[Federal Register Volume 66, Number 192 (Wednesday, October 3, 2001)]
[Rules and Regulations]
[Pages 50506-50519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24685]



[[Page 50505]]

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Part II





Department of the Treasury





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Office of Foreign Assets Control



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31 CFR Parts 586 and 587



Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo Sanctions 
Regulations; Federal Republic of Yugolsavia (Serbia and Montenegro) 
Milosevic Regulations; Final Rule

  Federal Register / Vol. 66, No. 192 / Wednesday, October 3, 2001 / 
Rules and Regulations  

[[Page 50506]]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Parts 586 and 587


Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo 
Sanctions Regulations; Federal Republic of Yugoslavia (Serbia and 
Montenegro) Milosevic Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Amendments; Interim Final rule.

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SUMMARY: The Office of Foreign Assets Control of the U.S. Department of 
the Treasury is amending existing regulations and adding new 
regulations consistent with Executive Order 13192 of January 17, 2001, 
which lifts certain economic sanctions imposed with respect to the 
Federal Republic of Yugoslavia (Serbia and Montenegro) pursuant to 
Executive Orders 13088 of June 9, 1998, and 13121 of April 30, 1999, 
while maintaining and modifying sanctions targeted against members and 
supporters of the regime of former President Slobodan Milosevic and 
certain persons under open indictment by the International Criminal 
Tribunal for the former Yugoslavia.

DATES: Effective Date: October 3, 2001.
    Comments: Written comments must be received no later than December 
3, 2001. Comments may be sent either via regular mail to David W. 
Mills, Chief, Policy Planning and Program Management Division, Office 
of Foreign Assets Control, Department of the Treasury, 1500 
Pennsylvania Ave. NW, Annex--2d Floor, Washington, DC 20220, or via 
OFAC's Web site (http://www.treas.gov/ofac).

FOR FURTHER INFORMATION CONTACT: Steven I. Pinter, Acting Chief of 
Licensing, tel.: 202/622-2480, or Barbara C. Hammerle, Chief Counsel, 
tel.: 202/622-2410, Office of Foreign Assets Control, Department of the 
Treasury, Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic Availability

    This document is available as an electronic file on The Federal 
Bulletin Board the day of publication in the Federal Register. By 
modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for 
disk or paper copies. This file is available for downloading without 
charge in ASCII and Adobe Acrobat7 readable (*.PDF) formats. For 
Internet access, the address for use with the World Wide Web (Home 
Page), Telnet, or FTP protocol is: fedbbs.access.gpo.gov. This document 
and additional information concerning the programs of the Office of 
Foreign Assets Control are available for downloading from the Office's 
Internet homepage: http://www.treas.gov/ofac, or in fax form through 
the Office's 24-hour fax-on-demand service: call 202/622-0077 using a 
fax machine, fax modem, or (within the United States) a touch-tone 
telephone.

Background

    In Executive Order 13088 of June 9, 1998 (63 FR 32109, June 12, 
1998), President Clinton declared a national emergency with respect to 
the actions and policies of the Governments of the Federal Republic of 
Yugoslavia (Serbia and Montenegro) (the ``FRY(S&M)'') and the Republic 
of Serbia regarding Kosovo and imposed sanctions with respect to those 
governments, invoking the authority, inter alia, of the International 
Emergency Economic Powers Act (50 U.S.C. 1701-1706) (``IEEPA''). 
Executive Order 13088, which was effective at 12:01 a.m. eastern 
daylight time on June 10, 1998, blocked, with certain exceptions, all 
property and interests in property of the Governments of the FRY(S&M), 
the Republic of Serbia, and the Republic of Montenegro within the 
United States or within the possession or control of U.S. persons 
(including foreign branches). It also prohibited all new investment by 
U.S. persons in the territory of the Republic of Serbia and the 
approval or other facilitation by U.S. persons of other persons' new 
investment in the territory of Serbia. In implementation of Executive 
Order 13088, the Office of Foreign Assets Control (``OFAC'') issued the 
Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo Sanctions 
Regulations, 31 CFR part 586 (63 FR 54576, October 13, 1998).
    In Executive Order 13121 of April 30, 1999 (64 FR 24021, May 5, 
1999), the President responded to the continuing human rights and 
humanitarian crises in Kosovo by amending Executive Order 13088 to 
broaden the scope and nature of the sanctions previously imposed on the 
FRY(S&M). Executive Order 13121 expanded the blocking regime imposed on 
the assets of the Governments of the FRY(S&M), the Republic of Serbia, 
and the Republic of Montenegro by revoking an exemption for certain 
financial transactions provided in Executive Order 13088 (as previously 
implemented in Sec. 586.201(c)); banned all U.S. exports and reexports 
to and imports from the FRY(S&M) or the Governments of the FRY(S&M), 
the Republic of Serbia, or the Republic of Montenegro; and prohibited 
any transaction or dealing by a U.S. person related to trade with or to 
the FRY(S&M) or the Governments of the FRY(S&M), the Republic of 
Serbia, or the Republic of Montenegro.
    On January 17, 2001, in light of the peaceful democratic transition 
begun by the newly elected leaders in the FRY(S&M), the President 
issued Executive Order 13192, which took effect on January 19, 2001. 
Executive Order 13192 further amended Executive Order 13088, as revised 
by Executive Order 13121, to lift with, respect to future transactions, 
remaining sanctions imposed on the Governments of the FRY (S&M) and the 
Republic of Serbia. (Sanctions imposed on the Government of the 
Republic of Montenegro under Executive Order 13088 previously had been 
suspended by OFAC general licenses.) Consistent with the lifting of the 
remaining sanctions on a prospective basis, OFAC is taking separate 
steps to remove all entries for individuals or entities identified by 
the term ``[FRYK]'' from appendix A to 31 CFR chapter V. Executive 
Order 13192 also further amended Executive Order 13088 to impose 
sanctions on designated family members, supporters, and members of the 
regime of former FRY(S&M) President Slobodan Milosevic, as well as on 
individuals under open indictment by the International Criminal 
Tribunal for the former Yugoslavia (the ``ICTY''), and other specified 
parties.
    OFAC is amending part 586 to chapter V of 31 CFR to reflect the 
lifting of certain economic sanctions relating to the FRY(S&M) and to 
make appropriate conforming and technical changes to the regulations. A 
new part 587 is being added to chapter V of 31 CFR to maintain and 
modify sanctions targeted against designated family members, 
supporters, and members of the regime of former President Slobodan 
Milosevic as well as certain persons under open indictment by the ICTY, 
and other specified parties.

Amendments to Part 586

    Lifting of Certain Sanctions. Explanatory notes are added to 
paragraphs (a), (b), and (d) of Sec. 586.201, and the existing note to 
Sec. 586.201 is revised, to reflect the prospective elimination by 
Section 1(a) of Executive Order 13192 of the prohibition on 
transactions involving property and interests in property of the 
Governments of the FRY(S&M), the Republic of Serbia, and the Republic 
of Montenegro. Executive Order 13192 also prospectively lifts the ban 
imposed pursuant to Executive Order 13088, as revised by Executive 
Order 13121, on

[[Page 50507]]

U.S. exports and reexports to and imports from the FRY(S&M), as well as 
the prohibition on transactions or dealings by U.S. persons relating to 
trade with or to the FRY(S&M). Consequently, with the exception of 
transactions involving property or interests in property of designated 
family members, supporters, and members of the regime of former 
President Slobodan Milosevic, as well as certain persons under open 
indictment by the ICTY, and other specified parties (as discussed below 
with respect to 31 CFR Sec. 587.201(a)), transactions on or after 
January 19, 2001, by U.S. persons involving the FRY(S&M) will no longer 
fall under the scope of the prohibitions outlined in part 586.
    An explanatory note is added to Sec. 586.204 to reflect the 
prospective elimination by section 1(b) of Executive Order 13192 of the 
prohibition on all new investment by United States persons in the 
territory of the Republic of Serbia and the approval and other 
facilitation by United States persons of other persons' new investment 
in the territory of the Republic of Serbia. Consequently, with the 
exception of transactions involving property or interests in property 
of persons designated in or pursuant to 31 CFR Sec. 587.201(a), the new 
investment activities of United States persons in the territory of the 
Republic of Serbia on or after January 19, 2001, are no longer 
prohibited by Sec. 586.204.
    Previously Blocked Property. Revised Sec. 586.201(c) implements 
Section 1(a) of Executive Order 13192 by continuing the blocking of any 
property and interests in property blocked pursuant to Executive Order 
13088 before January 19, 2001. The continued blocking of previously 
blocked property is necessary until provision is made to address claims 
or encumbrances with respect to such property. Because Executive Order 
13192 requires all property blocked before January 19, 2001, to remain 
blocked, a separate comprehensive list of the ``[FRYK]'' entries being 
removed from appendix A to 31 CFR chapter V is available to the public 
upon request from OFAC's Compliance Programs Division at (202) 622-
2490. Similar lists are available with respect to persons whose 
property and interests in property continue to be blocked pursuant to 
part 585 of 31 CFR chapter V. See 61 FR 12 (Jan. 19, 1996); 61 FR 24696 
(May 16, 1996).
    Unblocking of Certain Debt. Notwithstanding the generally continued 
blocking of previously blocked property, new Sec. 586.517(a) authorizes 
by general license the unblocking of debt obligations included within 
the rescheduling of Yugoslav debt pursuant to the New Financing 
Agreement of September 20, 1988, negotiated between the Socialist 
Federal Republic of Yugoslavia and the London Club of commercial banks. 
Section 586.517(b) provides for case-by-case review of requests to 
unblock all other previously blocked debt. Section 586.517(c) excludes 
from the general license transactions with any person designated in or 
pursuant to 31 CFR Sec. 587.201(a).
    Release of Certain Blocked Transfers. Notwithstanding the generally 
continued blocking of previously blocked property, new Sec. 586.518 
authorizes by general license U.S. financial institutions to unblock 
and return to the remitting party certain funds that came into the U.S. 
financial institution's possession or control through wire transfers or 
check remittances. Funds may not be unblocked and returned if they were 
originally destined for an account established on the books of a U.S. 
financial institution by a person whose property or interests in 
property were blocked immediately prior to January 19, 2001, or if they 
were remitted by or destined for any person designated in or pursuant 
to 31 CFR Sec. 587.201(a). Under this authorization, funds may 
generally be returned to, among others, the Government of the FRY(S&M), 
the Government of the Republic of Serbia, the Government of the 
Republic of Montenegro, or any persons purporting to act for or on 
their behalf.
    Funds Held at Overseas Branches of U.S. Financial Institutions. New 
Sec. 586.519 provides that OFAC will review on a case-by-case basis 
requests to unblock deposit accounts established outside the United 
States at overseas branches of U.S. institutions.
    Revision of Penalties Provisions. Subpart G of part 586 is revised 
in certain respects to describe more fully OFAC's procedures in order 
to enhance transparency of the penalty process.

