[Federal Register Volume 68, Number 28 (Tuesday, February 11, 2003)]
[Rules and Regulations]
[Pages 6820-6823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3310]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 501


Rules Governing Availability of Information

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Foreign Assets Control (``OFAC'') of the U.S. 
Department of the Treasury is issuing a final rule concerning the 
disclosure of certain civil penalties information. OFAC intends to 
publish information about civil penalties imposed and informal 
settlements on a weekly basis. If the publication falls on a holiday, 
or if required by an emergency, publication may be postponed to the 
following week.

DATES: This rule is effective February 11, 2003.

FOR FURTHER INFORMATION CONTACT: Chief of Civil Penalties, tel.: 202/
622-6140, or Chief Counsel, tel. 202/622-2410.

[[Page 6821]]


SUPPLEMENTARY INFORMATION: 

Background

    OFAC published a proposed rule on June 19, 2002 (67 FR 41658-59), 
announcing a new practice of releasing certain civil penalty 
enforcement information on a routine basis. OFAC received public 
comments on the proposed rule from thirty-two persons, including 
financial institutions, law firms, trade associations, individuals, and 
a public interest group. Six commenters generally supported the 
proposed rule, and many of these also urged the release of other types 
of information. Nine commenters generally opposed the proposed rule, 
particularly the proposal to release the names of entities involved in 
civil penalty actions. Seventeen additional commenters fell in the 
middle; most of these commenters opposed releasing the names of 
entities, but otherwise they supported the proposed rule. OFAC 
appreciates the very useful comments it received in response to the 
proposed rule, and it has carefully considered all relevant comments 
and how best to resolve the issues they raise.
    Entity Names. Among the commenters expressing reservations with the 
proposed rule, most opposed the naming of the entities involved in 
civil penalty actions. Some commenters argued that this information is 
likely to hurt the reputations of the entities involved, in part 
because the public may misunderstand the burdens of compliance with the 
economic sanctions programs OFAC administers. One commenter stated that 
public identification of foreign companies could trigger legal problems 
in their home countries, where compliance with U.S. economic sanctions 
may be prohibited. Some commenters also argued that identifying these 
entities would deter voluntary disclosures and informal settlements.
    After considering these comments, OFAC has concluded that, in most 
instances, the identities of these entities are already available to 
the public under the Freedom of Information Act (``FOIA''), 5 U.S.C. 
552. Additionally, other governmental agencies, including some within 
the Department, periodically publish enforcement actions such as civil 
penalties assessed. Accordingly, OFAC has determined to publicize the 
identities of entities involved in civil penalty actions by periodic 
release under this rule. We believe most of the concerns identified in 
the public comments can be adequately addressed in the descriptions 
OFAC will provide, including whether the entity voluntarily disclosed 
the violation and whether the penalty enforcement action was settled 
without a finding that a violation occurred.
    Descriptions of the Violations or Alleged Violations. Some 
commenters urged OFAC to draw a clear distinction between penalties 
(which represent a final agency determination that a violation has 
occurred) and settlements (which do not reflect such a determination) 
when releasing civil penalties information under this rule. Some also 
urged OFAC to recognize the entities that have made voluntary 
disclosures of the violations. OFAC agrees with these points and has 
revised the final rule accordingly.
    One commenter urged OFAC also to distinguish between what it 
characterized as ``minor administrative infractions'' and ``more 
serious violations.'' OFAC expects that the gravity of each incident 
should be reflected in the brief description to be provided. On a 
related point, a different commenter asked that companies be permitted 
to negotiate how the incident is described in the releases of 
information under this rule. OFAC envisions providing a very brief, 
factual description of the violation or alleged violation (e.g., 
``unauthorized funds transfer to SDN bank'') and will not negotiate 
this limited description as part of the civil penalty settlement 
process. However, if an entity wishes to submit a proposed description, 
OFAC would certainly consider it, placing a premium on accuracy and 
brevity.
    Advance Notice; Timing. Some commenters requested that OFAC give 
companies and other entities advance notice of up to 90 days before 
releasing information under this rule. One commenter urged that the 
information be released pursuant to a regular, predictable schedule; 
another commenter urged release within a day of reaching settlement or 
imposing a penalty. OFAC intends to release information regarding civil 
penalty actions on a weekly basis, beginning April 4, 2003. However, 
the final rule provides for disclosure on a ``routine basis, not less 
frequently than monthly,'' to afford OFAC some regulatory flexibility 
in preparing and releasing this information in the prescribed format. 
In the early implementation stages, OFAC intends to notify affected 
companies before information pertaining to them is made public under 
this rule.
    Some commenters suggested that an entity should be able to avoid 
disclosure altogether by ``correcting'' the violation during a short 
period after a penalty is imposed or settlement reached. OFAC believes 
these commenters may misunderstand the administrative civil penalties 
process. An export, import, funds transfer, or other transaction that 
violates the economic sanctions programs OFAC administers cannot be 
``corrected'' after it occurs. Any prudent person would take steps to 
prevent future violations, perhaps by investing in an improved 
compliance program, but these steps do not relieve an entity or 
individual of responsibility for completed violations.
    Scope of Application/Adequacy of FOIA. Several commenters urged 
that the final rule apply only to penalties imposed or settlements 
reached after today's publication date. Some commenters argued that 
this rulemaking is altogether unnecessary because FOIA provides 
adequate procedures for releasing information to the public. OFAC 
disagrees with both these points and will implement this rule to 
include settlements and penalties that have occurred since March 2002. 
All of the information that OFAC would release under this rule is 
already subject to public release under FOIA. OFAC records on 
settlements with entities from May 1998 through March 2002 were 
publicly released under FOIA and have been placed in the Department of 
the Treasury's electronic reading room http://www.treas.gov/foia/err_dof.htm. OFAC has found, however, that processing FOIA requests for 
this type of information on an ad hoc basis is not the most efficient 
use of its limited resources. In the implementation of this rule, OFAC 
intends to release information on all penalties imposed and settlements 
reached since the end of March 2002.
    Individual Names. In the preamble to the proposed rule, OFAC 
invited public comments on the potential disclosure of individual 
names. One commenter urged OFAC to release the identities of 
individuals whom OFAC penalizes or with whom OFAC reaches settlements. 
Other commenters opposed releasing the names of company employees who 
might be implicated in their employer's civil penalty or settlement; 
one of these commenters argued that any transparency benefits from 
releasing such employees' identities would be outweighed by the damage 
to their personal and professional reputations. OFAC is currently 
studying the issue of releasing individual names, including the names 
of individuals who were personally the subject of a civil penalties 
matter. For the present, the final rule provides for the release of 
information on proceedings against individuals on an aggregate basis, 
in

