[Federal Register Volume 67, Number 104 (Thursday, May 30, 2002)]
[Rules and Regulations]
[Pages 37671-37680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13425]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 588


Western Balkans Transactions Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Interim final rule.

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SUMMARY: The Office of Foreign Assets Control of the U.S. Department of 
the Treasury is issuing regulations to carry out the purposes of 
Executive Order 13219 of June 26, 2001, ``Blocking Property of Persons 
Who Threaten International Stabilization Efforts in the Western 
Balkans.''

DATES: Effective Date: May 30, 2002.
    Comments: Written comments must be received no later than July 29, 
2002.

ADDRESSES: Comments may be sent either via regular mail to the 
attention of Chief, Policy Planning and Program Management Division, 
rm. 2176, Office of Foreign Assets Control, Department of the Treasury, 
1500 Pennsylvania Ave. NW., Annex--2d Floor, Washington, DC 20220, or 
via OFAC's website (http://www.treas.gov/ofac).

FOR FURTHER INFORMATION CONTACT: Chief of Licensing, tel.: 202/622-
2480, or 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 Home Page: 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

    On June 26, 2001, the President, invoking the authority, inter 
alia, of the International Emergency Economic Powers Act (50 U.S.C. 
1701-1706) (``IEEPA''), issued Executive Order 13219 (66 FR 34777, June 
29, 2001), effective at 12:01 a.m. eastern daylight time on June 27, 
2001. The order declared a national emergency with respect to ``the 
actions of persons engaged in, or assisting, sponsoring, or supporting, 
(i) extremist violence in the former Yugoslav Republic of Macedonia, 
southern Serbia, the Federal Republic of Yugoslavia, and elsewhere in 
the Western Balkans region, or (ii) acts obstructing implementation of 
the Dayton Accords in Bosnia or United Nations Security Council 
Resolution 1244 of June 10, 1999, in Kosovo, threaten the peace in or 
diminish the security and stability of those areas and the wider 
region, undermine the authority, efforts, and objectives of the United 
Nations, the North Atlantic Treaty Organization (NATO), and other 
international organizations and entities present in those areas and the 
wider region, and endanger the safety of persons participating in or 
providing support to the activities of those organizations and 
entities, including United States military forces and Government 
officials.''

[[Page 37672]]

    Section 1 of the order blocks, with certain exceptions, all 
property and interests in property of (1) persons listed in the Annex 
to the order and (2) persons designated by the Secretary of the 
Treasury, pursuant to criteria set forth in the order. Section 1 of the 
order further states that the blocking of property and interests in 
property includes, but is not limited to, the prohibition of the making 
or receiving by a United States person of any contribution or provision 
of funds, goods or services to or for the benefit of a person 
designated in or pursuant to the order.
    Section 2 of the order prohibits any transaction by a United States 
person or within the United States that evades or avoids, or has the 
purpose of evading or avoiding, or attempts to violate, any of the 
prohibitions set forth in the order, as well as any conspiracy formed 
to violate such prohibitions.
    Section 4 of the order authorizes the Secretary of the Treasury, in 
consultation with the Secretary of State, to take such actions, 
including the promulgation of rules and regulations, as may be 
necessary to carry out the purposes of the order. In furtherance of 
those purposes, the Department of the Treasury's Office of Foreign 
Assets Control (``OFAC''), acting under authority delegated by the 
Secretary of the Treasury, is promulgating the Western Balkans 
Regulations, 31 CFR Part 588 (the ``Regulations'').
    Subpart B of the Regulations sets forth the prohibitions contained 
in sections 1 and 2 of the order. See: [sect][sect] 588.201, 588.204. 
Appendix A to 31 CFR chapter V has previously been amended to 
incorporate the names of persons set forth in the Annex to the order. 
Persons identified in the Annex to the order or designated by or under 
the authority of the Secretary of the Treasury pursuant to the order 
are referred to throughout the Regulations as ``persons whose property 
or interests in property are blocked pursuant to [sect] 588.201(a).'' 
Their names are or will be published on OFAC's website, announced in 
the Federal Register and incorporated on an ongoing basis into appendix 
A to 31 CFR chapter V, which lists persons subject to various sanctions 
programs administered by OFAC.
    Sections 588.202 and 588.203 of subpart B 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 588.205 of subpart B 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 
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 588.206 of subpart B details transactions that are exempt 
from the prohibitions of part 588. These exemptions derive from the 
exemptions set out in sections 203(b)(1), (3) and (4) of IEEPA (50 
U.S.C. 1702(b)(1), (3), and (4)) and relate to personal communications, 
the importation and exportation of information or informational 
materials, and travel. The President determined in sec. 1(b) of the 
order that donations of the type specified in sec. 203(b)(2) of IEEPA 
(50 U.S.C. 1702(b)(2)), i.e., donations of articles such as food, 
clothing and medicine intended to be used to relieve human suffering, 
would seriously impair the President's ability to deal with the 
declared national emergency. Accordingly, the donation of such articles 
is not exempted from the scope of these Regulations and is prohibited, 
unless authorized by OFAC.
    Subpart C of part 588 defines key terms used throughout the 
Regulations and subpart D sets forth interpretive sections regarding 
the general prohibitions contained in subpart B. Transactions otherwise 
prohibited under part 588 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.
    Subpart F of part 588 refers to subpart C of part 501 for 
applicable recordkeeping and reporting requirements. Subpart G 
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 588 refers to subpart D of part 501 for 
applicable provisions relating to administrative procedures. Subpart I 
of the Regulations sets forth a Paperwork Reduction Act notice.

