Federal Register, Volume 75 Issue 234 (Tuesday, December 7, 2010)

[Federal Register Volume 75, Number 234 (Tuesday, December 7, 2010)]
[Rules and Regulations]
[Pages 75904-75911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30520]

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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Parts 594, 595, and 597

Global Terrorism Sanctions Regulations; Terrorism Sanctions
Regulations; Foreign Terrorist Organizations Sanctions Regulations

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 amending the Global Terrorism Sanctions
Regulations (``GTSR'') and the Terrorism Sanctions Regulations
(``TSR'') to expand the scope of authorizations in each of those
programs for the provision of certain legal services. In addition, OFAC
is adding new general licenses under the GTSR, the TSR, and the Foreign
Terrorist Organizations Sanctions Regulations to authorize U.S. persons
to receive specified types of payment for certain authorized legal
services.

DATES: Effective Date: December 7, 2010.

FOR FURTHER INFORMATION CONTACT: Assistant Director for Compliance,
Outreach & Implementation, tel.: 202/622-2490, Assistant Director for

[[Page 75905]]

Licensing, tel.: 202/622-2480, Assistant Director for Policy, tel.:
202/622-4855, Office of Foreign Assets Control, or Chief Counsel
(Foreign Assets Control), tel.: 202/622-2410, Office of the General
Counsel, Department of the Treasury, Washington, DC 20220 (not toll
free numbers).

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

This document and additional information concerning OFAC are
available from OFAC's Web site (http://www.treas.gov/ofac). Certain
general information pertaining to OFAC's sanctions programs also is
available via facsimile through a 24-hour fax-on-demand service, tel.:
202/622-0077.

Background

OFAC administers three sanctions programs with respect to
terrorists and terrorist organizations. The Terrorism Sanctions
Regulations, 31 CFR part 595 (``TSR''), implement Executive Order 12947
of January 23, 1995, in which the President declared a national
emergency with respect to ``grave acts of violence committed by foreign
terrorists that disrupt the Middle East peace process.'' The Global
Terrorism Sanctions Regulations, 31 CFR part 594 (``GTSR''), implement
Executive Order 13224 of September 23, 2001, in which the President
declared an emergency more generally with respect to ``grave acts of
terrorism and threats of terrorism committed by foreign terrorists.''
The Foreign Terrorist Organizations Sanctions Regulations, 31 CFR part
597 (``FTOSR''), implement provisions of the Antiterrorism and
Effective Death Penalty Act of 1996.
OFAC is revising sections in the GTSR and the TSR that authorize
the provision of certain legal services to expand the scope of
authorized services. In addition, OFAC is adding a new section to the
GTSR, TSR, and FTOSR authorizing U.S. persons to receive specified
types of payment for certain authorized legal services. Section 594.506
of the GTSR and section 595.506 of the TSR authorize U.S. persons to
provide certain authorized legal services to or on behalf of persons
whose property and interests in property are blocked under those
regulations, provided that any payment of professional fees and
reimbursement of incurred expenses must be specifically licensed. OFAC
is expanding the scope of these general licenses by adding to the
authorized legal services the initiation and conduct of legal,
arbitration, or administrative proceedings before any U.S. federal,
state, or local court or agency for or on behalf of persons whose
property and interests in property are blocked under the GTSR or TSR.
The FTOSR prohibit financial transactions involving assets, within
the possession or control of U.S. financial institutions, in which a
designated foreign terrorist organization or its agent has an interest.
While the FTOSR, therefore, do not prohibit U.S. persons from providing
legal services to designated foreign terrorist organizations or agents
thereof, any payment for such services through a U.S. financial
institution is prohibited. Section 597.505 of the FTOSR provides that
OFAC may issue specific licenses, on a case-by-case basis, authorizing
the receipt of payment of professional fees and reimbursement of
incurred expenses through a U.S. financial institution for certain
legal services provided by U.S. persons to designated foreign terrorist
organizations or agents thereof.
In specific licenses it has issued for payment of U.S. persons for
professional services rendered and reimbursement of expenses incurred
in connection with authorized legal services provided on behalf of
blocked persons, OFAC has authorized several payment mechanisms. First,
OFAC has issued specific licenses authorizing payment of fees and
reimbursement of expenses where the funds used for such payment or
reimbursement originate outside the United States and do not come from
a U.S. person or any person, other than the person on whose behalf the
authorized legal services are provided, whose property and interests in
property are blocked. Second, OFAC has issued specific licenses
authorizing the establishment of legal defense funds that collect
donations from persons who are neither designated nor blocked to pay
legal fees and reimburse expenses incurred in connection with
authorized legal services rendered on behalf of blocked persons. With
this rule, OFAC incorporates these mechanisms for payment into general
licenses by adding new section 594.517 to the GTSR, new section 595.515
to the TSR, and new section 597.513 to the FTOSR. These new sections
authorize payments from funds originating outside the United States in
connection with certain authorized legal services rendered to or on
behalf of designated persons, as well as the formation of legal defense
funds to gather donations and dispense funds in connection with
payments for such legal services.
In addition to the payment mechanisms discussed above, OFAC may
issue specific licenses authorizing the release of a limited amount of
blocked funds for the payment of legal fees and expenses incurred in
seeking administrative reconsideration or judicial review of the
designation of a U.S. person or the blocking of the property and
interests in property of a U.S. person where alternative funding
sources are not available. For more information on this third mechanism
for payment, see OFAC's Guidance on the Release of Limited Amounts of
Blocked Funds for Payment of Legal Fees and Costs Incurred in
Challenging the Blocking of U.S. Persons in Administrative or Civil
Proceedings, which is available at: http://www.treas.gov/resource-center/sanctions/Documents/legal_fee_guide.pdf.