New Part 587--Sanctions Relating to Members and Supporters of the 
Milosevic Regime

    In addition to lifting certain of the sanctions on the Governments 
of the FRY(S&M) and the Republic of Serbia, Executive Order 13192 
imposes sanctions on designated family members, supporters and members 
of the regime of former President Slobodan Milosevic, as well as 
certain persons under open indictment by the ICTY, and other specified 
parties. A new part 587 is added to chapter V of 31 CFR to implement 
these ongoing sanctions.
    Subpart B of part 587 implements the prohibitions set forth in 
Executive Order 13192. Section 587.201(a) implements Section 1(a) of 
the order by blocking the property or interests in property of persons 
identified by the President in the Annex to the order, to the extent 
the property or property interests are in the United States, hereafter 
come within the United States, or are or hereafter come within the 
possession or control of U.S. persons, including their overseas 
branches. Section 587.201(a) also implements Section 1(a) by blocking 
the property or interests in property of individuals and entities 
determined by the Secretary of the Treasury, in consultation with the 
Secretary of State, either (i) to be under open indictment by the ICTY; 
(ii) to have sought or to be seeking through illegitimate means or 
otherwise to maintain or re-establish illegitimate control over the 
political processes or institutions or the economic resources or 
enterprises of the FRY(S&M), the Republic of Serbia, the Republic of 
Montenegro or the territory of Kosovo; (iii) to have provided material 
support or resources to any person designated in or pursuant to 
Sec. 587.201(a); or (iv) to be owned or controlled by or acting or 
purporting to act directly or indirectly for or on behalf of any person 
designated in or pursuant to Sec. 587.201(a). The names of persons 
identified by the President or designated by the Secretary of the 
Treasury will be incorporated into appendix A to 31 CFR chapter V. 
These persons are referred to throughout the regulations as ``persons 
designated in or pursuant to Sec. 587.201(a).''
    Section 587.201(b) implements section 1(b) of Executive Order 13192 
by prohibiting any transaction or dealing within the United States or 
by a United States person, wherever located, in property or interests 
in property of any person designated in or pursuant to Sec. 587.201(a).
    Sections 587.202 and 587.203 detail the effect of transfers of 
blocked property in violation of the regulations and the required 
holding of blocked property in interest-bearing blocked accounts. 
Section 587.204 implements section 1(d) of the Executive Order by 
prohibiting any transaction that evades or avoids, or has the purpose 
of evading or avoiding, or attempts to violate, any of the prohibitions 
set forth in this part. Conspiracies formed for the purpose of engaging 
in a prohibited transaction are also prohibited.
    Section 587.205 provides that all expenses incident to the 
maintenance of blocked physical property shall be the responsibility of 
the owners and operators of such property, and that

[[Page 50508]]

such expenses shall not be met from blocked funds. The section further 
provides that blocked property may, in the discretion of the Director 
of OFAC, be sold or liquidated and the net proceeds placed in a blocked 
interest-bearing account in the name of the owner of the property.
    Section 587.206 details exempt transactions. The exemptions derive 
from the exemptions set out in section 203(b) of IEEPA (50 U.S.C. 
1702(b)) and relate to personal communications, donations of articles 
to relieve human suffering, the importation and exportation of 
information or informational materials, and travel.
    Subpart C of part 587 defines key terms used throughout the 
regulations and subpart D sets forth interpretive sections regarding 
the general prohibitions of subpart B. Section 587.403 of subpart D 
describes the termination and acquisition of an interest in blocked 
property and Sec. 587.404 explains that, subject to certain exceptions, 
transactions incidental and necessary to the effectuation of a licensed 
transaction are authorized.
    Section 587.405 provides that the prohibitions of Sec. 587.201 
apply to the provision of services, such as financial or transportation 
services, performed by U.S. persons, wherever located. Section 587.406 
makes clear that even while outside the United States, U.S. persons are 
prohibited from dealing in property in which a person designated in or 
pursuant to Sec. 587.201(a) has an interest. Sections 587.407, 587.408, 
and 587.409 explain that debits generally may not be made to a blocked 
account to pay obligations to any person, U.S. financial institutions 
may not perform under existing credit agreements with a person 
designated in or pursuant to Sec. 587.201(a), including charge or debit 
cards issued to such a person, and no U.S. person may effect a setoff 
against blocked property.
    Transactions otherwise prohibited under part 587 but found to be 
consistent with U.S. policy may be authorized by one of the general 
licenses contained in subpart E or by a specific license issued 
pursuant to the procedures described in subpart D of part 501 of 31 CFR 
chapter V. Sections 587.504, 587.505, and 587.506 authorize U.S. 
financial institutions to make certain transfers of funds or credit 
between blocked accounts, to debit blocked accounts for normal service 
charges, and, subject to certain conditions, to invest and reinvest 
blocked assets. Sections 587.507 and 587.508 authorize the provision of 
certain legal and medical services, but require that receipt of payment 
for such services must be specifically licensed.
    Subpart F of part 587 refers, for the recordkeeping and reporting 
requirements of this part, to the Reporting and Procedures Regulations 
in subpart C of 31 CFR part 501. Subpart G of the regulations describes 
the civil and criminal penalties applicable to violations of the 
regulations, as well as the procedures governing the potential 
imposition of a civil monetary penalty.
    Subpart H of part 587 provides certain administrative procedures 
applicable to this part by reference to the Reporting and Procedures 
Regulations in subpart D of 31 CFR part 501, which contain provisions 
relating to administrative procedures. Subpart I of the regulations 
sets forth a Paperwork Reduction Act notice.

Request for Comments

    Because the amendment of 31 CFR part 586 and the addition of 31 CFR 
Part 587 pursuant to Executive Order 13192 involve a foreign affairs 
function, the provisions of Executive Order 12866 and the 
Administrative Procedure Act (5 U.S.C. 553) requiring notice of 
proposed rulemaking, opportunity for public participation, and delay in 
effective date, are inapplicable. However, because of the importance of 
the issues addressed in the amendments to part 586 and the introduction 
of part 587, comments will be considered in the development of final 
rules. Accordingly, the Department encourages interested persons who 
wish to comment to do so at the earliest possible time to permit the 
fullest consideration of their views. Comments may address the impact 
of the regulations on the submitter's activities, whether of a 
commercial, non-commercial or humanitarian nature, as well as changes 
that would improve the clarity and organization of the regulations.
    The period for submission of comments will close December 3, 2001. 
The Department will consider all comments received before the close of 
the comment period in developing final regulations. Comments received 
after the end of the comment period will be considered if possible, but 
their consideration cannot be assured. The Department will not accept 
public comments accompanied by a request that a part or all of the 
submission be treated confidentially because of its business 
proprietary nature or for any other reason. The Department will return 
such comments and materials when submitted by regular mail to the 
person submitting the comments and will not consider them in the 
development of final regulations. In the interest of accuracy and 
completeness, the Department requires comments in written form.
    All public comments on these regulations will be a matter of public 
record. Copies of the public record concerning these regulations will 
be made available, not sooner than January 2, 2002 and will be 
obtainable from OFAC's Web site (http://www.treas.gov/ofac). If that 
service is unavailable, written requests for copies may be sent to: 
Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 
Pennsylvania Ave., Annex --2d Floor, N.W. Washington, DC 20220, Attn: 
Merete Evans.
    Because no notice of proposed rulemaking is required for this rule, 
the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

Paperwork Reduction Act

    The collections of information related to 31 CFR parts 586 and 587 
are contained in 31 CFR part 501 (the ``Reporting and Procedures 
Regulations''). Pursuant to the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507), those collections of information have been approved by 
the Office of Management and Budget under control number 1505-0164. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless the collection of 
information displays a valid control number.

List of Subjects

31 CFR Part 586

    Administrative practice and procedure, Banks, Banking, Blocking of 
assets, Federal Republic of Yugoslavia (Serbia & Montenegro), 
Investments, Kosovo, Montenegro, New investment, Penalties, Reporting 
and recordkeeping requirements, Serbia.

31 CFR Part 587

    Administrative practice and procedure, Banks, Banking, Blocking of 
assets, Credit, Federal Republic of Yugoslavia (Serbia & Montenegro), 
Investments, Milosevic, Penalties, Reporting and recordkeeping 
requirements, Securities, Services.

    For the reasons set forth in the preamble, 31 CFR part 586 is 
amended and part 587 is added to read as follows:

PART 586--FEDERAL REPUBLIC OF YUGOSLAVIA (SERBIA & MONTENEGRO) 
KOSOVO SANCTIONS REGULATIONS

    1. The authority citation for part 586 is revised to read as 
follows:


[[Page 50509]]


    Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 
1701-1706; E.O. 13088, 63 FR 32109, 3 CFR, 98 Comp., p. 191; E.O. 
13121, 64 FR 24021, 3 CFR, 99 Comp. p. 176; E.O. 13192, 66 FR 7379, 
January 23, 2001.

Subpart B--Prohibitions

    2. Section 586.201 is amended by adding a note to paragraphs (a), 
(b), and (d); revising paragraph (c) and the accompanying note; and 
revising the note at the end of the section to read as follows:


Sec. 586.201  Prohibited transactions involving blocked property.

    (a) * * *


    Note to paragraph (a) of Sec. 586.201: See note at end of this 
section with regard to the lifting of certain sanctions effective 
January 19, 2001.


    (b) * * *


    Note to paragraph (b) of Sec. 586.201: See note at end of this 
section with regard to the lifting of certain sanctions effective 
January 19, 2001.


    (c) Property or interests in property blocked pursuant to Executive 
Order 13088 of June 9, 1998, as amended by Executive Order 13121 of 
April 30, 1999, and this part prior to 12:01 a.m. eastern standard 
time, January 19, 2001, are blocked, and may not be transferred, paid, 
exported or otherwise dealt in except as otherwise authorized by the 
Secretary of the Treasury.


