[Federal Register Volume 68, Number 109 (Friday, June 6, 2003)]
[Rules and Regulations]
[Pages 34196-34205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14251]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 594


Global Terrorism Sanctions 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 adding new part 594 to chapter V of 31 CFR to carry out 
the purposes of Executive Order 13224 of September 23, 2001, ``Blocking 
Property and Prohibiting Transactions with Persons Who Commit, Threaten 
to Commit, or Support Terrorism.''

DATES: Effective Date: June 6, 2003.
    Comments: Written comments must be received no later than August 5, 
2003.

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 Web site (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 September 23, 2001, the President, invoking the authority, inter 
alia, of the International Emergency Economic Powers Act (50 U.S.C. 
1701-1706) (``IEEPA'') and the United Nations Participation Act (22 
U.S.C. 287c), issued Executive Order 13224 (66 FR 49079, September 25, 
2001), effective at 12:01 a.m. eastern daylight time on September 24, 
2001. In the order, the President found that ``grave acts of terrorism 
and threats of terrorism committed by foreign terrorists, including the 
terrorist attacks in New York, Pennsylvania, and the Pentagon committed 
on September 11, 2001 * * * and the continuing and immediate threat of 
further attacks on United States nationals or the United States'' 
constituted an unusual and extraordinary threat to the national 
security, foreign policy and economy of the United States, and declared 
a national emergency with respect to that threat. The order was amended 
by Executive Order 13268 (67 FR 44751, July 3, 2001) and Executive 
Order 13284 (68 FR 4075, January 28, 2003).
    These regulations are promulgated to implement Executive Order 
13224. They are in addition to and do not take the place of other parts 
of 31 CFR chapter V relating to terrorism, including, but not limited 
to, the Terrorism Sanctions Regulations (part 595), implementing 
Executive Order 12947, ``Prohibiting Transactions With Terrorists Who 
Threaten To Disrupt the Middle East Peace Process'' (60 FR 5079, 
January 25, 1995); the Terrorism List Government Sanctions Regulations 
(part 596), implementing section 321 of the Antiterrorism and Effective 
Death Penalty Act of 1996 (18 U.S.C. 2332d); and the Foreign Terrorist 
Organizations Sanctions Regulations (part 597), implementing sections 
302 and 303 of the Antiterrorism and Effective Death Penalty Act of 
1996 (8 U.S.C. 1189, 18 U.S.C. 2339B). (Detailed information regarding 
each of those other parts is available on OFAC's Web site (http://www.treas.gov/ofac).) Certain persons designated pursuant to the 
regulations now being promulgated may also be designated pursuant to 
those other parts, and transactions related to those persons are 
subject to the requirements of those parts and other sanctions under 
U.S. law. These new regulations also do not in any way modify the 
criminal prohibition, set forth at 18 U.S.C. 2339B, against providing 
material support or resources to foreign terrorist organizations 
designated pursuant to section 219 of the Immigration and Nationality 
Act, as amended.
    Specifically, these regulations are promulgated in furtherance of 
the sanctions set forth in Executive Order 13224. Section 1 of the 
order blocks, with certain exceptions, all property and interests in 
property of foreign persons listed in an Annex to the order and persons 
designated by the Secretary of State or the Secretary of the Treasury 
pursuant to criteria set forth in the order. Section 2 of the order 
prohibits any transaction or dealing by a United States person or 
within the United States in property or interests in property blocked 
pursuant to the order, including but not limited to the making or 
receiving of any contribution 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 also 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 7 of the order authorizes the Secretary of 
the Treasury, in consultation with the Secretary of State, the 
Secretary of Homeland Security and the Attorney General, to take such 
actions, including the promulgation of rules and regulations, as may be 
necessary to carry out the purposes of the order. Acting under 
authority delegated by the Secretary of the Treasury, the Department of 
the Treasury's Office of Foreign Assets Control (``OFAC'') is 
promulgating these Global Terrorism Sanctions Regulations, 31 CFR part 
594 (the ``Regulations'').
    Subpart B of the Regulations sets forth the prohibitions contained 
in sections 1 and 2 of the order. See Sec. Sec.  594.201, 594.204, and 
594.205. Persons identified in the Annex to the order or designated by 
or under the authority of the Secretary of State or 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 Sec.  594.201(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 594.202 and 594.203 of subpart B detail the effect of 
transfers of