Request for Comments; Procedural Requirements

    Because the Regulations involve a foreign affairs function, the 
provisions of Executive Order 12866 and the Administrative Procedure 
Act (5 U.S.C. 553) (the ``APA'') 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 these regulations, this rule is being issued in 
interim form and comments will be considered in the development of 
final regulations. 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 July 29, 2002. 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 submission to the 
originator without considering 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 August 28, 2002 and will be 
obtainable from OFAC's website (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., NW., Washington, DC 20220, Attn: Chief, Records 
Division.
    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 the Regulations 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 previously 
approved by the Office of Management and Budget under control number 
1505-0164. An agency may not conduct or

[[Page 37673]]

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 in 31 CFR Part 588

    Administrative practice and procedure, Banks, banking, Blocking of 
assets, Credit, Penalties, Reporting and recordkeeping requirements, 
Securities, Services, Western Balkans.

    For the reasons set forth in the preamble, part 588 is added to 31 
CFR chapter V to read as follows:

PART 588--WESTERN BALKANS STABILIZATION REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations
Sec.
588.101 Relation of this part to other laws and regulations.
Subpart B--Prohibitions
588.201 Prohibited transactions involving blocked property.
588.202 Effect of transfers violating the provisions of this part.
588.203 Holding of funds in interest-bearing accounts; investment 
and reinvestment.
588.204 Evasions; attempts; conspiracies.
588.205 Expenses of maintaining blocked property; liquidation of 
blocked account.
588.206 Exempt transactions.
Subpart C--General Definitions
588.301 Blocked account; blocked property.
588.302 Effective date.
588.303 Entity.
588.304 Information or informational materials.
588.305 Interest.
588.306 Licenses; general and specific.
588.307 Person.
588.308 Property; property interest.
588.309 Transfer.
588.310 United States.
588.311 U.S. financial institution.
588.312 United States person; U.S. person.
Subpart D--Interpretations
588.401 Reference to amended sections.
588.402 Effect of amendment.
588.403 Termination and acquisition of an interest in blocked 
property.
588.404 Transactions incidental to a licensed transaction.
588.405 Provision of services.
588.406 Offshore transactions.
588.407 Payments from blocked accounts to satisfy obligations 
prohibited.
588.408 Charitable contributions.
588.409 Credit extended and cards issued by U.S. financial 
institutions.
588.410 Setoffs prohibited.
Subpart E--Licenses, Authorizations and Statements of Licensing Policy
588.501 General and specific licensing procedures.
588.502 Effect of license or authorization.
588.503 Exclusion from licenses.
588.504 Payments and transfers to blocked accounts in U.S. financial 
institutions.
588.505 Entries in certain accounts for normal service charges 
authorized.
588.506 Investment and reinvestment of certain funds.
588.507 Provision of certain legal services authorized.
588.508 Authorization of emergency medical services.
Subpart F--Reports
588.601 Records and reports.
Subpart G--Penalties
588.701 Penalties.
588.702 Prepenalty notice.
588.703 Response to prepenalty notice; informal settlement.
588.704 Penalty imposition or withdrawal.
588.705 Administrative collection; referral to United States 
Department of Justice.
Subpart H--Procedures
588.801 Procedures.
588.802 Delegation by the Secretary of the Treasury.
Subpart I--Paperwork Reduction Act
588.901 Paperwork Reduction Act notice.

    Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 
1701-1706; E.O. 13219, 66 FR 34777, June 29, 2001, 3 CFR, 2001 
Comp., p. 778.

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


[sect] 588.101  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 or authorization contained in or 
issued pursuant to this part relieves the involved parties from 
complying with any other applicable laws or regulations.

Subpart B--Prohibitions


[sect] 588.201  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 the following 
persons 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 13219 of June 
26, 2001 (3 CFR, 2001 Comp., p. 778); and
    (2) Any person designated by the Secretary of the Treasury, in 
consultation with the Secretary of State, because they are found:
    (i) To have committed, or to pose a significant risk of committing, 
acts of violence that have the purpose or effect of threatening the 
peace in or diminishing the stability or security of any area or state 
in the Western Balkans region, undermining the authority, efforts, or 
objectives of international organizations or entities present in the 
region, or endangering the safety of persons participating in or 
providing support to the activities of those international 
organizations or entities; or
    (ii) To have actively obstructed, or to pose a significant risk of 
actively obstructing, implementation of the Dayton Accords in Bosnia or 
United Nations Security Council Resolution 1244 of June 10, 1999, in 
Kosovo; or
    (iii) Materially to assist in, sponsor, or provide financial 
support for, or goods or services in support of, such acts of violence 
and obstructionism; 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 13219 or any person otherwise designated 
by the Secretary of the Treasury pursuant to this section.


    Note to paragraph (a) of [sect] 588.201: The names of persons 
whose property or interests in property are blocked pursuant to 
paragraph (a) of this section will be published on OFAC's website, 
announced in the Federal Register and incorporated on an ongoing 
basis with the identifier [BALKANS] into 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 pursuant to paragraph (a)(2) of

[[Page 37674]]

this section 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 [sect] 501.806 of this chapter.


    (b) The blocking of property and interests in property pursuant to 
paragraph (a) of this section includes, but is not limited to, the 
prohibition of the making or receiving by a United States person of any 
contribution or provision of funds, goods or services to or for the 
benefit of a person whose property or interests in property are blocked 
pursuant to paragraph (a) of this section.
    (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 whose property or 
interests in property are blocked pursuant to paragraph (a) of this 
section 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.


[sect] 588.202  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 
[sect] 588.201(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 [sect] 588.201(a), unless the person with 
whom such property is held or 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 (50 
U.S.C. 1701 et seq.), 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 [sect] 588.202: 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 there existed an interest of a person whose 
property or interests in property are blocked pursuant to [sect] 
588.201(a).


[sect] 588.203  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 [sect] 588.201(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 (15 
U.S.C. 78a et seq.), 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 [sect] 588.201(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.

[[Page 37675]]

    (d) Blocked funds held in accounts or instruments outside the 
United States at the time the funds become subject to [sect] 588.201(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 [sect] 588.201(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 whose property or interests in property 
are blocked pursuant to [sect] 588.201(a), nor may their holder 
cooperate in or facilitate the pledging or other attempted use as 
collateral of blocked funds or other assets.


[sect] 588.204  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.