    Note to paragraph (c) of Sec. 586.201: See note at end of this 
section with regard to the lifting of certain sanctions effective 
January 19, 2001.


    (d) * * *

    Note to paragraph (d) of Sec. 586.201: See note at end of this 
section with regard to the lifting of certain sanctions effective 
January 19, 2001.


    (e) * * *


    Note to Sec. 586.201: Section 1(a) of Executive Order 13192 of 
January 17, 2001 (66 FR 7379, January 23, 2001), amended Executive 
Order 13088 of June 9, 1998 (63 FR 32109, June 12, 1998), to remove 
prospectively the prohibition on transactions that involve blocked 
property and interests in property of the Governments of the 
FRY(S&M), the Republic of Serbia, and the Republic of Montenegro. 
Consequently, with the exception of transactions involving property 
or interests in property of persons designated in or pursuant to 31 
CFR Sec. 587.201(a), transactions or transfers by U.S. persons that 
involve the property or interests in property of the FRY(S&M) and 
that occur on or after January 19, 2001, are not prohibited by 
Secs. 586.201(a), (b), or (d). Executive Order 13088, as amended by 
Executive Order 13192, however, also requires that all property or 
interests in property blocked pursuant to Executive Order 13088 
prior to January 19, 2001, shall remain blocked, except as otherwise 
authorized by the Secretary of the Treasury. See Sec. 586.201(c). 
The continued blocking of previously blocked property is necessary 
until provision is made to address claims or encumbrances with 
respect to such property.



    3. Section 586.204 is amended by adding a note to read as follows:


Sec. 586.204  Prohibited new investment within Serbia.

* * * * *

    Note to Sec. 586.204: Section 1(b) of Executive Order 13192 of 
January 17, 2001 (66 FR 7379, January 23, 2001), revoked section 3 
of Executive Order 13088 of June 9, 1998 (63 FR 32109, June 12, 
1998), which prohibited all new investment by United States persons 
in the territory of the Republic of Serbia and the approval and 
other facilitation by United States persons of other persons' new 
investment in the territory of the Republic of Serbia. Consequently, 
with the exception of transactions involving property or interests 
in property of persons designated in or pursuant to 31 CFR 
Sec. 587.201(a), the new investment activities of United States 
persons in the territory of the Republic of Serbia on or after 
January 19, 2001, are not prohibited by Sec. 586.204.

Subpart C--General Definitions

    4. Section 586.302 is revised to read as follows:


Sec. 586.302  Effective date.

    The term effective date refers to the effective date of the 
applicable prohibitions and directives contained in this part which is 
12:01 a.m. eastern daylight time, June 10, 1998, except, with respect 
to Sec. 586.201(c), 12:01 a.m. eastern standard time, January 19, 2001, 
shall apply.

    5. Section 586.319 is revised to read as follows:


Sec. 586.319.  United States Person; U.S. person.

    The term United States person or U.S. person means any United 
States citizen, permanent resident alien, entity organized under the 
laws of the United States or any jurisdiction within the United States 
(including foreign branches), or any person in the United States.

Subpart D--Interpretations

    6. Section 586.405 is revised to read as follows:


Sec. 586.405  Transactions incidental to a licensed transaction.

    Any transaction ordinarily incident to a licensed transaction and 
necessary to give effect thereto is also authorized, except:
    (a) An incidental transaction, not explicitly authorized within the 
terms of the license, by or with a person whose property or interests 
in property are blocked pursuant to Sec. 586.201; or
    (b) An incidental transaction, not explicitly authorized within the 
terms of the license, involving a debit or credit to a blocked account 
or a transfer of blocked property.


Sec. 586.406  Provision of services. [Amended]

    7. Section 586.406 is amended by removing the phrase ``as provided 
in Sec. 586.201(c) or'' in the first sentence of paragraph (a).

Subpart E--Licenses, Authorizations, and Statements of Licensing 
Policy


Sec. 586.501  General and specific licensing procedures. [Amended]

    8. Section 586.501 is amended by removing the phrase ``subpart C'' 
and adding in its place the phrase ``subpart D''.

    9. Section 586.517 is added to subpart E to read as follows:


Sec. 586.517  Unblocking of certain debt.

    (a) Subject to the limitations in paragraph (c) below, debt 
obligations in the possession or control of U.S. persons for which the 
National Bank of Yugoslavia has joint or several liability and that 
were rescheduled pursuant to the ``New Financing Agreement'' of 
September 20, 1988, are unblocked.
    (b) Specific licenses may be issued on a case-by-case basis to 
permit the unblocking of debt obligations not otherwise authorized 
under either paragraph (a) of this section or 31 CFR 585.509.
    (c) Nothing in this section authorizes transactions with any person 
designated in or pursuant to 31 CFR 587.201(a).
    10. Section 586.518 is added to subpart E to read as follows:


Sec. 586.518  Authorization of release of certain blocked transfers by 
U.S. financial institutions.

    (a) Subject to the limitation set forth in this paragraph, U.S. 
financial institutions are authorized to unblock and return to the 
remitting party funds blocked pursuant to this part that came into 
their possession or control through wire transfer instructions or check 
remittances, provided those funds were not destined for an account 
established on the books of a U.S. financial institution by a person 
whose property or interests in property were blocked immediately prior 
to January 19, 2001. Funds otherwise eligible for release under this 
general license, however, may not be unblocked and returned if

[[Page 50510]]

they were remitted by or destined for a person designated in or 
pursuant to 31 CFR 587.201(a).
    (b) Funds blocked pursuant to this part that were destined through 
wire transfer instructions or check remittances for an account 
established on the books of a U.S. financial institution by a person 
whose property or interests in property were blocked immediately prior 
to January 19, 2001, remain blocked. If such funds are not already held 
in the account for which they were destined, they must be transferred 
to such an account by October 15, 2001, and maintained in blocked 
status pursuant to Sec. 586.201(c).

    11. Section 586.519 is added to subpart E to read as follows:


Sec. 586.519  Release of certain funds held at overseas branches of 
U.S. financial institutions.

    Specific licenses may be issued on a case-by-case basis to permit 
the overseas branches of U.S. financial institutions to unblock deposit 
accounts that were blocked pursuant to this part prior to January 19, 
2001, and that were established outside of the United States in 
situations in which such accounts are not owned or controlled, directly 
or indirectly, by any person designated in or pursuant to 31 CFR 
Sec. 587.201(a).

Subpart G--Penalties

    12. Section 586.701 is revised to read as follows:


Sec. 586.701  Penalties.

    (a) Attention is directed to section 206 of the International 
Emergency Economic Powers Act (the ``Act'') (50 U.S.C. 1705), which is 
applicable to violations of the provisions of any license, ruling, 
regulation, order, direction, or instruction issued by or pursuant to 
the direction or authorization of the Secretary of the Treasury 
pursuant to this part or otherwise under the Act. Section 206 of the 
Act, as adjusted by the Federal Civil Penalties Inflation Adjustment 
Act of 1990 (Public Law 101-410, as amended, 28 U.S.C. 2461 note), 
provides that:
    (1) A civil penalty not to exceed $11,000 per violation may be 
imposed on any person who violates, or attempts to violate, any 
license, order, or regulation issued under the Act;
    (2) Whoever willfully violates, or willfully attempts to violate, 
any license, order, or regulation issued under the Act, upon 
conviction, shall be fined not more than $50,000, and, if a natural 
person, may also be imprisoned for not more than 10 years; and any 
officer, director, or agent of any corporation who knowingly 
participates in such violation may be punished by a like fine, 
imprisonment, or both.
    (b) The criminal penalties provided in the Act are subject to 
increase pursuant to 18 U.S.C. 3571.
    (c) Attention is also directed to 18 U.S.C. 1001, which provides 
that whoever, in any matter within the jurisdiction of the executive, 
legislative, or judicial branch of the Government of the United States, 
knowingly and willfully falsifies, conceals, or covers up by any trick, 
scheme, or device a material fact, or makes any materially false, 
fictitious, or fraudulent statement or representation, or makes or uses 
any false writing or document knowing the same to contain any 
materially false, fictitious, or fraudulent statement or entry shall be 
fined under title 18, United States Code, or imprisoned not more than 
five years, or both.
    (d) Violations of this part may also be subject to relevant 
provisions of other applicable laws.

    13. Section 586.702 is revised to read as follows:


Sec. 586.702  Prepenalty notice.

    (a) When required. If the Director of the Office of Foreign Assets 
Control has reasonable cause to believe that there has occurred a 
violation of any provision of this part or a violation of the 
provisions of any license, ruling, regulation, order, direction, or 
instruction issued by or pursuant to the direction or authorization of 
the Secretary of the Treasury pursuant to this part or otherwise under 
the International Emergency Economic Powers Act, and the Director 
determines that further proceedings are warranted, the Director shall 
notify the alleged violator of the agency's intent to impose a monetary 
penalty by issuing a prepenalty notice. The prepenalty notice shall be 
in writing. The prepenalty notice may be issued whether or not another 
agency has taken any action with respect to the matter.
    (b) Contents of notice--(1) Facts of violation. The prepenalty 
notice shall describe the violation, specify the laws and regulations 
allegedly violated, and state the amount of the proposed monetary 
penalty.
    (2) Right to respond. The prepenalty notice also shall inform the 
respondent of respondent's right to make a written presentation within 
the applicable 30-day period set forth in Sec. 586.703 as to why a 
monetary penalty should not be imposed or why, if imposed, the monetary 
penalty should be in a lesser amount than proposed.
    (c) Informal settlement prior to issuance of prepenalty notice. At 
any time prior to the issuance of a prepenalty notice, an alleged 
violator may request in writing that, for a period not to exceed sixty 
(60) days, the agency withhold issuance of the prepenalty notice for 
the exclusive purpose of effecting settlement of the agency's potential 
civil monetary penalty claims. In the event the Director grants the 
request, under terms and conditions within his discretion, the Office 
of Foreign Assets Control will agree to withhold issuance of the 
prepenalty notice for a period not to exceed 60 days and will enter 
into settlement negotiations of the potential civil monetary penalty 
claim.

    14. Section 586.703 is revised to read as follows:


Sec. 586.703  Response to prepenalty notice; informal settlement.

