’s list of Specially Designated Nationals and Blocked Persons (SDN List).⁶  Entities can be designated as SDGTs under IEEPA and relevant executive orders (1) if they have committed, or pose a significant risk of committing, acts of terrorism that threaten the security of US nationals or the national security, foreign policy, or economy of the United States; (2) if they are owned or controlled by, or act for or on behalf of, specified individuals or entities; (3) if they assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, acts of terrorism or specified individuals or entities; or (4) if they are otherwise associated with certain individuals or entities designated in or under the operative executive order.⁷ For the purpose of SDGT designations, “terrorism” is defined to be 

an activity that—

(i) involves a violent act or an act dangerous to human life, property, or infrastructure; and

(ii) appears to be intended

(A) to intimidate or coerce a civilian population;

(B) to influence the policy of a government by intimidation or coercion; or

(C) to affect the conduct of a government by mass destruction, assassination, kidnapping, or hostage-taking.⁸ 

Impacts of FTO and SDGT Designations on Designated Parties

While the legal consequences that flow from FTO and SDGT designations differ slightly, the bottom line is that both designations result in a designated entity’s inclusion on the list of SDNs, meaning that their “assets are blocked, and U.S. persons are generally prohibited from dealing with them” in nearly any capacity.⁹

More specifically, FTO designations may interfere with a designated entity’s financial, property and travel interests. Representatives and members of a designated FTO, if they are non-US nationals, are inadmissible to, and removable from, the United States, pursuant to 8 U.S.C. §§ 1182(a)(3)(B), 1182(a)(3)(F) and 1227(a)(4)(B)). Moreover, the Secretary of the Treasury may require US financial institutions possessing or controlling any assets of a designated FTO to block all transactions involving those assets, pursuant to 8 U.S.C. § 1189(a)(2)(C) and 31 C.F.R. Part 597. Similarly, SDGT designations block all property and interests in property of designated individuals or entities that are in the United States or that come within the United States, or that come within the possession or control of US persons.

Notably, designations of US persons (meaning both entities and individuals) as SDGTs are likely to face significant challenges in court, as the case law regarding domestic SDGT designations remains unsettled, and several courts have raised constitutional due process concerns with such designations in the past.¹⁰  Nonetheless, even if a designation of a US person were ultimately held to be unlawful, the investigative and litigation processes could be lengthy, costly and disruptive for the entity or individual thus designated.

Impacts of FTO and SDGT Designations on Third Parties

Regardless of whether an entity or individual is designated as an FTO or SDGT, such designations can have serious effects on third parties associated with the designated entity, including financially, reputationally and legally onerous investigations and prosecutions. Such actions may include:

• Criminal Investigations and Enforcement Actions. Third parties may face criminal investigation and prosecution based on certain connections to (or actions related to) entities designated as FTOs or SDGTs, or may receive legal process in the course of US government investigations of the designated entities and others associated with them.
  • Material Support and Potential Investigations/Prosecutions. Third parties may be investigated or prosecuted for allegedly providing “material support or resources” to a designated FTO under 18 U.S.C. § 2339B, which is defined broadly to mean “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, … communications equipment, … [or] transportation.” Conviction is punishable by imprisonment for not more than 20 years (but for any period of years or for life if death results from commission of the offense) or by a fine of not more than $250,000 (but not more than $500,000 for an organizational defendant), or by both imprisonment and a fine.¹¹  There is a particularly acute risk of third parties providing material support to designated entities being themselves designated pursuant to 31 C.F.R. § 594.201(a)(3)(iii). This poses a real risk for companies and individuals alike and requires due diligence to determine whether any transactions or interactions implicate designated entities.¹²
  • Sanctions-Related Investigations/Prosecutions. An FTO/SDGT designation opens the door to criminal prosecutions for sanctions violations. For example, under IEEPA, any “person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of” a sanctions violation related to FTOs or SDGTs may be subject to criminal penalties of up to $1 million and 20 years of imprisonment.¹³ 
  • Burdens of Related Investigations. More broadly, the fact of designation can enable the government to bring to bear additional national security authorities, including counterterrorism authorities, and resources. That additional attention will likely reach and reveal activities by individuals and entities associated (wittingly or unwittingly) with newly designated FTOs and SDGTs, which will in turn expose them to risk of further investigation by the US government. And, specifically in the context of a criminal investigation, the government could seek to attribute to a company the knowledge of a specific employee.¹⁴ 
• Anti-Terrorism Act (ATA) Civil Suits. FTO and SDGT designations open US courts to private civil suits against individuals, companies or other organizations under the ATA. See 18 U.S.C. § 2333. The ATA establishes US federal court jurisdiction and provides terrorism-related causes of action for individuals or entities injured by the terrorist acts of a designated FTO or SDGT or its affiliates or agents. For example, plaintiffs can sue not only the designated entities themselves for their acts of terrorism—e.g., Antifa—but also any company, entity or individual that allegedly aids and abets such acts or conspires with an FTO/SDGT or its affiliates or agents in support of such acts—e.g., a foundation or nonprofit alleged to have provided Antifa material support. Successful plaintiffs may be awarded treble damages, litigation costs and attorneys’ fees. See id. § 2333(d)(2).

“Domestic Terrorist Organization” Designation

The President’s recent designation of Antifa as a “domestic terrorist organization” is not a recognized designation from which legal consequences flow directly, making it different from FTO or SDGT designations with their bases in particular statutes and articulated legal consequences.¹⁵  But, as we have outlined in another client alert in depth, the National Security Presidential Memorandum issued soon thereafter orders the creation of a “national strategy to investigate and disrupt networks, entities and organizations that foment political violence so that law enforcement can intervene in criminal conspiracies before they result in violent political acts.”

The executive order and the National Security Presidential Memorandum also suggest, in line with other Administration comments, that foundations, individual funders and other nonprofit organizations are a particular focus of ongoing efforts and, moreover, that this designation is likely to prompt a series of executive branch implementation actions, including reviews of tax-exempt status of organizations and, potentially, criminal investigations. We expect that such actions will be designed to attempt to mirror, to the extent possible under law, the types of actions available to implement FTO and SDGT designations. At a minimum, “Domestic Terrorist Organization” designation could have significant reputational and operational effects on designated parties and their associates.

WilmerHale continues to advise for-profit businesses, foundations and other nonprofits as the executive branch’s actions in this area continue. We are closely monitoring Administration and congressional actions and are available to support foundations, other nonprofits and implicated for-profit entities in this developing landscape, including with a dedicated team ready to advise on tax compliance, criminal investigations, terrorism designations, asset blocking and congressional preparation.