[[Page 6822]]

language substantially similar to the proposed rule.
    Security Risks. Some commenters argued that release of this civil 
penalties information would provide clues to terrorists or others about 
which financial institutions have the weakest OFAC compliance programs. 
OFAC disagrees. The frequency of civil penalty actions does not 
necessarily correspond to the effectiveness of a financial 
institution's compliance program; a small community bank should be 
expected to have fewer incidents than a large financial institution 
that processes thousands of transactions daily. As noted above, this 
information about OFAC's civil penalties proceedings is already 
available to the public under FOIA, and OFAC does not see any 
substantial security risk in the implementation of this rule.
    Additional Information. One commenter sought clarification of 
proposed section 501.805(d)(1)(iii), which provided that OFAC may, 
``[o]n a case-by-case basis, * * * release additional information 
concerning a particular civil penalties proceeding.'' This subsection 
has been relocated to section 501.805(d)(4) in the final rule. Section 
501.805(d)(4) is intended to clarify that this rule does not restrict 
OFAC's ability to disclose additional information about a penalty or 
settlement to the extent authorized by law. For example, the Department 
of the Treasury occasionally issues press releases to announce the 
conclusion of noteworthy OFAC civil penalty actions, and these press 
releases may include more detail than what is contemplated in the 
routine releases of information under this rule. OFAC does not intend 
to release any trade secrets or confidential business information it 
may acquire during the course of a civil penalty action.
    A few commenters urged OFAC to publish, in the implementation of 
this rule, additional information unique to each civil penalty action. 
Some urged publication of an analysis of aggravating and mitigating 
factors in each case; others urged that we describe what the affected 
entity could have done to avoid the incident. With respect to 
settlements, one commenter urged that OFAC explain why it decided to 
settle a case rather than pursue a penalty. At this time, OFAC does not 
intend to release these types of information on a regular basis as part 
of the implementation of this rule. Some of this information would be 
privileged, and in each case preparing detailed additional information 
would encumber the prompt and efficient implementation of this rule.
    Other Comments. OFAC received a wide variety of other comments, 
including suggestions that OFAC develop free compliance software for 
banks, add a ``frequently asked questions'' section to its website, and 
publish its internal civil penalties guidelines. These matters are not 
addressed in the final rule because they are outside the scope of this 
rulemaking. We note, however, that OFAC's website does include a 
``frequently asked questions'' section http://www.treas.gov/ofac and 
that OFAC's enforcement guidelines are due to be published in the 
Federal Register in the near future.