    (a) Deadline for response. The respondent may submit a response to 
the prepenalty notice within the applicable 30-day period set forth in 
this paragraph. The Director may grant, at his discretion, an extension 
of time in which to submit a response to the prepenalty notice. The 
failure to submit a response within the applicable time period set 
forth in this paragraph shall be deemed to be a waiver of the right to 
respond.
    (1) Computation of time for response. A response to the prepenalty 
notice must be postmarked or date-stamped by the U.S. Postal Service 
(or foreign postal service, if mailed abroad) or courier service 
provider (if transmitted to OFAC by courier) on or before the 30th day 
after the postmark date on the envelope in which the prepenalty notice 
was mailed. If the respondent refused delivery or otherwise avoided 
receipt of the prepenalty notice, a response must be postmarked or 
date-stamped on or before the 30th day after the date on the stamped 
postal receipt maintained at the Office of Foreign Assets Control. If 
the prepenalty notice was personally delivered to the respondent by a 
non-U.S. Postal Service agent authorized by the Director, a response 
must be postmarked or date-stamped on or before the 30th day after the 
date of delivery.
    (2) Extensions of time for response. If a due date falls on a 
federal holiday or weekend, that due date is extended to include the 
following business day. Any other extensions of time will be granted, 
at the Director's discretion, only upon the respondent's specific 
request to the Office of Foreign Assets Control.
    (b) Form and method of response. The response must be submitted in 
writing and may be handwritten or typed. The response need not be in 
any particular form. A copy of the written response

[[Page 50511]]

may be sent by facsimile, but the original must also be sent to the 
Office of Foreign Assets Control Civil Penalties Division by mail or 
courier and must be postmarked or date-stamped, in accordance with 
paragraph (a) of this section.
    (c) Contents of response. A written response must contain 
information sufficient to indicate that it is in response to the 
prepenalty notice.
    (1) A written response must include the respondent's full name, 
address, telephone number, and facsimile number, if available, or those 
of the representative of the respondent.
    (2) A written response should either admit or deny each specific 
violation alleged in the prepenalty notice and also state if the 
respondent has no knowledge of a particular violation. If the written 
response fails to address any specific violation alleged in the 
prepenalty notice, that alleged violation shall be deemed to be 
admitted.
    (3) A written response should include any information in defense, 
evidence in support of an asserted defense, or other factors that the 
respondent requests the Office of Foreign Assets Control to consider. 
Any defense or explanation previously made to the Office of Foreign 
Assets Control or any other agency must be repeated in the written 
response. Any defense not raised in the written response will be 
considered waived. The written response should also set forth the 
reasons why the respondent believes the penalty should not be imposed 
or why, if imposed, it should be in a lesser amount than proposed.
    (d) Default. If the respondent elects not to submit a written 
response within the time limit set forth in paragraph (a) of this 
section, the Office of Foreign Assets Control will conclude that the 
respondent has decided not to respond to the prepenalty notice. The 
agency generally will then issue a written penalty notice imposing the 
penalty proposed in the prepenalty notice.
    (e) Informal settlement. In addition to or as an alternative to a 
written response to a prepenalty notice, the respondent or respondent's 
representative may contact the Office of Foreign Assets Control as 
advised in the prepenalty notice to propose the settlement of 
allegations contained in the prepenalty notice and related matters. 
However, the requirements set forth in paragraph (f) of this section as 
to oral communication by the representative must first be fulfilled. In 
the event of settlement at the prepenalty stage, the claim proposed in 
the prepenalty notice will be withdrawn, the respondent will not be 
required to take a written position on allegations contained in the 
prepenalty notice, and the Office of Foreign Assets Control will make 
no final determination as to whether a violation occurred. The amount 
accepted in settlement of allegations in a prepenalty notice may vary 
from the civil penalty that might finally be imposed in the event of a 
formal determination of violation. In the event no settlement is 
reached, the time limit specified in paragraph (a) of this section for 
written response to the prepenalty notice will remain in effect unless 
additional time is granted by the Office of Foreign Assets Control.
    (f) Representation. A representative of the respondent may act on 
behalf of the respondent, but any oral communication with the Office of 
Foreign Assets Control prior to a written submission regarding the 
specific allegations contained in the prepenalty notice must be 
preceded by a written letter of representation, unless the prepenalty 
notice was served upon the respondent in care of the representative.

    15. Section 586.704 is revised to read as follows:


Sec. 586.704  Penalty imposition or withdrawal.

    (a) No violation. If, after considering any response to the 
prepenalty notice and any relevant facts, the Director of the Office of 
Foreign Assets Control determines that there was no violation by the 
respondent named in the prepenalty notice, the Director shall notify 
the respondent in writing of that determination and the cancellation of 
the proposed monetary penalty.
    (b) Violation. (1) If, after considering any written response to 
the prepenalty notice, or default in the submission of a written 
response, and any relevant facts, the Director of the Office of Foreign 
Assets Control determines that there was a violation by the respondent 
named in the prepenalty notice, the Director is authorized to issue a 
written penalty notice to the respondent of the determination of 
violation and the imposition of the monetary penalty.
    (2) The penalty notice shall inform the respondent that payment or 
arrangement for installment payment of the assessed penalty must be 
made within 30 days of the date of mailing of the penalty notice by the 
Office of Foreign Assets Control.
    (3) The penalty notice shall inform the respondent of the 
requirement to furnish the respondent's taxpayer identification number 
pursuant to 31 U.S.C. 7701 and that such number will be used for 
purposes of collecting and reporting on any delinquent penalty amount.
    (4) The issuance of the penalty notice finding a violation and 
imposing a monetary penalty shall constitute final agency action. The 
respondent has the right to seek judicial review of that final agency 
action in federal district court.

    16. Section 586.705 is revised to read as follows:


Sec. 586.705  Administrative collection; referral to United States 
Department of Justice.

    In the event that the respondent does not pay the penalty imposed 
pursuant to this part or make payment arrangements acceptable to the 
Director of the Office of Foreign Assets Control within 30 days of the 
date of mailing of the penalty notice, the matter may be referred for 
administrative collection measures by the Department of the Treasury or 
to the United States Department of Justice for appropriate action to 
recover the penalty in a civil suit in federal district court.

    17. Part 587 is added to 31 CFR Chapter V to read as follows:

PART 587--FEDERAL REPUBLIC OF YUGOSLAVIA (SERBIA AND MONTENEGRO) 
MILOSEVIC SANCTIONS REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations

Sec.
587.101   Relation of this part to other laws and regulations.
Subpart B--Prohibitions
587.201   Prohibited transactions involving blocked property.
587.202   Effect of transfers violating the provisions of this part.
587.203   Holding of funds in interest-bearing accounts; investment 
and reinvestment.
587.204   Evasions; attempts; conspiracies.
587.205   Expenses of maintaining blocked property; liquidation of 
blocked account.
587.206   Exempt transactions.
Subpart C--General Definitions
587.301   Blocked account; blocked property.
587.302   Effective date.
587.303   Entity.
587.304   Information or informational materials.
587.305   Interest.
587.306   Licenses; general and specific.
587.307   Person.
587.308   Property; property interest.
587.309   Transfer.
587.310   United States.
587.311   U.S. financial institution.
587.312   United States person; U.S. person.
Subpart D--Interpretations
587.401   Reference to amended sections.
587.402   Effect of amendment.
587.403   Termination and acquisition of an interest in blocked 
property.

[[Page 50512]]

587.404   Transactions incidental to a licensed transaction.
587.405   Provision of services.
587.406   Offshore transactions.
587.407   Payments from blocked accounts to satisfy obligations 
prohibited.
587.408   Credit extended and cards issued by U.S. financial 
institutions.
587.409   Setoffs prohibited.
Subpart E--Licenses, Authorizations and Statements of Licensing Policy
587.501   General and specific licensing procedures.
587.502   Effect of license or authorization.
587.503   Exclusion from licenses.
587.504   Payments and transfers to blocked accounts in U.S. 
financial institutions.
587.505   Entries in certain accounts for normal service charges 
authorized.
587.506   Investment and reinvestment of certain funds.
587.507   Provision of certain legal services authorized.
587.508   Authorization of emergency medical services.
Subpart F--Reports
587.601   Records and reports.
Subpart G--Penalties
587.701   Penalties.
587.702   Prepenalty notice.
587.703   Response to prepenalty notice; informal settlement.
587.704   Penalty imposition or withdrawal.
587.705   Administrative collection; referral to United States 
Department of Justice.
Subpart H--Procedures
587.801   Procedures.
587.802   Delegation by the Secretary of the Treasury.
Subpart I--Paperwork Reduction Act
587.901   Paperwork Reduction Act notice.

    Authority: 3 U.S.C. 301; 22 U.S.C. 287c, 31 U.S.C. 321(b); 50 
U.S.C. 1601-1651, 1701-1706; E.O. 13088, 63 FR 32109, 3 CFR, 98 
Comp, p. 191; E.O. 13121, 64 FR 24021, 3 CFR, 99 Comp. p. 176; E.O. 
13192, 65 FR 7379, January 23, 2001.

Subpart A--Relation of This Part to Other Laws and Regulations


Sec. 587.101  Relation of this part to other laws and regulations.

    This part is separate from, and independent of, the other parts of 
this chapter, with the exception of part 501 of this chapter, the 
recordkeeping and reporting requirements and license application and 
other procedures of which apply to this part. Actions taken pursuant to 
part 501 of this chapter with respect to the prohibitions contained in 
this part are considered actions taken pursuant to this part. Differing 
foreign policy and national security circumstances may result in 
differing interpretations of similar language among the parts of this 
chapter. No license or authorization contained in or issued pursuant to 
those other parts authorizes any transaction prohibited by this part. 
No license or authorization contained in or issued pursuant to any 
other provision of law or regulation authorizes any transaction 
prohibited by this part. No license contained in or issued pursuant to 
this part relieves the involved parties from complying with any other 
applicable laws or regulations.

Subpart B--Prohibitions


Sec. 587.201  Prohibited transactions involving blocked property.