[sect] 588.205  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 daylight time, June 27, 2001, 
all expenses incident to the maintenance of physical property blocked 
pursuant to [sect] 588.201(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 [sect] 588.201(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 interest-bearing 
account in the name of the owner of the property.


[sect] 588.206  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) Information or informational materials. (1) The importation 
from any country and the exportation to any country of information or 
informational materials, as defined in [sect] 588.304, 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 whose property or interests in property are blocked pursuant to 
[sect] 588.201(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 730-774, 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 whose property or interests in property are blocked pursuant to 
[sect] 588.201(a) are prohibited.
    (c) 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


[sect] 588.301  Blocked account; blocked property.

    The terms blocked account and blocked property shall mean any 
account or property subject to the prohibitions in [sect] 588.201 held 
in the name of a person whose property or interests in property are 
blocked pursuant to [sect] 588.201(a), or in which such person 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.


[sect] 588.302  Effective date.

    The term effective date refers to the effective date of the 
applicable prohibitions and directives contained in this part as 
follows:
    (a) With respect to a person whose property or interests in 
property are blocked pursuant to [sect] 588.201(a)(1), 12:01 a.m. 
eastern daylight time, June 27, 2001;
    (b) With respect to a person whose property or interests in 
property are blocked pursuant to [sect] 588.201(a)(2), the earlier of 
the date on which is received actual or constructive notice of such 
person's designation by the Secretary of the Treasury.


[sect] 588.303  Entity.

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


[sect] 588.304  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 [sect] 588.304. To be considered 
information or informational

[[Page 37676]]

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.


[sect] 588.305  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.


[sect] 588.306  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 [sect] 588.306: See [sect] 501.801 of this chapter on 
licensing procedures.


[sect] 588.307  Person.

    The term person means an individual or entity.


[sect] 588.308  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 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.


[sect] 588.309  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.


[sect] 588.310  United States.

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


[sect] 588.311  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 term 
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.


[sect] 588.312  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


[sect] 588.401  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.


[sect] 588.402  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.


[sect] 588.403  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

[[Page 37677]]

blocked pursuant to [sect] 588.201(a), unless there exists in the 
property another interest that is blocked pursuant to [sect] 588.201(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 whose property or interests in property are blocked pursuant to 
[sect] 588.201(a), such property shall be deemed to be property in 
which that person has an interest and therefore blocked.


[sect] 588.404  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 [sect] 588.201(a); or
    (b) An incidental transaction, not explicitly authorized within the 
terms of the license, involving a debit to a blocked account or a 
transfer of blocked property.


[sect] 588.405  Provision of services.

    (a) Except as provided in [sect] 588.206, the prohibitions on 
transactions involving blocked property contained in [sect] 588.201 
apply to services performed in the United States or by U.S. persons, 
wherever located, including by an overseas branch of an entity located 
in the United States:
    (1) On behalf of or for the benefit of a person whose property or 
interests in property are blocked pursuant to [sect] 588.201(a); or
    (2) With respect to property interests subject to [sect] 588.201.
    (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 whose property or interests in property are blocked 
pursuant to [sect] 588.201(a).


    Note to [sect] 588.405: See [sect][sect] 588.507 and 588.508, 
respectively, on licensing policy with regard to the provision of 
certain legal or medical services.


[sect] 588.406  Offshore transactions.

    The prohibitions in [sect] 588.201 on transactions involving 
blocked property 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 whose 
property or interests in property are blocked pursuant to [sect] 
588.201(a) or in which the U.S. person knows, or has reason to know, a 
person whose property or interests in property are blocked pursuant to 
[sect] 588.201(a) has or has had an interest since the effective date.


[sect] 588.407  Payments from blocked accounts to satisfy obligations 
prohibited.

    Pursuant to [sect] 588.201, 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.


[sect] 588.408  Charitable contributions.