[[Page 34197]]

blocked property in violation of the Regulations and the requirement to 
hold blocked property in interest-bearing blocked accounts. Section 
594.206 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.
    Subpart C of the Regulations defines key terms used throughout the 
Regulations, and subpart D sets forth interpretive sections regarding 
the general prohibitions contained in subpart B. Certain transactions 
otherwise prohibited under the Regulations but found to be consistent 
with U.S. policy are authorized by one of the general licenses 
contained in subpart E or may be authorized by a specific license 
issued pursuant to the procedures described in subpart D of part 501 of 
31 CFR chapter V.
    Subpart F of the Regulations refers to subpart C of part 501 for 
applicable recordkeeping and reporting requirements. 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 the Regulations 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 August 5, 2003. 
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 September 4, 2003, 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., 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 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 594

    Administrative practice and procedure, Banks, Banking, Blocking of 
assets, Penalties, Reporting and recordkeeping requirements, Specially 
designated global terrorist, Terrorism, Transfer of assets.

0
1. For the reasons set forth in the preamble, part 594 is added to 31 
CFR chapter V to read as follows:

PART 594--GLOBAL TERRORISM SANCTIONS REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations
Sec.
594.101 Relation of this part to other laws and regulations.
Subpart B--Prohibitions
594.201 Prohibited transactions involving blocked property.
594.202 Effect of transfers violating the provisions of this part.
594.203 Holding of funds in interest-bearing accounts; investment 
and reinvestment.
594.204 Prohibited transaction or dealing in property; contributions 
of funds, goods, or services.
594.205 Evasions; attempts; conspiracies.
594.206 Expenses of maintaining blocked property; liquidation of 
blocked property.
Subpart C--General Definitions
594.301 Blocked account; blocked property.
594.302 Effective date.
594.303 Entity.
594.304 Foreign person.
594.305 Information or informational materials.
594.306 Interest.
594.307 Licenses; general and specific.
594.308 Person.
594.309 Property; property interest.
594.310 Specially designated global terrorist; SDGT.
594.311 Terrorism.
594.312 Transfer.
594.313 United States.
594.314 U.S. financial institution.
594.315 United States person; U.S. person.
Subpart D--Interpretations
594.401 Reference to amended sections.
594.402 Effect of amendment.
594.403 Setoffs prohibited.
594.404 Termination and acquisition of an interest in blocked 
property.
594.405 Transactions incidental to a licensed transaction.
594.406 Provision of services.
594.407 Offshore transactions.
594.408 Payments from blocked accounts to satisfy obligations 
prohibited.
594.409 Charitable contributions.
594.410 Credit extended and cards issued by U.S. financial 
institutions.
Subpart E--Licenses, Authorizations and Statements of Licensing Policy
594.501 General and specific licensing procedures.
594.502 Effect of license or authorization.
594.503 Exclusion from licenses and other authorizations.
594.504 Payments and transfers to blocked accounts in U.S. financial 
institutions.
594.505 Entries in certain accounts for normal service charges 
authorized.
594.506 Provision of certain legal services authorized.

[[Page 34198]]

594.507 Authorization of emergency medical services.
594.508 Transactions related to telecommunications authorized.
594.509 Transactions related to mail authorized.
Subpart F--Reports
594.601 Records and reports.
Subpart G--Penalties
594.701 Penalties.
594.702 Prepenalty notice.
594.703 Response to prepenalty notice; informal settlement.
594.704 Penalty imposition or withdrawal.
594.705 Administrative collection; referral to United States 
Department of Justice.
Subpart H--Procedures
594.801 Procedures.
594.802 Delegation by the Secretary of the Treasury.
Subpart I--Paperwork Reduction Act
594.901 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. 13224, 66 FR 49079, September 25, 
2001; E.O. 13268, 67 FR 44751, July 3, 2002, 3 CFR, 2002 Comp., p. 
240; E.O. 13284, 64 FR 4075, January 28, 2003.

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


Sec.  594.101  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


Sec.  594.201  Prohibited transactions involving blocked property.