    (a) Except as authorized by regulations, orders, directives, 
rulings, instructions, licenses or otherwise, and notwithstanding any 
contracts entered into or any license or permit granted prior to the 
effective date, property or interests in property of any person 
designated below that are in the United States, that hereafter come 
within the United States, or that are or hereafter come within the 
possession or control of U.S. persons, including their overseas 
branches, are blocked and may not be transferred, paid, exported, 
withdrawn or otherwise dealt in:
    (1) Any person listed in the Annex to Executive Order 13192 of 
January 17, 2001 (66 FR 7379, January 23, 2001); and
    (2) Any person determined by the Secretary of the Treasury, in 
consultation with the Secretary of State:
    (i) To be under open indictment by the International Criminal 
Tribunal for the former Yugoslavia, subject to applicable laws and 
procedures;
    (ii) To have sought, or to be seeking, through repressive measures 
or otherwise, to maintain or reestablish illegitimate control over the 
political processes or institutions or the economic resources or 
enterprises of the Federal Republic of Yugoslavia, the Republic of 
Serbia, the Republic of Montenegro or the territory of Kosovo;
    (iii) To have provided material support or resources to any person 
designated in the Annex to Executive Order 13192 or any person 
otherwise designated by the Secretary of the Treasury pursuant to this 
section; or
    (iv) To be owned or controlled by or acting or purporting to act 
directly or indirectly for or on behalf of any person designated in the 
Annex to Executive Order 13192 or any person otherwise designated by 
the Secretary of the Treasury pursuant to this section.

    Note to paragraph (a) of Sec. 587.201: Persons designated 
pursuant to Sec. 587.201(a)(1) or (2) are listed with the acronym 
[FRYM] in appendix A to 31 CFR chapter V. Section 501.807 of this 
chapter V sets forth the procedures to be followed by persons 
seeking administrative reconsideration of their designation or who 
wish to assert that the circumstances resulting in designation no 
longer apply. Similarly, when a transaction results in the blocking 
of funds at a financial institution pursuant to this section and a 
party to the transaction believes the funds to have been blocked due 
to mistaken identity, that party may seek to have such funds 
unblocked pursuant to the administrative procedures set forth in 
Sec. 501.806 of this chapter.

    (b) Except as authorized by regulations, orders, directives, 
rulings, instructions, licenses or otherwise, and notwithstanding any 
contracts entered into or any license or permit granted prior to the 
effective date, any transaction or dealing by U.S. persons, wherever 
located, or within the United States in property or interests in 
property of any person designated in or pursuant to Sec. 587.201(a) are 
prohibited.
    (c) Unless otherwise authorized by this part or by a specific 
license expressly referring to this section, any dealing in any 
security (or evidence thereof) held within the possession or control of 
a U.S. person and either registered or inscribed in the name of or 
known to be held for the benefit of any person designated in or 
pursuant to Sec. 587.201(a) is prohibited. This prohibition includes 
but is not limited to the transfer (including the transfer on the books 
of any issuer or agent thereof), disposition, transportation, 
importation, exportation, or withdrawal of any such security or the 
endorsement or guaranty of signatures on any such security. This 
prohibition applies irrespective of the fact that at any time (whether 
prior to, on, or subsequent to the effective date) the registered or 
inscribed owner of any such security may have or might appear to have 
assigned, transferred, or otherwise disposed of the security.


Sec. 587.202  Effect of transfers violating the provisions of this 
part.

    (a) Any transfer after the effective date that is in violation of 
any provision of this part or of any regulation, order, directive, 
ruling, instruction, or license issued pursuant to this part, and that 
involves any property or interest in property blocked pursuant to 
Sec. 587.201(a), is null and void and shall not be the basis for the 
assertion or recognition of any interest in or right, remedy, power, or 
privilege with respect to such property or property interests.
    (b) No transfer before the effective date shall be the basis for 
the assertion or recognition of any right, remedy, power, or privilege 
with respect to, or any interest in, any property or interest in 
property blocked pursuant to Sec. 587.201(a), unless the person with 
whom such property is held or

[[Page 50513]]

maintained, prior to that date, had written notice of the transfer or 
by any written evidence had recognized such transfer.
    (c) Unless otherwise provided, an appropriate license or other 
authorization issued by or pursuant to the direction or authorization 
of the Director of the Office of Foreign Assets Control before, during, 
or after a transfer shall validate such transfer or make it enforceable 
to the same extent that it would be valid or enforceable but for the 
provisions of the International Emergency Economic Powers Act, this 
part, and any regulation, order, directive, ruling, instruction, or 
license issued pursuant to this part.
    (d) Transfers of property that otherwise would be null and void or 
unenforceable by virtue of the provisions of this section shall not be 
deemed to be null and void or unenforceable as to any person with whom 
such property was held or maintained (and as to such person only) in 
cases in which such person is able to establish to the satisfaction of 
the Director of the Office of Foreign Assets Control each of the 
following:
    (1) Such transfer did not represent a willful violation of the 
provisions of this part by the person with whom such property was held 
or maintained;
    (2) The person with whom such property was held or maintained did 
not have reasonable cause to know or suspect, in view of all the facts 
and circumstances known or available to such person, that such transfer 
required a license or authorization issued pursuant to this part and 
was not so licensed or authorized, or, if a license or authorization 
did purport to cover the transfer, that such license or authorization 
had been obtained by misrepresentation of a third party or withholding 
of material facts or was otherwise fraudulently obtained; and
    (3) The person with whom such property was held or maintained filed 
with the Office of Foreign Assets Control a report setting forth in 
full the circumstances relating to such transfer promptly upon 
discovery that:
    (i) Such transfer was in violation of the provisions of this part 
or any regulation, ruling, instruction, license, or other direction or 
authorization issued pursuant to this part;
    (ii) Such transfer was not licensed or authorized by the Director 
of the Office of Foreign Assets Control; or
    (iii) If a license did purport to cover the transfer, such license 
had been obtained by misrepresentation of a third party or withholding 
of material facts or was otherwise fraudulently obtained.

    Note to paragraph (d) of Sec. 587.202: The filing of a report in 
accordance with the provisions of paragraph (d)(3) of this section 
shall not be deemed evidence that the terms of paragraphs (d)(1) and 
(d)(2) of this section have been satisfied.

    (e) Unless licensed pursuant to this part, any attachment, 
judgment, decree, lien, execution, garnishment, or other judicial 
process is null and void with respect to any property in which on or 
since the effective date of Sec. 587.201 there existed an interest of a 
person designated in or pursuant to Sec. 587.201(a).


Sec. 587.203  Holding of funds in interest-bearing accounts; investment 
and reinvestment.

    (a) Except as provided in paragraph (c) or (d) of this section, or 
as otherwise directed by the Office of Foreign Assets Control, any U.S. 
person holding funds, such as currency, bank deposits, or liquidated 
financial obligations subject to Sec. 587.201(a) shall hold or place 
such funds in a blocked interest-bearing account located in the United 
States.
    (b)(1) For purposes of this section, the term blocked interest-
bearing account means a blocked account:
    (i) In a federally-insured U.S. bank, thrift institution, or credit 
union, provided the funds are earning interest at rates that are 
commercially reasonable; or
    (ii) With a broker or dealer registered with the Securities and 
Exchange Commission under the Securities Exchange Act of 1934, provided 
the funds are invested in a money market fund or in U.S. Treasury 
bills.
    (2) For purposes of this section, a rate is commercially reasonable 
if it is the rate currently offered to other depositors on deposits or 
instruments of comparable size and maturity.
    (3) Funds held or placed in a blocked account pursuant to this 
paragraph (b) may not be invested in instruments the maturity of which 
exceeds 180 days. If interest is credited to a separate blocked account 
or subaccount, the name of the account party on each account must be 
the same.
    (c) Blocked funds held in instruments the maturity of which exceeds 
180 days at the time the funds become subject to Sec. 587.201(a) may 
continue to be held until maturity in the original instrument, provided 
any interest, earnings, or other proceeds derived therefrom are paid 
into a blocked interest-bearing account in accordance with paragraph 
(b) or (d) of this section.
    (d) Blocked funds held in accounts or instruments outside the 
United States at the time the funds become subject to Sec. 587.201(a) 
may continue to be held in the same type of accounts or instruments, 
provided the funds earn interest at rates that are commercially 
reasonable.
    (e) This section does not create an affirmative obligation for the 
holder of blocked tangible property, such as chattels or real estate, 
or of other blocked property, such as debt or equity securities, to 
sell or liquidate such property at the time the property becomes 
subject to Sec. 587.201(a). However, the Office of Foreign Assets 
Control may issue licenses permitting or directing such sales in 
appropriate cases.
    (f) Funds subject to this section may not be held, invested, or 
reinvested in a manner that provides immediate financial or economic 
benefit or access to any person designated in or pursuant to 
Sec. 587.201(a), nor may their holder cooperate in or facilitate the 
pledging or other attempted use as collateral of blocked funds or other 
assets.


Sec. 587.204  Evasions; attempts; conspiracies.

    (a) Except as otherwise authorized, and notwithstanding any 
contract entered into or any license or permit granted prior to the 
effective date, any transaction by any U.S. person or within the United 
States on or after the effective date that evades or avoids, has the 
purpose of evading or avoiding, or attempts to violate any of the 
prohibitions set forth in this part is prohibited.
    (b) Except as otherwise authorized, and notwithstanding any 
contract entered into or any license or permit granted prior to the 
effective date, any conspiracy formed for the purpose of engaging in a 
transaction prohibited by this part is prohibited.


Sec. 587.205  Expenses of maintaining blocked property; liquidation of 
blocked account.

    (a) Except as otherwise authorized, and notwithstanding the 
existence of any rights or obligations conferred or imposed by any 
international agreement or contract entered into or any license or 
permit granted before 12:01 a.m., eastern standard time, January 19, 
2001, all expenses incident to the maintenance of physical property 
blocked pursuant to Sec. 587.201(a) shall be the responsibility of the 
owners or operators of such property, which expenses shall not be met 
from blocked funds.
    (b) Property blocked pursuant to Sec. 587.201(a) may, in the 
discretion of the Director, Office of Foreign Assets Control, be sold 
or liquidated and the net proceeds placed in a blocked

[[Page 50514]]

interest-bearing account in the name of the owner of the property.


Sec. 587.206  Exempt transactions.