Public Participation

Because these amendments to 31 CFR parts 594, 595, and 597 involve
a foreign affairs function, Executive Order 12866 and the provisions of
the Administrative Procedure Act (5 U.S.C. 553) requiring notice of
proposed rulemaking, opportunity for public participation, and delay in
effective date are inapplicable. Because no notice of proposed
rulemaking is required for this rule, the Regulatory Flexibility Act (5
U.S.C. 601-612) does not apply.

Paperwork Reduction Act

The collections of information related to 31 CFR parts 594, 595,
and 597 are contained in 31 CFR part 501 (the ``Reporting, Procedures
and Penalties Regulations''). Pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3507), those collections of information have been
approved by the Office of Management and Budget under control number
1505-0164. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection of information displays a valid control number.

List of Subjects

31 CFR Part 594

Administrative practice and procedure, Banks, Banking, Currency,
Foreign investments in United States, Penalties, Reporting and
recordkeeping requirements, Securities, Terrorism.

31 CFR Part 595

Administrative practice and procedure, Banks, Banking, Currency,
Foreign investments in United States, Penalties, Reporting and
recordkeeping requirements, Securities, Terrorism.

[[Page 75906]]

31 CFR Part 597

Administrative practice and procedure, Banks, Banking, Currency,
Foreign investments in United States, Penalties, Reporting and
recordkeeping requirements, Securities, Terrorism.

0
For the reasons set forth in the preamble, the Office of Foreign Assets
Control amends 31 CFR parts 594, 595, and 597 as follows:

PART 594--GLOBAL TERRORISM SANCTIONS REGULATIONS

0
1. The authority citation for part 594 continues to read as follows:

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; Pub. L. 101-410, 104 Stat. 890 (28
U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13224, 66 FR
49079, 3 CFR, 2001 Comp., p. 786; E.O. 13268, 67 FR 44751, 3 CFR,
2002 Comp., p. 240; E.O. 13284, 68 FR 4075, 3 CFR, 2003 Comp., p.
161.

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

0
2. Amend Sec. 594.506 by revising the introductory text of paragraph
(a), redesignating existing paragraphs (b) and (c) as paragraphs (c)
and (d), respectively, and adding new paragraph (b) to read as follows:

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 and 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 or otherwise authorized pursuant to this
part:
* * * * *
(b) The provision of legal services not otherwise authorized by
paragraph (a) of this section to or on behalf of persons whose property
and interests in property are blocked pursuant to Sec. 594.201(a) in
connection with the initiation and conduct of legal, arbitration, or
administrative proceedings before any U.S. federal, state, or local
court or agency is authorized, provided that all receipts of payment of
professional fees and reimbursement of incurred expenses must be
specifically licensed.
* * * * *

0
3. Add new Sec. 594.517 to subpart E to read as follows:

Sec. 594.517 Payments from funds originating outside the United
States and the formation of legal defense funds authorized.