    (a) Except as authorized by statutes, 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 and interests in property 
of the following persons that are in the United States, that hereafter 
come within the United States, or that 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) Foreign persons listed in the Annex to Executive Order 13224 of 
September 23, 2001, as may be amended;
    (2) Foreign persons determined by the Secretary of State, in 
consultation with the Secretary of the Treasury, the Secretary of 
Homeland Security and the Attorney General, to have committed, or to 
pose a significant risk of committing, acts of terrorism that threaten 
the security of U.S. nationals or the national security, foreign 
policy, or economy of the United States;
    (3) Persons determined by the Secretary of the Treasury, in 
consultation with the Secretary of State, the Secretary of Homeland 
Security and the Attorney General, to be owned or controlled by, or to 
act for or on behalf of, any person whose property or interests in 
property are blocked pursuant to paragraphs (a)(1), (a)(2), (a)(3), or 
(a)(4)(i) of this section; or
    (4) Except as provided in section 5 of Executive Order 13224, any 
person determined by the Secretary of the Treasury, in consultation 
with the Secretary of State, the Secretary of Homeland Security and the 
Attorney General:
    (i) To assist in, sponsor, or provide financial, material, or 
technological support for, or financial or other services to or in 
support of:
    (A) Acts of terrorism that threaten the security of U.S. nationals 
or the national security, foreign policy, or economy of the United 
States, or
    (B) Any person whose property or interests in property are blocked 
pursuant to paragraph (a) of this section; or
    (ii) To be otherwise associated with any person whose property or 
interests in property are blocked pursuant to paragraphs (a)(1), 
(a)(2), (a)(3), or (a)(4)(i) of this section.

    Note 1 to paragraph (a). Section 5 of Executive Order 13224, as 
amended, provides that, with respect to those persons designated 
pursuant to paragraph (a)(4) of this section, the Secretary of the 
Treasury, in the exercise of his discretion and in consultation with 
the Secretary of State, the Secretary of Homeland Security and the 
Attorney General, may take such other actions than the complete 
blocking of property or interests in property as the President is 
authorized to take under the International Emergency Economic Powers 
Act and the United Nations Participation Act if the Secretary of the 
Treasury, in consultation with the Secretary of State, the Secretary 
of Homeland Security and the Attorney General, deems such other 
actions to be consistent with the national interests of the United 
States, considering such factors as he deems appropriate.


    Note 2 to paragraph (a). The names of persons whose property or 
interests in property are blocked pursuant to Sec.  594.201(a) are 
published on OFAC's website, announced in the Federal Register and 
incorporated on an ongoing basis with the identifier [SDGT] in 
appendix A to 31 CFR chapter V.


    Note 3 to paragraph (a). Section 501.807 of this chapter V sets 
forth the procedures to be followed by persons seeking 
administrative reconsideration of their designation pursuant to 
Sec.  594.201(a)(2), (a)(3), or (a)(4) 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) 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 Sec.  594.201(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.

    Note 1 to Sec.  594.201. Section 106 of the USA PATRIOT Act of 
2001 (Pub. L. 107-56, Oct. 26, 2001) amended section 203 of the 
International Emergency Economic Powers Act (50 U.S.C. 1702) to 
authorize explicitly the blocking of property and interests in 
property of a person or entity during the pendency of an 
investigation. The name of any person or entity whose property or 
interests in property are blocked pursuant to this authority appears 
on the Office of

[[Page 34199]]

Foreign Assets Control's (OFAC) blocked persons list with the 
descriptor ``[BPI-PA].'' The scope of the property or interests in 
property blocked during the pendency of an investigation may be more 
limited than the scope of the blocking set forth in Sec.  
594.201(a). Inquiries regarding the scope of any such blocking 
should be directed to OFAC's Compliance Division at 202/622-2490.


    Note 2 to Sec.  594.201. The prohibitions set forth in this part 
are separate from and in addition to other parts of 31 CFR chapter 
V, including but not limited to the Terrorism Sanctions Regulations 
(part 595), the Terrorism List Government Sanctions Regulations 
(part 596), and the Foreign Terrorist Organizations Sanctions 
Regulations (part 597). The prohibitions set forth in this part also 
are separate and apart from the criminal prohibition, set forth at 
18 U.S.C. 2339B, against providing material support or resources to 
foreign terrorist organizations designated pursuant to section 219 
of the Immigration and Nationality Act, as amended.