    (a) Personal communications. The prohibitions contained in this 
part do not apply to any postal, telegraphic, telephonic, or other 
personal communication that does not involve the transfer of anything 
of value.
    (b) Humanitarian donations. The prohibitions contained in this part 
do not apply to donations by U.S. persons of articles, such as food, 
clothing, and medicine, intended to be used to relieve human suffering.
    (c) Information or informational materials. (1) The importation 
from any country and the exportation to any country of information or 
informational materials, as defined in Sec. 587.304, whether commercial 
or otherwise, regardless of format or medium of transmission, are 
exempt from the prohibitions of this part.
    (2) This section does not exempt from regulation or authorize 
transactions related to information or informational materials not 
fully created and in existence at the date of the transactions, or to 
the substantive or artistic alteration or enhancement of informational 
materials, or to the provision of marketing and business consulting 
services. Such prohibited transactions include, but are not limited to, 
payment of advances for information or informational materials not yet 
created and completed (with the exception of prepaid subscriptions for 
widely-circulated magazines and other periodical publications); 
provision of services to market, produce or co-produce, create, or 
assist in the creation of information or informational materials; and, 
with respect to information or informational materials imported from 
persons designated in or pursuant to Sec. 587.201(a), payment of 
royalties with respect to income received for enhancements or 
alterations made by U.S. persons to such information or informational 
materials.
    (3) This section does not exempt or authorize transactions incident 
to the exportation of software subject to the Export Administration 
Regulations, 15 CFR parts 730 through 774, or to the exportation of 
goods, technology or software, or to the provision, sale, or leasing of 
capacity on telecommunications transmission facilities (such as 
satellite or terrestrial network connectivity) for use in the 
transmission of any data. The exportation of such items or services and 
the provision, sale, or leasing of such capacity or facilities to a 
person designated in or pursuant to Sec. 587.201(a) are prohibited.
    (d) Travel. The prohibitions contained in this part do not apply to 
transactions ordinarily incident to travel to or from any country, 
including exportation or importation of accompanied baggage for 
personal use, maintenance within any country including payment of 
living expenses and acquisition of goods or services for personal use, 
and arrangement or facilitation of such travel including nonscheduled 
air, sea, or land voyages.

Subpart C--General Definitions


Sec. 587.301  Blocked account; blocked property.

    The terms blocked account and blocked property shall mean any 
account or property subject to the prohibitions in Sec. 587.201 held in 
the name of a person designated in or pursuant to Sec. 587.201(a), or 
in which a person designated in or pursuant to Sec. 587.201(a) has an 
interest, and with respect to which payments, transfers, exportations, 
withdrawals, or other dealings may not be made or effected except 
pursuant to an authorization or license from the Office of Foreign 
Assets Control expressly authorizing such action.


Sec. 587.302  Effective date.

    The term effective date refers to the effective date of the 
applicable prohibitions and directives contained in this part, which is 
12:01 a.m. eastern standard time, January 19, 2001, or, in the case of 
any person designated pursuant to Sec. 587.201(a)(2), the earlier of 
the date on which a person receives actual or constructive notice of 
such designation.


Sec. 587.303  Entity.

    The term entity means a partnership, association, trust, joint 
venture, corporation, group, subgroup, or other organization.


Sec. 587.304  Information or informational materials.

    (a) For purposes of this part, the term information or 
informational materials includes, but is not limited to publications, 
films, posters, phonograph records, photographs, microfilms, 
microfiche, tapes, compact disks, CD ROMs, artworks, and news wire 
feeds.


    Note to paragraph (a) of Sec. 587.304. To be considered 
information or informational materials, artworks must be classified 
under chapter heading 9701, 9702, or 9703 of the Harmonized Tariff 
Schedule of the United States.
    (b) The term information or informational materials with respect 
to United States exports does not include items:
    (1) That were, as of April 30, 1994, or that thereafter become, 
controlled for export pursuant to section 5 of the Export 
Administration Act of 1979, 50 U.S.C. App. 2401-2420 (1979) (the 
``EAA''), or section 6 of the EAA to the extent that such controls 
promote the nonproliferation or antiterrorism policies of the United 
States; or
    (2) With respect to which acts are prohibited by 18 U.S.C. 
chapter 37.

Sec. 587.305  Interest.

    Except as otherwise provided in this part, the term interest when 
used with respect to property (e.g., ``an interest in property'') means 
an interest of any nature whatsoever, direct or indirect.


Sec. 587.306  Licenses; general and specific.

    (a) Except as otherwise specified, the term license means any 
license or authorization contained in or issued pursuant to this part.
    (b) The term general license means any license or authorization the 
terms of which are set forth in subpart E of this part.
    (c) The term specific license means any license or authorization 
not set forth in subpart E of this part but issued pursuant to this 
part.

    Note to Sec. 587.306: See Sec. 501.801 of this chapter on 
licensing procedures.

Sec. 587.307  Person.

    The term person means an individual or entity.


Sec. 587.308  Property; property interest.

    The terms property and property interest include, but are not 
limited to, money, checks, drafts, bullion, bank deposits, savings 
accounts, debts, indebtedness, obligations, notes, guarantees, 
debentures, stocks, bonds, coupons, any other financial instruments, 
bankers acceptances, mortgages, pledges, liens or other rights in the 
nature of security, warehouse receipts, bills of lading, trust 
receipts, bills of sale, any other evidences of title, ownership or 
indebtedness, letters of credit and any documents relating to any 
rights or obligations thereunder, powers of attorney, goods, wares, 
merchandise, chattels, stocks on hand, ships, goods on ships, real 
estate mortgages, deeds of trust, vendors' sales agreements, land 
contracts, leaseholds, ground rents, real estate and any other interest 
therein, options, negotiable instruments, trade acceptances, royalties, 
book accounts, accounts payable, judgments, patents, trademarks or 
copyrights, insurance policies, safe deposit boxes and their contents, 
annuities, pooling agreements, services

[[Page 50515]]

of any nature whatsoever, contracts of any nature whatsoever, and any 
other property, real, personal, or mixed, tangible or intangible, or 
interest or interests therein, present, future or contingent.


Sec. 587.309  Transfer.

    The term transfer means any actual or purported act or transaction, 
whether or not evidenced by writing, and whether or not done or 
performed within the United States, the purpose, intent, or effect of 
which is to create, surrender, release, convey, transfer, or alter, 
directly or indirectly, any right, remedy, power, privilege, or 
interest with respect to any property and, without limitation upon the 
foregoing, shall include the making, execution, or delivery of any 
assignment, power, conveyance, check, declaration, deed, deed of trust, 
power of attorney, power of appointment, bill of sale, mortgage, 
receipt, agreement, contract, certificate, gift, sale, affidavit, or 
statement; the making of any payment; the setting off of any obligation 
or credit; the appointment of any agent, trustee, or fiduciary; the 
creation or transfer of any lien; the issuance, docketing, filing, or 
levy of or under any judgment, decree, attachment, injunction, 
execution, or other judicial or administrative process or order, or the 
service of any garnishment; the acquisition of any interest of any 
nature whatsoever by reason of a judgment or decree of any foreign 
country; the fulfillment of any condition; the exercise of any power of 
appointment, power of attorney, or other power; or the acquisition, 
disposition, transportation, importation, exportation, or withdrawal of 
any security.


Sec. 587.310  United States.

    The term United States means the United States, its territories and 
possessions, and all areas under the jurisdiction or authority thereof.


Sec. 587.311  U.S. financial institution.

    The term U.S. financial institution means any U.S. entity 
(including its foreign branches) that is engaged in the business of 
accepting deposits, making, granting, transferring, holding, or 
brokering loans or credits, or purchasing or selling foreign exchange, 
securities, commodity futures or options, or procuring purchasers and 
sellers thereof, as principal or agent; including but not limited to, 
depository institutions, banks, savings banks, trust companies, 
securities brokers and dealers, commodity futures and options brokers 
and dealers, forward contract and foreign exchange merchants, 
securities and commodities exchanges, clearing corporations, investment 
companies, employee benefit plans, and U.S. holding companies, U.S. 
affiliates, or U.S. subsidiaries of any of the foregoing. This terms 
includes those branches, offices and agencies of foreign financial 
institutions that are located in the United States, but not such 
institutions' foreign branches, offices, or agencies.


Sec. 587.312  United States person; U.S. person.

    The term United States person or U.S. person means any United 
States citizen, permanent resident alien, entity organized under the 
laws of the United States or any jurisdiction within the United States 
(including foreign branches), or any person in the United States.

Subpart D--Interpretations


Sec. 587.401  Reference to amended sections.

    Except as otherwise specified, reference to any provision in or 
appendix to this part or chapter or to any regulation, ruling, order, 
instruction, direction, or license issued pursuant to this part refers 
to the same as currently amended.


Sec. 587.402  Effect of amendment.

    Unless otherwise specifically provided, any amendment, 
modification, or revocation of any provision in or appendix to this 
part or chapter or of any order, regulation, ruling, instruction, or 
license issued by or under the direction of the Director of the Office 
of Foreign Assets Control does not affect any act done or omitted, or 
any civil or criminal suit or proceeding commenced or pending prior to 
such amendment, modification, or revocation. All penalties, 
forfeitures, and liabilities under any such order, regulation, ruling, 
instruction, or license continue and may be enforced as if such 
amendment, modification, or revocation had not been made.


Sec. 587.403  Termination and acquisition of an interest in blocked 
property.

    (a) Whenever a transaction licensed or authorized by or pursuant to 
this part results in the transfer of property (including any property 
interest) away from a person, such property shall no longer be deemed 
to be property blocked pursuant to Sec. 587.201(a), unless there exists 
in the property another interest that is blocked pursuant to 
Sec. 587.201(a) or any other part of this chapter, the transfer of 
which has not been effected pursuant to license or other authorization.
    (b) Unless otherwise specifically provided in a license or 
authorization issued pursuant to this part, if property (including any 
property interest) is transferred or attempted to be transferred to a 
person designated in or pursuant to Sec. 587.201(a), such property 
shall be deemed to be property in which that person has an interest and 
therefore blocked.


Sec. 587.404  Transactions incidental to a licensed transaction.

    Any transaction ordinarily incident to a licensed transaction and 
necessary to give effect thereto is also authorized, except:
    (a) An incidental transaction, not explicitly authorized within the 
terms of the license, by or with a person whose property or interests 
in property are blocked pursuant to Sec. 587.201(a); or
    (b) An incidental transaction, not explicitly authorized within the 
terms of the license, involving a debit or credit to a blocked account 
or a transfer of blocked property.


Sec. 587.405  Provision of services.