(a) Payments from funds originating outside the United States.
Effective December 7, 2010, receipts of payment of professional fees
and reimbursement of incurred expenses for the provision of legal
services authorized pursuant to Sec. 594.506(a) are authorized from
funds originating outside the United States, provided that:
(1) Prior to receiving payment for legal services authorized
pursuant to Sec. 594.506(a) rendered to persons whose property and
interests in property are blocked pursuant to Sec. 594.201(a), the
U.S. person that is an attorney, law firm, or legal services
organization provides to the Office of Foreign Assets Control a copy of
a letter of engagement or a letter of intent to engage specifying the
services to be performed and signed by the individual to whom such
services are to be provided or, where services are to be provided to an
entity, by a legal representative of the entity. The copy of a letter
of engagement or a letter of intent to engage, accompanied by
correspondence referencing this paragraph (a), is to be mailed to:
Licensing Division, Office of Foreign Assets Control, U.S. Department
of the Treasury, 1500 Pennsylvania Avenue, NW., Annex, Washington, DC
20220;
(2) The funds received by U.S. persons as payment of professional
fees and reimbursement of incurred expenses for the provision of legal
services authorized pursuant to Sec. 594.506(a) must not originate
from:
(i) A source within the United States;
(ii) Any source, wherever located, within the possession or control
of a U.S. person; or
(iii) Any individual or entity, other than the person on whose
behalf the legal services authorized pursuant to Sec. 594.506(a) are
to be provided, whose property and interests in property are blocked
pursuant to any part of this chapter or any Executive order;

Note to paragraph (a)(2) of Sec. 594.517: This paragraph
authorizes the blocked person on whose behalf the legal services
authorized pursuant to Sec. 594.506(a) are to be provided to make
payments for authorized legal services using funds originating
outside the United States that were not previously blocked. Nothing
in this paragraph authorizes payments for legal services using funds
in which any other person whose property and interests in property
are blocked pursuant to Sec. 594.201(a) or any other part of this
chapter holds an interest.

(3) Reports. (i) U.S. persons who receive payments in connection
with legal services authorized pursuant to Sec. 594.506(a) must submit
quarterly reports no later than 30 days following the end of the
calendar quarter during which the payments were received providing
information on the funds received. Such reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) If applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in connection with
authorized legal services, such as private investigators or expert
witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (a), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (a)(3) of Sec. 594.517: U.S. persons who
receive payments in connection with legal services authorized
pursuant to Sec. 594.506(a) do not need to obtain specific
authorization to contract for related services that are ordinarily
incident to the provision of those legal services, such as those
provided by private investigators or expert witnesses, or to pay for
such services. Additionally, U.S. persons do not need to obtain
specific authorization to provide related services that are
ordinarily incident to the provision of legal services authorized
pursuant to Sec. 594.506(a).

(4) Nothing in this paragraph (a) authorizes the receipt of payment
of professional fees or reimbursement of incurred expenses for the
provision of legal services authorized pursuant to Sec. 594.506(b).

Note 1 to paragraph (a) of Sec. 594.517: Any payment
authorized in or pursuant to this paragraph that is routed through
the U.S. financial system should reference this paragraph (a) to
avoid the blocking of the transfer.

Note 2 to paragraph (a) of Sec. 594.517: Nothing in this
paragraph authorizes the transfer of any blocked property, the
debiting of any blocked account, the entry of any judgment or order
that effects a transfer of blocked property, or the execution of any
judgment against property blocked pursuant to any Executive order or
this Chapter. U.S. persons seeking administrative reconsideration or
judicial review of their designation or the blocking of their
property and interests in property may apply for a specific license
from the Office of Foreign Assets Control to authorize the release
of a

[[Page 75907]]

limited amount of blocked funds for the payment of legal fees where
alternative funding sources are not available. For more information,
see OFAC's Guidance on the Release of Limited Amounts of Blocked
Funds for Payment of Legal Fees and Costs Incurred in Challenging
the Blocking of U.S. Persons in Administrative or Civil Proceedings,
which is available at: http://www.treas.gov/resource-center/sanctions/Documents/legal_fee_guide.pdf.