Sec.  594.202  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.  
594.201(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.  594.201(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, 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). 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) Except to the extent otherwise provided by law or 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 Sec.  594.201(a).


Sec.  594.203  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.  594.201(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.  594.201(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.  594.201(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.  594.201(a). However, the Office of Foreign Assets 
Control may issue licenses permitting or directing such sales or 
liquidation in appropriate cases.

[[Page 34200]]

    (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 Sec.  594.201(a), nor may their holder 
cooperate in or facilitate the pledging or other attempted use as 
collateral of blocked funds or other assets.


Sec.  594.204  Prohibited transaction or dealing in property; 
contributions of funds, goods, or services.

    Except as otherwise authorized, no U.S. person may engage in any 
transaction or dealing in property or interests in property of persons 
whose property or interests in property are blocked pursuant to Sec.  
594.201(a), including but not limited to the making or receiving of any 
contribution of funds, goods, or services to or for the benefit of 
persons whose property or interests in property are blocked pursuant to 
Sec.  594.201(a).


Sec.  594.205  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.  594.206  Expenses of maintaining blocked property; liquidation of 
blocked property.

    (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 the effective date, all expenses incident to the 
maintenance of physical property blocked pursuant to Sec.  594.201(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.  594.201(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.

Subpart C--General Definitions


Sec.  594.301  Blocked account; blocked property.

    The terms blocked account and blocked property shall mean any 
account or property subject to the prohibition in Sec.  594.201 held in 
the name of a person whose property or interests in property are 
blocked pursuant to Sec.  594.201(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.


Sec.  594.302  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 Sec.  594.201(a)(1), 12:01 a.m. 
eastern daylight time, September 24, 2001;
    (b) With respect to a person whose property or interests in 
property are blocked pursuant to Sec.  594.201(a)(2), (a)(3), or 
(a)(4), the earlier of the date on which is received actual or 
constructive notice of such person's designation by the Secretary of 
State or the Secretary of the Treasury.


Sec.  594.303  Entity.

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


Sec.  594.304  Foreign person.

    The term foreign person means any citizen or national of a foreign 
state (including any such individual who is also a citizen or national 
of the United States), or any entity not organized solely under the 
laws of the United States or existing solely in the United States, but 
does not include a foreign state.


Sec.  594.305  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). 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 became, 
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.  594.306  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.  594.307  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.  594.307. See Sec.  501.801 of this chapter on 
licensing procedures.

Sec.  594.308  Person.

    The term person means an individual or entity.


Sec.  594.309  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

[[Page 34201]]

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.


Sec.  594.310  Specially designated global terrorist; SDGT.

    The term specially designated global terrorist or SDGT means any 
foreign person or person listed in the Annex or designated pursuant to 
Executive Order 13224 of September 23, 2001.


Sec.  594.311  Terrorism.

    The term terrorism means an activity that:
    (a) Involves a violent act or an act dangerous to human life, 
property, or infrastructure; and
    (b) Appears to be intended:
    (1) To intimidate or coerce a civilian population;
    (2) To influence the policy of a government by intimidation or 
coercion; or
    (3) To affect the conduct of a government by mass destruction, 
assassination, kidnapping, or hostage-taking.


Sec.  594.312  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.  594.313  United States.

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


Sec.  594.314  U.S. financial institution.

    The term U.S. financial institution means any U.S. person 
(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.


Sec.  594.315  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 (including foreign branches), or any person 
in the United States.

Subpart D--Interpretations


Sec.  594.401  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.  594.402  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.  594.403  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. Sec.  594.201 and 594.204 if effected after the effective 
date.


Sec.  594.404  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.  594.201(a), unless there 
exists in the property another interest that is blocked pursuant to 
Sec.  594.201(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 
Sec.  594.201(a), such property shall be deemed to be property in which 
that person has an interest and therefore blocked.


Sec.  594.405  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.  594.201(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.


Sec.  594.406  Provision of services.