    (a) Except as provided in Sec. 587.206, the prohibitions contained 
in Sec. 587.201 apply to services performed by U.S. persons, wherever 
located:
    (1) On behalf of or for the benefit of a person designated in or 
pursuant to Sec. 587.201(a); or
    (2) With respect to property interests of a person designated in or 
pursuant to Sec. 587.201(a).
    (b) Example: U.S. persons may not, except as authorized by or 
pursuant to this part, provide legal, accounting, financial, brokering, 
freight forwarding, transportation, public relations, or other services 
to a person designated in or pursuant to Sec. 587.201(a). See 
Secs. 587.507 and 587.508, respectively, on licensing policy with 
regard to the provision of certain legal or medical services.


Sec. 587.406  Offshore transactions.

    The prohibitions in Sec. 587.201 apply to transactions by any U.S. 
person in a location outside the United States with respect to property 
that the U.S. person knows, or has reason to know, is held in the name 
of a person designated in or pursuant to Sec. 587.201(a) or in which 
the U.S. person knows, or has reason to know, a person designated in or 
pursuant to Sec. 587.201(a) has or has had an interest since the 
effective date.


Sec. 587.407  Payments from blocked accounts to satisfy obligations 
prohibited.

    Pursuant to Sec. 587.201, no debits may be made to a blocked 
account to pay obligations to U.S. persons or other persons, except as 
authorized pursuant to this part.

[[Page 50516]]

Sec. 587.408  Credit extended and cards issued by U.S. financial 
institutions.

    Section 587.201 on dealing in property in which a person designated 
in or pursuant to Sec. 587.201(a) has an interest prohibits U.S. 
financial institutions from performing under any existing credit 
agreements, including, but not limited to, charge cards, debit cards, 
or other credit facilities issued by a U.S. financial institution to a 
person designated in or pursuant to Sec. 587.201(a).


Sec. 587.409  Setoffs prohibited.

    A setoff against blocked property (including a blocked account), 
whether by a U.S. bank or other U.S. person, is a prohibited transfer 
under Sec. 587.201 if effected after the effective date.

Subpart E--Licenses, Authorizations and Statements of Licensing 
Policy


Sec. 587.501  General and specific licensing procedures.

    For provisions relating to licensing procedures, see part 501, 
subpart D of this chapter. Licensing actions taken pursuant to part 501 
of this chapter with respect to the prohibitions contained in this part 
are considered actions taken pursuant to this part.


Sec. 587.502  Effect of license or authorization.

    (a) No license or other authorization contained in this part, or 
otherwise issued by or under the direction of the Director of the 
Office of Foreign Assets Control, authorizes or validates any 
transaction effected prior to the issuance of the license, unless 
specifically provided in such licenses or authorization.
    (b) No regulation, ruling, instruction, or license authorizes any 
transaction prohibited under this part unless the regulation, ruling, 
instruction or license is issued by the Office of Foreign Assets 
Control and specifically refers to this part. No regulation, ruling, 
instruction, or license referring to this part shall be deemed to 
authorize any transaction prohibited by any provision of this chapter 
unless the regulation, ruling, instruction, or license specifically 
refers to such provision.
    (c) Any regulation, ruling, instruction, or license authorizing any 
transaction otherwise prohibited under this part has the effect of 
removing a prohibition contained in this part from the transaction, but 
only to the extent specifically stated by its terms. Unless the 
regulation, ruling, instruction, or license otherwise specifies, such 
an authorization does not create any right, duty, obligation, claim, or 
interest in, or with respect to, any property which would not otherwise 
exist under ordinary principles of law.


Sec. 587.503  Exclusion from licenses.

    The Director of the Office of Foreign Assets Control reserves the 
right to exclude any person, property, or transaction from the 
operation of any license or from the privileges conferred by any 
license. The Director of the Office of Foreign Assets Control also 
reserves the right to restrict the applicability of any license to 
particular persons, property, transactions, or classes thereof. Such 
actions are binding upon all persons receiving actual or constructive 
notice of the exclusions or restrictions.


Sec. 587.504  Payments and transfers to blocked accounts in U.S. 
financial institutions.

    Any payment of funds or transfer of credit in which a person 
designated in or pursuant to Sec. 587.201(a) has any interest, that 
comes within the possession or control of a U.S. financial institution, 
must be blocked in an account on the books of that financial 
institution. A transfer of funds or credit by a U.S. financial 
institution between blocked accounts in its branches or offices is 
authorized, provided that no transfer is made from an account within 
the United States to an account held outside the United States, and 
further provided that a transfer from a blocked account may only be 
made to another blocked account held in the same name.

    Note to Sec. 587.504. Please refer to Sec. 501.603 of this 
chapter for mandatory reporting requirements regarding financial 
transfers. See also Sec. 587.203 concerning the obligation to hold 
blocked funds in interest-bearing accounts.

Sec. 587.505  Entries in certain accounts for normal service charges 
authorized.

    (a) A U.S. financial institution is authorized to debit any blocked 
account held at that financial institution in payment or reimbursement 
for normal service charges owed it by the owner of that blocked 
account.
    (b) As used in this section, the term normal service charge shall 
include charges in payment or reimbursement for interest due; cable, 
telegraph, internet, or telephone charges; postage costs; custody fees; 
small adjustment charges to correct bookkeeping errors; and, but not by 
way of limitation, minimum balance charges, notary and protest fees, 
and charges for reference books, photocopies, credit reports, 
transcripts of statements, registered mail, insurance, stationery and 
supplies, and other similar items.


Sec. 587.506  Investment and reinvestment of certain funds.

    Subject to the requirements of Sec. 587.201, U.S. financial 
institutions are authorized to invest and reinvest assets blocked 
pursuant to Sec. 587.201, subject to the following conditions:
    (a) The assets representing such investments and reinvestments are 
credited to a blocked account or subaccount which is held in the same 
name at the same U.S. financial institution, or within the possession 
or control of a U.S. person, but funds shall not be transferred outside 
the United States for this purpose;
    (b) The proceeds of such investments and reinvestments shall not be 
credited to a blocked account or subaccount under any name or 
designation that differs from the name or designation of the specific 
blocked account or subaccount in which such funds or securities were 
held; and
    (c) No immediate financial or economic benefit accrues (e.g., 
through pledging or other use) to persons designated in or pursuant to 
Sec. 587.201(a).


Sec. 587.507  Provision of certain legal services authorized.

    (a) Provision of the legal services set forth in paragraph (b) of 
this section to or on behalf of persons designated in or pursuant to 
Sec. 587.201(a) is authorized, provided that all receipts of payment of 
professional fees and reimbursement of incurred expenses must be 
specifically licensed.
    (b) Specific licenses may be issued on a case-by-case basis 
authorizing receipt from unblocked sources of payment of professional 
fees and reimbursement of incurred expenses for the following legal 
services by U.S. persons to persons specified in paragraph (a) of this 
section:
    (1) Provision of legal advice and counseling on the requirements of 
and compliance with the laws of any jurisdiction within the United 
States, provided that such advice and counseling is not provided to 
facilitate transactions in violation of this part;
    (2) Representation of persons when named as defendants in or 
otherwise made parties to domestic U.S. legal, arbitration, or 
administrative proceedings;
    (3) Initiation and conduct of domestic U.S. legal, arbitration, or 
administrative proceedings in defense of property interests subject to 
U.S. jurisdiction;
    (4) Representation of persons before any federal or state agency 
with respect to the imposition, administration, or enforcement of U.S. 
sanctions against such persons; and

[[Page 50517]]

    (5) Provision of legal services in any other context in which 
prevailing U.S. law requires access to legal counsel at public expense.
    (c) Provision of any other legal services to persons designated in 
or pursuant to Sec. 587.201(a), not otherwise authorized in this part, 
requires the issuance of a specific license.
    (d) Entry into a settlement agreement affecting property or 
interests in property or the enforcement of any lien, judgment, 
arbitral award, decree, or other order through execution, garnishment, 
or other judicial process purporting to transfer or otherwise alter or 
affect property or interests in property blocked pursuant to 
Sec. 587.201 is prohibited unless specifically licensed in accordance 
with Sec. 587.202(e).


Sec. 587.508  Authorization of emergency medical services.

    The provision of nonscheduled emergency medical services in the 
United States to persons designated in or pursuant to Sec. 587.201(a) 
is authorized, provided that all receipt of payment for such services 
must be specifically licensed.

Subpart F--Reports


Sec. 587.601  Records and reports.

    For provisions relating to required records and reports, see part 
501, subpart C, of this chapter. Recordkeeping and reporting 
requirements imposed by part 501 of this chapter with respect to the 
prohibitions contained in this part are considered requirements arising 
pursuant to this part.

Subpart G--Penalties


Sec. 587.701  Penalties.

    (a) Attention is directed to section 206 of the International 
Emergency Economic Powers Act (the ``Act'') (50 U.S.C. 1705), which is 
applicable to violations of the provisions of any license, ruling, 
regulation, order, direction, or instruction issued by or pursuant to 
the direction or authorization of the Secretary of the Treasury 
pursuant to this part or otherwise under the Act. Section 206 of the 
Act, as adjusted by the Federal Civil Penalties Inflation Adjustment 
Act of 1990 (Public Law 101-410, as amended, 28 U.S.C. 2461 note), 
provides that:
    (1) A civil penalty not to exceed $11,000 per violation may be 
imposed on any person who violates or attempts to violate any license, 
order, or regulation issued under the Act;
    (2) Whoever willfully violates or willfully attempts to violate any 
license, order, or regulation issued under the Act, upon conviction, 
shall be fined not more than $50,000 and, if a natural person, may also 
be imprisoned for not more than 10 years; and any officer, director, or 
agent of any corporation who knowingly participates in such violation 
may be punished by a like fine, imprisonment, or both.
    (b) The criminal penalties provided in the Act are subject to 
increase pursuant to 18 U.S.C. 3571.
    (c) Attention is directed to section 5 of the United Nations 
Participation Act (22 U.S.C. 287c(b)), which provides that any person 
who willfully violates or evades or attempts to violate or evade any 
order, rule, or regulation issued by the President pursuant to the 
authority granted in that section, upon conviction, shall be fined not 
more than $10,000 and, if a natural person, may also be imprisoned for 
not more than 10 years; and the officer, director, or agent of any 
corporation who knowingly participates in such violation or evasion 
shall be punished by a like fine, imprisonment, or both, and any 
property, funds, securities, papers, or other articles or documents, or 
any vessel, together with her tackles, apparel, furniture, and 
equipment, or vehicle, or aircraft, concerned in such violation shall 
be forfeited to the United States. The criminal penalties provided in 
the United Nations Participation Act are subject to increase pursuant 
to 18 U.S.C. 3571.
    (d) Attention is also directed to 18 U.S.C. 1001, which provides 
that whoever, in any matter within the jurisdiction of the executive, 
legislative, or judicial branch of the Government of the United States, 
knowingly and willfully falsifies, conceals, or covers up by any trick, 
scheme, or device, a material fact, or makes any materially false, 
fictitious, or fraudulent statement or representation, or makes or uses 
any false writing or document knowing the same to contain any 
materially false, fictitious, or fraudulent statement or entry shall be 
fined under title 18, United States Code, or imprisoned not more than 
five years, or both.
    (e) Violations of this part may also be subject to relevant 
provisions of other applicable laws.


