What legal authorities allow the U.S. president or Treasury to hold foreign sovereign assets in overseas bank accounts?
Executive summary
The executive branch can immobilize — and in limited cases transfer — foreign sovereign assets through a mix of statutory authorities, executive orders implemented by Treasury’s Office of Foreign Assets Control (OFAC), civil-forfeiture statutes enforced by DOJ, and multilateral or treaty-based mechanisms; however, sovereign immunity, international law, and practical banking constraints sharply limit outright confiscation and often require coordinated legislative or judicial action [1] sanctions-confiscation-and-the-rule-of-law/" target="blank" rel="noopener noreferrer">[2] [3]. The difference between “blocking” (freezing) and “seizing/confiscating” is central: OFAC can block assets under IEEPA-backed sanctions and related EOs, while permanent transfer typically depends on judicial forfeiture, statutory exceptions to sovereign immunity, or international agreements [1] [4] [3].
1. The president’s sanctions toolbox: IEEPA and executive orders that block assets
The primary route for the president to put foreign-state funds beyond use is the International Emergency Economic Powers Act (IEEPA), exercised through executive orders that authorize OFAC to block property and prohibit transactions with designated persons, including state actors or state-controlled entities; OFAC describes blocking as freezing assets and notes it can issue specific or general licenses to authorize otherwise prohibited transactions [1] [5] [2]. Blocking under IEEPA or related statutory authorities immobilizes assets that are “within the possession or control of a U.S. person” or routed through U.S. financial links, but title remains with the original owner unless a separate confiscatory legal process occurs [5] [1].
2. Treasury’s leverage over correspondent banks and the dollar system
U.S. authorities exploit the centrality of dollar clearing by compelling domestic correspondent banks to cut off or block foreign banks and accounts that touch U.S. systems; statutes and regulations tied to the USA PATRIOT Act (section 319/31 U.S.C. 5318(k)) let Treasury and DOJ subpoena records from foreign banks with U.S. correspondent relationships and can force U.S. banks to terminate those ties, effectively freezing assets that depend on dollar clearing [6]. That leverage often produces de facto asset immobilization abroad without direct jurisdiction over the foreign account, but it exposes U.S. banks to legal and diplomatic risks and can provoke foreign courts to order releases, as historical disputes over Libyan assets showed [7] [8].
3. DOJ civil forfeiture and the narrow path to transfer or seizure
To move from blocking to taking title, DOJ relies on civil-forfeiture statutes and venue rules that permit U.S. courts to assert jurisdiction over foreign-located property in limited circumstances: 18 U.S.C. §981 allows restraint and forfeiture of assets tied to U.S. civil forfeiture actions by targeting correspondent accounts in the United States, and 28 U.S.C. §1355(b) furnishes district courts with jurisdictional paths to pursue forfeiture of property located abroad [6] [4]. Even so, enforcement against assets physically abroad generally requires cooperation from the foreign state or judicial assistance under treaties, and may collide with doctrines of sovereign immunity and international comity [4] [6].
4. Sovereign immunity, international law, and why confiscation is hard
Domestic statutes coexist with international law protections: the Foreign Sovereign Immunities Act (FSIA) and customary international law give central bank reserves and many state properties strong protection from execution, and legal scholars note near-absolute immunity for central bank assets, meaning freezing via sanctions may be easier than judicial confiscation without explicit exceptions or new congressional authority [3]. Policymakers have proposed statutes such as the REPO Act to authorize seizure of certain foreign sovereign assets held in the U.S., but commentators and institutions — including the ECB — warn of legal, market, and diplomatic costs if confiscation departs from sovereign-immunity norms [9] [3].
5. Multilateral instruments and UN resolutions as supplementary routes
When facing regime-change or post-conflict asset transfers, the U.S. has worked through UN resolutions and diplomatic channels to guide freezing and transfer (for example, Resolution 1483’s directive to freeze and transfer Iraqi funds), but GAO found that implementation depends on other states’ domestic legal authorities, OFAC-like institutions, and banking systems — underscoring that U.S. ability to hold or move foreign sovereign assets abroad is often contingent on multilateral cooperation [7] [8].
6. Practical and political constraints — alternatives and trade-offs
Legal mechanisms give the executive significant tactical tools to immobilize foreign-state assets, but permanent appropriation requires judicial findings, congressional statutes, treaty enforcement, or foreign cooperation; critics argue that overreliance on sanctions or unilateral confiscation risks violating international law, undermining the integrity of global reserve holdings, and provoking retaliatory measures, while proponents counter that statutory carve-outs and careful multilateral design can lawfully channel frozen assets to restitution or reconstruction [2] [9] [3].