(b) Legal defense funds. Effective December 7, 2010, U.S. persons
that are attorneys, law firms, or legal services organizations are
authorized to form legal defense funds from which payments of
professional fees and reimbursement for expenses incurred in connection
with the provision of legal services authorized pursuant to Sec.
594.506(a) may be debited provided that:
(1) The legal defense fund must be held in a savings or checking
account at a financial institution located in the United States;
(2) Prior to debiting the legal defense fund, the U.S. person
responsible for establishing the legal defense fund must submit the
following information to the Office of Foreign Assets Control: A copy
of a letter of engagement or a letter of intent to engage specifying
the services to be performed and signed by the individual to whom such
services are to be provided or, where services are to be provided to an
entity, by a legal representative of the entity; the name of the
individual or entity responsible for establishing the legal defense
fund; the name of the financial institution at which the account for
the legal defense fund will be held; a point of contact at the
financial institution holding the account for the legal defense fund;
and the account name and account number for the legal defense fund. The
foregoing information must be accompanied by correspondence referencing
this paragraph (b) and is to be mailed to: Licensing Division, Office
of Foreign Assets Control, U.S. Department of the Treasury, 1500
Pennsylvania Avenue, NW., Annex, Washington, DC 20220;
(3) The legal defense fund may not receive funds from a person
whose property and interests in property are blocked pursuant to Sec.
594.201(a) or any other part of this chapter;
(4) The U.S. person responsible for establishing the legal defense
fund must notify the financial institution at which the account for the
legal defense fund is held that the account may only be debited to make
payments of professional fees and reimburse expenses incurred in
connection with the provision of legal services authorized pursuant to
Sec. 594.506(a);
(5) Reports. (i) U.S. persons responsible for establishing legal
defense funds from which payments of professional fees and
reimbursement for expenses incurred in connection with the provision of
legal services authorized pursuant to Sec. 594.506(a) may be debited
must submit quarterly reports no later than 30 days following the end
of the calendar quarter during which the funds were deposited with or
debited from the account of the legal defense fund providing
information on the funds received by the legal defense fund and debits
made to the legal defense fund during the reporting period. Such
reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) Any individual or entity to whom any payments were made,
including, if applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in connection with
authorized legal services, such as private investigators or expert
witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (b), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (b)(5) of Sec. 594.517: U.S. persons who
receive payments in connection with legal services authorized
pursuant to Sec. 594.506(a) do not need to obtain specific
authorization to contract for related services that are ordinarily
incident to the provision of those legal services, such as those
provided by private investigators or expert witnesses, or to pay for
such services. Additionally, U.S. persons do not need to obtain
specific authorization to provide related services that are
ordinarily incident to the provision of legal services authorized
pursuant to Sec. 594.506(a).

(6) Nothing in this paragraph (b) authorizes the formation or
debiting of legal defense funds in connection with the provision of
legal services authorized pursuant to Sec. 594.506(b).

Note 1 to paragraph (b) of Sec. 594.517: Any payment
authorized in or pursuant to this paragraph that is routed through
the U.S. financial system should reference this paragraph (b) to
avoid the blocking of the transfer.

Note 2 to paragraph (b) of Sec. 594.517: Any funds remaining
in a legal defense fund account after all payments of professional
fees and reimbursement of incurred expenses authorized pursuant to
this paragraph have been made or upon termination of the legal
services for which payment is authorized pursuant to this paragraph
are property in which the person to or on whose behalf the legal
services were rendered has an interest and is subject to the
prohibitions of this part. Persons in the possession or control of
such remaining funds may apply for the unblocking of the funds by
following the procedures set forth at Sec. 501.801 of this chapter.

PART 595--TERRORISM SANCTIONS REGULATIONS

0
4. The authority citation for part 595 continues to read as follows:

Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651,
1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note);
Pub. L. 110-96, 121 Stat. 1011; E.O. 12947, 60 FR 5079, 3 CFR, 1995
Comp., p. 319; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208.