Sec. 587.702  Prepenalty notice.

    (a) When required. If the Director of the Office of Foreign Assets 
Control has reasonable cause to believe that there has occurred a 
violation of any provision of this part or a violation of the 
provisions of any license, ruling, regulation, order, direction, or 
instruction issued by or pursuant to the direction or authorization of 
the Secretary of the Treasury pursuant to this part or otherwise under 
the International Emergency Economic Powers Act, and the Director 
determines that further proceedings are warranted, the Director shall 
notify the alleged violator of the agency's intent to impose a monetary 
penalty by issuing a prepenalty notice. The prepenalty notice shall be 
in writing. The prepenalty notice may be issued whether or not another 
agency has taken any action with respect to the matter.
    (b) Contents of notice--(1) Facts of violation. The prepenalty 
notice shall describe the violation, specify the laws and regulations 
allegedly violated, and state the amount of the proposed monetary 
penalty.
    (2) Right to respond. The prepenalty notice also shall inform the 
respondent of respondent's right to make a written presentation within 
the applicable 30 day period set forth in Sec. 587.703 as to why a 
monetary penalty should not be imposed or why, if imposed, the monetary 
penalty should be in a lesser amount than proposed.
    (c) Informal settlement prior to issuance of prepenalty notice. At 
any time prior to the issuance of a prepenalty notice, an alleged 
violator may request in writing that, for a period not to exceed sixty 
(60) days, the agency withhold issuance of the prepenalty notice for 
the exclusive purpose of effecting settlement of the agency's potential 
civil monetary penalty claims. In the event the Director grants the 
request, under terms and conditions within his discretion, the Office 
of Foreign Assets Control will agree to withhold issuance of the 
prepenalty notice for a period not to exceed 60 days and will enter 
into settlement negotiations of the potential civil monetary penalty 
claim.


Sec. 587.703  Response to prepenalty notice; informal settlement.

    (a) Deadline for response. The respondent may submit a response to 
the prepenalty notice within the applicable 30 day period set forth in 
this paragraph. The Director may grant, at his discretion, an extension 
of time in which to submit a response to the prepenalty notice. The 
failure to submit a response within the applicable time period set 
forth in this paragraph shall be deemed to be a waiver of the right to 
respond.
    (1) Computation of time for response. A response to the prepenalty 
notice must be postmarked or date-stamped by the U.S. Postal Service 
(or foreign postal service, if mailed abroad) or courier service 
provider (if transmitted to OFAC by courier) on or before the 30th day

[[Page 50518]]

after the postmark date on the envelope in which the prepenalty notice 
was mailed. If the respondent refused delivery or otherwise avoided 
receipt of the prepenalty notice, a response must be postmarked or 
date-stamped on or before the 30th day after the date on the stamped 
postal receipt maintained at the Office of Foreign Assets Control. If 
the prepenalty notice was personally delivered to the respondent by a 
non-U.S. Postal Service agent authorized by the Director, a response 
must be postmarked or date-stamped on or before the 30th day after the 
date of delivery.
    (2) Extensions of time for response. If a due date falls on a 
federal holiday or weekend, that due date is extended to include the 
following business day. Any other extensions of time will be granted, 
at the Director's discretion, only upon the respondent's specific 
request to the Office of Foreign Assets Control.
    (b) Form and method of response. The response must be submitted in 
writing and may be handwritten or typed. The response need not be in 
any particular form. A copy of the written response may be sent by 
facsimile, but the original also must be sent to the Office of Foreign 
Assets Control Civil Penalties Division by mail or courier and must be 
postmarked or date-stamped, in accordance with paragraph (a) of this 
section.
    (c) Contents of response. A written response must contain 
information sufficient to indicate that it is in response to the 
prepenalty notice.
    (1) A written response must include the respondent's full name, 
address, telephone number, and facsimile number, if available, or those 
of the representative of the respondent.
    (2) A written response should either admit or deny each specific 
violation alleged in the prepenalty notice and also state if the 
respondent has no knowledge of a particular violation. If the written 
response fails to address any specific violation alleged in the 
prepenalty notice, that alleged violation shall be deemed to be 
admitted.
    (3) A written response should include any information in defense, 
evidence in support of an asserted defense, or other factors that the 
respondent requests the Office of Foreign Assets Control to consider. 
Any defense or explanation previously made to the Office of Foreign 
Assets Control or any other agency must be repeated in the written 
response. Any defense not raised in the written response will be 
considered waived. The written response also should set forth the 
reasons why the respondent believes the penalty should not be imposed 
or why, if imposed, it should be in a lesser amount than proposed.
    (d) Default. If the respondent elects not to submit a written 
response within the time limit set forth in paragraph (a) of this 
section, the Office of Foreign Assets Control will conclude that the 
respondent has decided not to respond to the prepenalty notice. The 
agency generally will then issue a written penalty notice imposing the 
penalty proposed in the prepenalty notice.
    (e) Informal settlement. In addition to or as an alternative to a 
written response to a prepenalty notice, the respondent or respondent's 
representative may contact the Office of Foreign Assets Control as 
advised in the prepenalty notice to propose the settlement of 
allegations contained in the prepenalty notice and related matters. 
However, the requirements set forth in paragraph (f) of this section as 
to oral communication by the representative must first be fulfilled. In 
the event of settlement at the prepenalty stage, the claim proposed in 
the prepenalty notice will be withdrawn, the respondent will not be 
required to take a written position on allegations contained in the 
prepenalty notice, and the Office of Foreign Assets Control will make 
no final determination as to whether a violation occurred. The amount 
accepted in settlement of allegations in a prepenalty notice may vary 
from the civil penalty that might finally be imposed in the event of a 
formal determination of violation. In the event no settlement is 
reached, the time limit specified in paragraph (a) of this section for 
written response to the prepenalty notice will remain in effect unless 
additional time is granted by the Office of Foreign Assets Control.
    (f) Representation. A representative of the respondent may act on 
behalf of the respondent, but any oral communication with the Office of 
Foreign Assets Control prior to a written submission regarding the 
specific allegations contained in the prepenalty notice must be 
preceded by a written letter of representation, unless the prepenalty 
notice was served upon the respondent in care of the representative.


Sec. 587.704  Penalty imposition or withdrawal.

    (a) No violation. If, after considering any response to the 
prepenalty notice and any relevant facts, the Director of the Office of 
Foreign Assets Control determines that there was no violation by the 
respondent named in the prepenalty notice, the Director shall notify 
the respondent in writing of that determination and of the cancellation 
of the proposed monetary penalty.
    (b) Violation. (1) If, after considering any written response to 
the prepenalty notice, or default in the submission of a written 
response, and any relevant facts, the Director of the Office of Foreign 
Assets Control determines that there was a violation by the respondent 
named in the prepenalty notice, the Director is authorized to issue a 
written penalty notice to the respondent of the determination of 
violation and the imposition of the monetary penalty.
    (2) The penalty notice shall inform the respondent that payment or 
arrangement for installment payment of the assessed penalty must be 
made within 30 days of the date of mailing of the penalty notice by the 
Office of Foreign Assets Control.
    (3) The penalty notice shall inform the respondent of the 
requirement to furnish the respondent's taxpayer identification number 
pursuant to 31 U.S.C. 7701 and that such number will be used for 
purposes of collecting and reporting on any delinquent penalty amount.
    (4) The issuance of the penalty notice finding a violation and 
imposing a monetary penalty shall constitute final agency action. The 
respondent has the right to seek judicial review of that final agency 
action in federal district court.


Sec. 587.705  Administrative collection; referral to United States 
Department of Justice.

    In the event that the respondent does not pay the penalty imposed 
pursuant to this part or make payment arrangements acceptable to the 
Director of the Office of Foreign Assets Control within 30 days of the 
date of mailing of the penalty notice, the matter may be referred for 
administrative collection measures by the Department of the Treasury or 
to the United States Department of Justice for appropriate action to 
recover the penalty in a civil suit in a federal district court.

Subpart H--Procedures


Sec. 587.801  Procedures.

    For license application procedures and procedures relating to 
amendments, modifications, or revocations of licenses; administrative 
decisions; rulemaking; and requests for documents pursuant to the 
Freedom of Information and Privacy Acts (5 U.S.C. Secs. 552 and 552a), 
see part 501, subpart D, of this chapter.


Sec. 587.802  Delegation by the Secretary of the Treasury.

    Any action that the Secretary of the Treasury is authorized to take 
pursuant to Executive Order 13192 of January 17, 2001 (66 FR 7379, 
January 23, 2001) and

[[Page 50519]]

any further Executive orders relating to the national emergency 
declared in Executive Order 13088 of June 9, 1988 (63 FR 32109, June 
12, 1998) may be taken by the Director of the Office of Foreign Assets 
Control or by any other person to whom the Secretary of the Treasury 
has delegated authority so to act.

Subpart I--Paperwork Reduction Act


Sec. 587.901  Paperwork Reduction Act notice.

    For approval by the Office of Management and Budget (``OMB'') under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) of information 
collections relating to recordkeeping and reporting requirements, 
licensing procedures (including those pursuant to statements of 
licensing policy), and other procedures, see Sec. 501.901 of this 
chapter. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a valid control number assigned by OMB.

    Dated: September 4, 2001.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.
    Approved: September 6, 2001.
Jimmy Gurule,
Under Secretary (Enforcement), Department of the Treasury.
[FR Doc. 01-24685 Filed 10-1-01; 9:42 am]
BILLING CODE 4810-25-P