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What Happens to Frozen Assets?

By Chris Suellentrop
Posted Wednesday, Dec. 5, 2001, at 5:59 PM ET

On Tuesday, the Bush administration froze the financial assets of three organizations it accused of having ties to Hamas. (Click here for Explainer's tutorial on the differences among Hamas, Hezbollah, Fatah, and Islamic Jihad.) What happens to frozen assets?

Nothing, usually. They're held by the banks that had the assets when they were frozen, until they're unfrozen. The U.S. government does not take possession. The Treasury Department's Office of Foreign Assets Control has frozen nearly $4 billion in assets from countries designated as "terrorist states" by the State Department, including $254 million in Taliban assets in the United States that were frozen in 1999.

Some members of Congress and lawyers want that pot of money to be used to compensate the victims of terrorist attacks. The State Department, however, opposes that idea, believing that it can use the frozen assets as leverage to get states to stop sponsoring terrorism and to become more democratic. The State Department also believes that using frozen assets to pay victims who bring private lawsuits against countries that sponsor terrorism would be unfair to terrorism victims who don't file lawsuits.

So far, victims have been paid in only a few cases involving Cuba and Iran. Last year, Congress passed a law that led to $97 million being paid from Cuba's frozen assets to the families of the Cuban-American pilots shot down in 1996 by the Cuban government. And the U.S. government paid more than $213 million to eight families that had won judgments against Iran. In exchange, the families dropped their claims against Iran's frozen assets held by the United States. The government hopes to collect from Iran using an international tribunal that was established in 1981 to settle billions of dollars in claims after the Iranian hostage crisis.

Next question?

Explainer thanks Slate reader Bryson Bennett for asking the question.

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Chris Suellentrop, a former Slate staffer, writes "The Opinionator" for the New York Times.
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