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

0
5. Amend Sec. 595.506 by revising the introductory text of paragraph
(a), redesignating existing paragraphs (b) and (c) as paragraphs (c)
and (d), respectively, and adding new paragraph (b) to read as follows:

Sec. 595.506 Provision of certain legal services authorized.

(a) The provision of the following legal services to or on behalf
of persons whose property and interests in property are blocked
pursuant to Sec. 595.201(a) is authorized, provided that all receipts
of payment of professional fees and reimbursement of incurred expenses
must be specifically licensed or otherwise authorized pursuant to this
part:
* * * * *
(b) The provision of legal services not otherwise authorized by
paragraph (a) of this section to or on behalf of persons whose property
and interests in property are blocked pursuant to Sec. 595.201(a) in
connection with the initiation and conduct of legal, arbitration, or
administrative proceedings before any U.S. federal, state, or local
court or agency is authorized, provided that all receipts of payment of
professional fees and reimbursement of incurred expenses must be
specifically licensed.

0
6. Add new Sec. 595.515 to subpart E to read as follows:

[[Page 75908]]

Sec. 595.515 Payments from funds originating outside the United
States and the formation of legal defense funds authorized.

(a) Payments from funds originating outside the United States.
Effective December 7, 2010, receipts of payment of professional fees
and reimbursement of incurred expenses for the provision of legal
services authorized pursuant to Sec. 595.506(a) are authorized from
funds originating outside the United States, provided that:
(1) Prior to receiving payment for legal services authorized
pursuant to Sec. 595.506(a) rendered to persons whose property and
interests in property are blocked pursuant to Sec. 595.201(a), the
U.S. person that is an attorney, law firm, or legal services
organization provides to the Office of Foreign Assets Control a copy of
a letter of engagement or a letter of intent to engage specifying the
services to be performed and signed by the individual to whom such
services are to be provided or, where services are to be provided to an
entity, by a legal representative of the entity. The copy of a letter
of engagement or a letter of intent to engage, accompanied by
correspondence referencing this paragraph (a), is to be mailed to:
Licensing Division, Office of Foreign Assets Control, U.S. Department
of the Treasury, 1500 Pennsylvania Avenue, NW., Annex, Washington, DC
20220;
(2) The funds received by U.S. persons as payment of professional
fees and reimbursement of incurred expenses for the provision of legal
services authorized pursuant to Sec. 595.506(a) must not originate
from:
(i) A source within the United States;
(ii) Any source, wherever located, within the possession or control
of a U.S. person; or
(iii) Any individual or entity, other than the person on whose
behalf the legal services authorized pursuant to Sec. 595.506(a) are
to be provided, whose property and interests in property are blocked
pursuant to any part of this chapter or any Executive order;

Note to paragraph (a)(2) of Sec. 595.515: This paragraph
authorizes the blocked person on whose behalf the legal services
authorized pursuant to Sec. 595.506(a) are to be provided to make
payments for authorized legal services using funds originating
outside the United States that were not previously blocked. Nothing
in this paragraph authorizes payments for legal services using funds
in which any other person whose property and interests in property
are blocked pursuant to Sec. 595.201(a) or any other part of this
chapter holds an interest.

(3) Reports. (i) U.S. persons who receive payments in connection
with legal services authorized pursuant to Sec. 595.506(a) must submit
quarterly reports no later than 30 days following the end of the
calendar quarter during which the payments were received providing
information on the funds received. Such reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) If applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in connection with
authorized legal services, such as private investigators or expert
witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (a), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (a)(3) of Sec. 595.515: U.S. persons who
receive payments in connection with legal services authorized
pursuant to Sec. 595.506(a) do not need to obtain specific
authorization to contract for related services that are ordinarily
incident to the provision of those legal services, such as those
provided by private investigators or expert witnesses, or to pay for
such services. Additionally, U.S. persons do not need to obtain
specific authorization to provide related services that are
ordinarily incident to the provision of legal services authorized
pursuant to Sec. 595.506(a).

Note 1 to paragraph (a) of Sec. 595.515: Any payment
authorized in or pursuant to this paragraph that is routed through
the U.S. financial system should reference this paragraph Sec.
595.515(a) to avoid the blocking of the transfer.