    Unless otherwise specifically authorized by the Office of Foreign 
Assets Control by or pursuant to this part, no charitable contribution 
or donation of funds, goods, services, or technology may be made to or 
for the benefit of a person whose property or interests in property are 
blocked pursuant to [sect] 588.201(a). For purposes of this part, a 
contribution or donation is made to or for the benefit of a person 
whose property or interests in property are blocked pursuant to [sect] 
588.201(a) if made to or in the name of such a person; if made to or in 
the name of an entity or individual acting for or on behalf of, or 
owned or controlled by, such a person; or if made in an attempt to 
violate, to evade or to avoid the bar on the provision of contributions 
or donations to such a person.


[sect] 588.409  Credit extended and cards issued by U.S. financial 
institutions.

    The prohibition in [sect] 588.201 on dealing in property subject to 
that section 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 whose property or interests in 
property are blocked pursuant to [sect] 588.201(a).


[sect] 588.410  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 [sect] 588.201 if effected after the effective date.

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


[sect] 588.501  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.


[sect] 588.502  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 license 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.


[sect] 588.503  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.


[sect] 588.504  Payments and transfers to blocked accounts in U.S. 
financial institutions.

    Any payment of funds or transfer of credit in which a person whose 
property or interests in property are blocked pursuant to [sect] 
588.201(a) has any interest, that comes within the possession or 
control of a U.S. financial

[[Page 37678]]

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 [sect] 588.504. Please refer to [sect] 501.603 of this 
chapter for mandatory reporting requirements regarding financial 
transfers. See also [sect] 588.203 concerning the obligation to hold 
blocked funds in interest-bearing accounts.

[sect] 588.505  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.


[sect] 588.506  Investment and reinvestment of certain funds.

    Subject to the requirements of [sect] 588.203, U.S. financial 
institutions are authorized to invest and reinvest assets blocked 
pursuant to [sect] 588.201, 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 whose property or interests 
in property are blocked pursuant to [sect] 588.201(a).


[sect] 588.507  Provision of certain legal services authorized.

    (a) The provision of the following legal services to or on behalf 
of persons whose property or interests in property are blocked pursuant 
to [sect] 588.201(a) is authorized, provided that all receipts of 
payment of professional fees and reimbursement of incurred expenses 
must be specifically licensed:
    (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 are 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
    (5) Provision of legal services in any other context in which 
prevailing U.S. law requires access to legal counsel at public expense.
    (b) The provision of any other legal services to persons whose 
property or interests in property are blocked pursuant to [sect] 
588.201(a), not otherwise authorized in this part, requires the 
issuance of a specific license.
    (c) 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 [sect] 
588.201(a) is prohibited unless specifically licensed in accordance 
with [sect] 588.202(e).


[sect] 588.508  Authorization of emergency medical services.

    The provision of nonscheduled emergency medical services in the 
United States to persons whose property or interests in property are 
blocked pursuant to [sect] 588.201(a) is authorized, provided that all 
receipt of payment for such services must be specifically licensed.

Subpart F--Reports


[sect] 588.601  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


[sect] 588.701  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.

[[Page 37679]]

    (d) Violations of this part may also be subject to relevant 
provisions of other applicable laws.


[sect] 588.702  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 the respondent's right to make a written presentation 
within the applicable 30 day period set forth in [sect] 588.703 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.


[sect] 588.703  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 (a) 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 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

[[Page 37680]]

prepenalty notice was served upon the respondent in care of the 
representative.


[sect] 588.704  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 the 
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.


[sect] 588.705  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


[sect] 588.801  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. 552 and 552a), see 
part 501, subpart D, of this chapter.


[sect] 588.802  Delegation by the Secretary of the Treasury.

    Any action that the Secretary of the Treasury is authorized to take 
pursuant to Executive Order 13219 of June 26, 2001 (3 CFR, 2001 Comp., 
p. 778), and any further Executive orders relating to the national 
emergency declared therein, 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


[sect] 588.901  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 [sect] 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: April 2, 2002.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.

    Approved: April 19, 2002.
Jimmy Gurul[eacute],
Under Secretary (Enforcement), Department of the Treasury.
[FR Doc. 02-13425 Filed 5-24-02; 3:11 pm]
BILLING CODE 4810-25-P