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, Telnet, 
or FTP protocol is fedbbs.access.gpo.gov.
    This document and additional information concerning OFAC are 
available from OFAC's website http://www.treas.gov/ofac or via 
facsimile through OFAC's 24-hour fax-on-demand service, tel: 202/622-
0077. Comments on this proposed rule may be viewed electronically via 
OFAC's website.

Regulatory Flexibility Act, Paperwork Reduction Act, and Executive 
Order 12866

    Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., 
it is hereby certified that this final rule will not have a significant 
economic impact on a substantial number of small entities. The rule 
imposes no regulatory burdens on the public and simply announces that 
OFAC will publicly release certain information about civil penalties 
imposed and informal settlements. Accordingly, no regulatory 
flexibility analysis is required.
    The Paperwork Reduction Act does not apply because the rule does 
not impose information collection requirements that would require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501 et 
seq. A regulatory assessment is not required because this rule is not a 
``significant regulatory action'' as defined in Executive Order 12866.

List of Subjects in 31 CFR Part 501

    Administrative practice and procedure, Penalties, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 31 CFR Part 501 is 
amended as follows:

PART 501--REPORTING AND PROCEDURES REGULATIONS

    1. The authority citation continues to read as follows:

    Authority: 21 U.S.C. 1901-1908; 22 U.S.C. 287c; 31 U.S.C. 
321(b); 50 U.S.C. 1701-1706; 50 U.S.C. App. 1-44.


    2. Section 501.805 is amended by adding paragraph (d) to read as 
follows:


Sec.  501.805  Rules governing availability of information.

* * * * *
    (d) Certain Civil Penalties Information. (1) After the conclusion 
of a civil penalties proceeding that results in either the imposition 
of a civil monetary penalty or an informal settlement, OFAC shall make 
available to the public certain information on a routine basis, not 
less frequently than monthly, as follows:
    (i) In each such proceeding against an entity, OFAC shall make 
available to the public
    (A) The name and address of the entity involved,
    (B) The sanctions program involved,
    (C) A brief description of the violation or alleged violation,
    (D) A clear indication whether the proceeding resulted in an 
informal settlement or in the imposition of a penalty,
    (E) An indication whether the entity voluntarily disclosed the 
violation or alleged violation to OFAC, and
    (F) The amount of the penalty imposed or the amount of the agreed 
settlement.
    (ii) In such proceedings against individuals, OFAC shall release on 
an aggregate basis
    (A) The number of penalties imposed and informal settlements 
reached,
    (B) The sanctions programs involved,
    (C) A brief description of the violations or alleged violations,
    (D) A clear indication whether the proceedings resulted in informal 
settlements, in the imposition of penalties, or in administrative 
hearing requests pursuant to the Trading With the Enemy Act (TWEA), 50 
U.S.C. 5(b), and
    (E) The amounts of the penalties imposed and the amounts of the 
agreed settlements.

[[Page 6823]]

    (2) The medium through which information will be released is OFAC's 
website at http://www.treas.gov/ofac.
    (3) The information made available pursuant to paragraph (d)(1) of 
this section shall not include the following:
    (i) The name of any violator or alleged violator who is an 
individual.
    (ii) Records or information obtained or created in the 
implementation of part 598 of this chapter.
    (4) On a case-by-case basis, OFAC may release additional 
information concerning a particular civil penalties proceeding.

    Dated: January 10, 2003.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.
    Approved: January 14, 2003.
Kenneth E. Lawson,
Assistant Secretary (Enforcement), Department of the Treasury.
[FR Doc. 03-3310 Filed 2-6-03; 11:32 am]
BILLING CODE 4810-25-P