Note 2 to paragraph (a) of Sec. 595.515: Nothing in this
paragraph authorizes the transfer of any blocked property, the
debiting of any blocked account, the entry of any judgment or order
that effects a transfer of blocked property, or the execution of any
judgment against property blocked pursuant to any Executive order or
this Chapter. U.S. persons seeking administrative reconsideration or
judicial review of their designation or the blocking of their
property and interests in property may apply for a specific license
from the Office of Foreign Assets Control to authorize the release
of a limited amount of blocked funds for the payment of legal fees
where alternative funding sources are not available. For more
information, see OFAC's Guidance on the Release of Limited Amounts
of Blocked Funds for Payment of Legal Fees and Costs Incurred in
Challenging the Blocking of U.S. Persons in Administrative or Civil
Proceedings, which is available at: http://www.treas.gov/resource-center/sanctions/Documents/legal_fee_guide.pdf.

[[Page 75909]]

(5) Reports. (i) U.S. persons responsible for establishing legal
defense funds from which payments of professional fees and
reimbursement for expenses incurred in connection with the provision of
legal services authorized pursuant to Sec. 595.506(a) may be debited
must submit quarterly reports no later than 30 days following the end
of the calendar quarter during which the funds were deposited with or
debited from the account of the legal defense fund providing
information on the funds received by the legal defense fund and debits
made to the legal defense fund during the reporting period. Such
reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) Any individual or entity to whom any payments were made,
including, if applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in connection with
authorized legal services, such as private investigators or expert
witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (b), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (b)(5) of Sec. 595.515: U.S. persons who
receive payments in connection with legal services authorized
pursuant to Sec. 595.506(a) do not need to obtain specific
authorization to contract for related services that are ordinarily
incident to the provision of those legal services, such as those
provided by private investigators or expert witnesses, or to pay for
such services. Additionally, U.S. persons do not need to obtain
specific authorization to provide related services that are
ordinarily incident to the provision of legal services authorized
pursuant to Sec. 595.506(a).

(6) Nothing in this paragraph (b) authorizes the formation or
debiting of legal defense funds in connection with the provision of
legal services authorized pursuant to Sec. 595.506(b).

Note 1 to paragraph (b) of Sec. 595.515: Any payment authorized
in or pursuant to this paragraph that is routed through the U.S.
financial system should reference this paragraph Sec. 595.515(b) to
avoid the blocking of the transfer.

Note 2 to paragraph (b) of Sec. 595.515: Any funds remaining in
a legal defense fund account after all payments of professional fees
and reimbursement of incurred expenses authorized pursuant to this
paragraph have been made or upon termination of the legal services
for which payment is authorized pursuant to this paragraph are
property in which the person to or on whose behalf the legal
services were rendered has an interest and is subject to the
prohibitions of this part. Persons in the possession or control of
such remaining funds may apply for the unblocking of the funds by
following the procedures set forth at Sec. 501.801 of this chapter.

PART 597--FOREIGN TERRORIST ORGANIZATIONS SANCTIONS REGULATIONS

0
7. The authority citation for part 597 continues to read as follows:

Authority: 31 U.S.C. 321(b); Pub. L. 101-410, 104 Stat. 890 (28
U.S.C. 2461 note); Pub. L. 104-132, 110 Stat. 1214, 1248-53 (8
U.S.C. 1189, 18 U.S.C. 2339B).

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

0
8. Amend Sec. 597.505 by revising the introductory text and adding a
new note to the section to read as follows:

Sec. 597.505 Payment for certain legal services.

Except as otherwise authorized, specific licenses may be issued, on
a case-by-case basis, authorizing receipt of payment of professional
fees and reimbursement of incurred expenses through a U.S. financial
institution for the following legal services by U.S. persons:
* * * * *

Note to Sec. 597.505: See Sec. 597.513 of this part for
authorized mechanisms for payment through a U.S. financial
institution of professional fees and reimbursement of incurred
expenses for legal services specified in this section provided by a
U.S. person to or on behalf of a foreign terrorist organization or
an agent thereof.