    (a) Except as provided in Sec.  594.207, the prohibitions on 
transactions or dealings involving blocked property contained in 
Sec. Sec.  594.201 and 594.204

[[Page 34202]]

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 Sec.  594.201(a); or
    (2) With respect to property interests subject to Sec. Sec.  
594.201 and 594.204.
    (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, educational, or 
other services to a person whose property or interests in property are 
blocked pursuant to Sec.  594.201(a).

    Note to Sec.  594.406. See Sec. Sec.  594.506 and 594.507, 
respectively, on licensing policy with regard to the provision of 
certain legal or medical services.

Sec.  594.407  Offshore transactions.

    The prohibitions in Sec. Sec.  594.201 and 594.204 on transactions 
or dealings involving blocked property apply to transactions or 
dealings 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 Sec.  594.201(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 Sec.  594.201(a) has or 
has had an interest since the effective date.


Sec.  594.408  Payments from blocked accounts to satisfy obligations 
prohibited.

    Pursuant to Sec. Sec.  594.201 and 594.204, 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.


Sec.  594.409  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, including those 
to relieve human suffering, such as food, clothing, or medicine, may be 
made to or for the benefit of a person whose property or interests in 
property are blocked pursuant to Sec.  594.201(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 
Sec.  594.201(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.


Sec.  594.410  Credit extended and cards issued by U.S. financial 
institutions.

    The prohibitions in Sec. Sec.  594.201 and 594.204 on engaging in 
transactions or dealings in property subject to those sections 
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 Sec.  594.201(a).

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


Sec.  594.501  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.  594.502  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.


Sec.  594.503  Exclusion from licenses and other authorizations.

    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.  594.504  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 Sec.  
594.201(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.  594.504. Please refer to Sec.  501.603 of this 
chapter for mandatory reporting requirements regarding financial 
transfers. See also Sec.  594.203 concerning the obligation to hold 
blocked funds in interest-bearing accounts.

Sec.  594.505  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.

[[Page 34203]]

Sec.  594.506  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 Sec.  594.201(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 Sec.  
594.201(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 Sec.  
594.201(a) is prohibited except to the extent otherwise provided by law 
or unless specifically licensed in accordance with Sec.  594.202(e).


Sec.  594.507  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 Sec.  594.201(a) is authorized, provided that all 
receipt of payment for such services must be specifically licensed.


Sec.  594.508  Transactions related to telecommunications authorized.

    All transactions ordinarily incident to the receipt or transmission 
of telecommunications involving persons whose property or interests in 
property are blocked pursuant to Sec.  594.201(a) are authorized, 
provided that any payment owed to any such person is paid into a 
blocked account in a U.S. financial institution. This section does not 
authorize the provision, sale, or lease to persons whose property or 
interests in property are blocked pursuant to Sec.  594.201(a) of 
telecommunications equipment or technology; nor does it authorize the 
provision, sale, or leasing of capacity on telecommunications 
transmission facilities (such as satellite or terrestrial network 
connectivity).


Sec.  594.509  Transactions related to mail authorized.

    All transactions by U.S. persons, including payment and transfers 
to common carriers, incident to the receipt or transmission of mail 
between a U.S. person and a person whose property or interests in 
property are blocked pursuant to Sec.  594.201(a) are authorized, 
provided the mail is limited to personal communications not involving a 
transfer of anything of value and not exceeding 12 ounces in weight.

Subpart F--Reports


Sec.  594.601  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.  594.701  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 (Pub. L. 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 tackle, 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.  594.702  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

[[Page 34204]]

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 Sec.  594.703 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.  594.703  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 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.  594.704  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

[[Page 34205]]

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 a federal district court.


Sec.  594.705  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.  594.801  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.


Sec.  594.802  Delegation by the Secretary of the Treasury.

    Any action that the Secretary of the Treasury is authorized to take 
pursuant to Executive Order 13224 of September 23, 2001 (66 FR 49079, 
September 25, 2001), 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


Sec.  594.901  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 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: May 13, 2003.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.

    Approved: May 22, 2003.
Juan C. Zarate,
Deputy Assistant Secretary (Terrorist Financing and Financial Crimes), 
Department of the Treasury.
[FR Doc. 03-14251 Filed 6-3-03; 8:50 am]
BILLING CODE 4810-25-P