0
9. Add new Sec. 597.513 to subpart E to read as follows:

Sec. 597.513 Payments from funds originating outside the United
States and the formation of legal defense funds authorized.

(a) Payments from funds originating outside the United States.
Effective December 7, 2010, receipts of payment through a U.S.
financial institution of professional fees and reimbursement of
incurred expenses for the provision of legal services specified in
Sec. 597.505 are authorized from funds originating outside the United
States, provided that:
(1) Prior to receiving payment through a U.S. financial institution
for legal services specified in Sec. 597.505 rendered to a foreign
terrorist organization or agent thereof, the U.S. person that is an
attorney, law firm, or legal services organization provides to the
Office of Foreign Assets Control a copy of a letter of engagement or a
letter of intent to engage specifying the services to be performed and
signed by the individual to whom such services are to be provided or,
where services are to be provided to an entity, by a legal
representative of the entity. The copy of a letter of engagement or a
letter of intent to engage, accompanied by correspondence referencing
this paragraph Sec. 597.513(a), is to be mailed to: Licensing
Division, Office of Foreign Assets Control, U.S. Department of the
Treasury, 1500 Pennsylvania Avenue, NW., Annex, Washington, DC 20220;
(2) The funds received by U.S. persons through a U.S. financial
institution as payment of professional fees and reimbursement of
incurred expenses for the provision of legal services specified in
Sec. 597.505 must not originate from:
(i) A source within the United States;
(ii) Any source, wherever located, within the possession or control
of a U.S. person; or
(iii) Any individual or entity, other than the person on whose
behalf the legal services specified in Sec. 597.505 are to be
provided, whose property and interests in property are blocked pursuant
to any part of this chapter or any Executive order;

Note to paragraph (a)(2) of Sec. 597.513: This paragraph
authorizes the person on whose behalf the legal services specified
in Sec. 597.505 are to be provided to make payments for specified
legal services using funds originating outside the United States
that were not previously blocked. Nothing in this paragraph
authorizes payments for legal services using funds in which any
other person whose assets and funds are subject to the prohibitions
in Sec. 597.201(a) or whose property and interests in property are
blocked pursuant to any other part of this chapter holds an
interest.

(3) Reports. (i) U.S. persons who receive payments in connection
with legal services specified in Sec. 597.505 must submit quarterly
reports no later than 30 days following the end of the calendar quarter
during which the payments were received providing information on the
funds received. Such reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) If applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in

[[Page 75910]]

connection with specified legal services, such as private investigators
or expert witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (a), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (a)(3) of Sec. 597.513: U.S. persons who
receive payments in connection with legal services specified in
Sec. 597.505 do not need to obtain specific authorization to make
payments through a U.S. financial institution for related services
that are ordinarily incident to the provision of those legal
services, such as those provided by private investigators or expert
witnesses.

(4) Nothing in this paragraph (a) authorizes the receipt of payment
through a U.S. financial institution of professional fees or
reimbursement of incurred expenses for the provision of legal services
not specified in Sec. 597.505.

Note 1 to paragraph (a) of Sec. 597.513: Any payment authorized
in or pursuant to this paragraph that is routed through the U.S.
financial system should reference this paragraph (a) to avoid the
blocking of the transfer.

Note 2 to paragraph (a) of Sec. 597.513: Nothing in this
paragraph authorizes the transfer of any blocked property, the
debiting of any blocked account, the entry of any judgment or order
that effects a transfer of blocked property, or the execution of any
judgment against property blocked pursuant to any Executive order or
this chapter. U.S. persons seeking administrative reconsideration or
judicial review of their designation or the blocking of their
property and interests in property may apply for a specific license
from the Office of Foreign Assets Control to authorize the release
of a limited amount of blocked funds for the payment of legal fees
where alternative funding sources are not available. For more
information, see OFAC's Guidance on the Release of Limited Amounts
of Blocked Funds for Payment of Legal Fees and Costs Incurred in
Challenging the Blocking of U.S. Persons in Administrative or Civil
Proceedings, which is available at: http://www.treas.gov/resource-center/sanctions/Documents/legal_fee_guide.pdf.

(b) Legal defense funds. Effective December 7, 2010, U.S. persons
that are attorneys, law firms, or legal services organizations are
authorized to form legal defense funds from which payments of
professional fees and reimbursement for expenses incurred in connection
with the provision of legal services specified in Sec. 597.505 may be
debited provided that:
(1) The legal defense fund must be held in a savings or checking
account at a financial institution located in the United States;
(2) Prior to debiting the legal defense fund, the U.S. person
responsible for establishing the legal defense fund must submit the
following information to the Office of Foreign Assets Control: A copy
of a letter of engagement or a letter of intent to engage specifying
the services to be performed and signed by the individual to whom such
services are to be provided or, where services are to be provided to an
entity, by a legal representative of the entity; the name of the
individual or entity responsible for establishing the legal defense
fund; the name of the financial institution at which the account for
the legal defense fund will be held; a point of contact at the
financial institution holding the account for the legal defense fund;
and the account name and account number for the legal defense fund. The
foregoing information must be accompanied by correspondence referencing
this paragraph (b) and is to be mailed to: Licensing Division, Office
of Foreign Assets Control, U.S. Department of the Treasury, 1500
Pennsylvania Avenue, NW., Annex, Washington, DC 20220;
(3) The legal defense fund may not receive funds from a person
whose assets and funds are subject to the prohibitions in Sec.
597.201(a) or whose property and interests in property are blocked
pursuant to any other part of this chapter;
(4) The U.S. person responsible for establishing the legal defense
fund must notify the financial institution at which the account for the
legal defense fund is held that the account may only be debited to make
payments of professional fees and reimburse expenses incurred in
connection with the provision of legal services specified in Sec.
597.505;
(5) Reports. (i) U.S. persons responsible for establishing legal
defense funds from which payments of professional fees and
reimbursement for expenses incurred in connection with the provision of
legal services specified in Sec. 597.505 may be debited must submit
quarterly reports no later than 30 days following the end of the
calendar quarter during which the funds were deposited with or debited
from the account of the legal defense fund providing information on the
funds received by the legal defense fund and debits made to the legal
defense fund during the reporting period. Such reports shall specify:
(A) The individual or entity from whom the funds originated and the
amount of funds received; and
(B) Any individual or entity to whom any payments were made,
including, if applicable:
(1) The names of any individuals or entities providing related
services to the U.S. person receiving payment in connection with
specified legal services, such as private investigators or expert
witnesses;
(2) A general description of the services provided; and
(3) The amount of funds paid in connection with such services.
(ii) In the event that no transactions occur or no funds are
received during the reporting period, a statement is to be filed to
that effect.
(iii) Reports, which must reference this paragraph (b), are to be
mailed to: Licensing Division, Office of Foreign Assets Control, U.S.
Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex,
Washington, DC 20220; and

Note to paragraph (b)(5) of Sec. 597.513: U.S. persons who
receive payments in connection with legal services specified in
Sec. 597.505 do not need to obtain specific authorization to make
payments through a U.S. financial institution for related services
that are ordinarily incident to the provision of those legal
services, such as those provided by private investigators or expert
witnesses.

(6) Nothing in this paragraph (b) authorizes the formation or
debiting of legal defense funds in connection with the provision of
legal services not specified in Sec. 597.505.

Note 1 to paragraph (b) of Sec. 597.513: Any payment authorized
in or pursuant to this paragraph that is routed through the U.S.
financial system should reference this paragraph (b) to avoid the
blocking of the transfer.

Note 2 to paragraph (b) of Sec. 597.513: Any funds remaining in
a legal defense fund account after all payments of professional fees
and reimbursement of incurred expenses authorized pursuant to this
paragraph have been made or upon termination of the legal services
for which payment is authorized pursuant to this paragraph are
deemed to be funds of the foreign terrorist organization or agent
thereof to or on whose behalf the legal services were rendered and
subject to the prohibitions of this part. U.S. financial
institutions in the possession or control of such remaining funds
may apply for the unblocking of the funds by following the
procedures set forth at Sec. 501.801 of this chapter.

[[Page 75911]]

Dated: December 1, 2010.
Adam J. Szubin,
Director, Office of Foreign Assets Control.
[FR Doc. 2010-30520 Filed 12-6-10; 8:45 am]
BILLING CODE 4810-AL-P