Iranian Financial Sanctions Regulations

Summary

The Department of the Treasury's Office of Foreign Assets Control (``OFAC'') is promulgating the Iranian Financial Sanctions Regulations, to implement provisions of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, which require the Secretary of the Treasury to prescribe certain regulations. These regulations also implement other related provisions of the aforementioned legislation.

Full text

SUMMARY: The Department of the Treasury's Office of Foreign Assets 
Control (``OFAC'') is promulgating the Iranian Financial Sanctions 
Regulations, to implement provisions of the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act of 2010, which require 
the Secretary of the Treasury to prescribe certain regulations. These 
regulations also implement other related provisions of the 
aforementioned legislation.

DATES: Effective date: August 16, 2010.
    Comment date: You may submit comments on or before October 15, 
2010.

ADDRESSES: These regulations are not subject to the provisions of 
Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 
553) that require notice of proposed rulemaking, opportunity for public 
participation, and a delayed effective date. Nevertheless, OFAC 
welcomes the submission of comments on this final rule. Please note 
that the submission of comments will not affect the final rule's 
effective date, nor will OFAC be required to respond to the comments 
submitted or to amend or republish this final rule. You may submit 
comments by any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov.
    Follow the instructions for submitting comments.
    Fax: Attn: Request for Comments (Iranian Financial Sanctions 
Regulations) Office of Prgm Policy & Implementation, 202/622-1657.
    Mail: Attn: Request for Comments (Iranian Financial Sanctions 
Regulations): Office of Prgm Policy & Implementation, Office of Foreign 
Assets Control, Department of the Treasury, 1500 Pennsylvania Avenue, 
NW., Washington, DC 20220.
    Instructions: All submissions received must be in writing and 
include the agency name and the Federal Register Doc. Number that 
appears at the end of this document. OFAC will not accept comments 
accompanied by a request that all or a part of the submission be 
treated confidentially because of its business proprietary nature or 
for any other reason. Comments received will be made available to the 
public via regulations.gov or upon request, without change and 
including any personal information provided.

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

    On July 1, 2010, the President signed into law the Comprehensive 
Iran Sanctions, Accountability, and Divestment Act of 2010 (Pub. L. 
111-195) (``CISADA''). In signing CISADA, the President stated that 
this act builds upon the recently adopted United Nations Security 
Council Resolution (``UNSCR'') 1929 (2010) and its strong foundation 
for new multilateral sanctions and provides a powerful tool against 
Iran's development of nuclear weapons and support of terrorism. The 
President pointed out that the Government of Iran, for years, has 
violated its commitments under the NPT and defied United Nations 
Security Council resolutions calling on Iran to cease its 
proliferation-related activities and imposing sanctions for Iran's 
failure to do so.
    The President went on to describe UNSCR 1929 as providing the 
toughest and most comprehensive multilateral sanctions against the Government of 
Iran to date. UNSCR 1929, among other things, calls upon States to 
prohibit in their territories the opening of new branches, 
subsidiaries, or representative offices of Iranian banks; to prohibit 
Iranian banks from establishing or maintaining correspondent 
relationships with banks in their jurisdiction; and to prevent the 
provision of financial services, including insurance or re-insurance, 
if they have reasonable grounds to believe that these activities could 
contribute to Iran's proliferation-sensitive nuclear activities or the 
development of nuclear weapon delivery systems. CISADA builds upon 
UNSCR 1929 by strengthening existing sanctions under the Iran Sanctions 
Act of 1996 (Pub. L. 104-172, 50 U.S.C. 1701 note) and adding new 
mandatory sanctions on foreign financial institutions that facilitate 
Iran's proliferation-related activities or support for terrorism or 
that do significant business with Iran's Islamic Revolutionary Guard 
Corps (``IRGC'') or certain other blocked persons.
    Specifically, section 104(c) of CISADA requires the Secretary of 
the Treasury, not later than 90 days after the date of CISADA's 
enactment, to prescribe regulations to prohibit, or impose strict 
conditions on, the opening or maintaining in the United States of a 
correspondent account or a payable-through account for a foreign 
financial institution that the Secretary finds knowingly: (1) 
Facilitates the efforts of the Government of Iran, including the IRGC 
or its agents or affiliates, to acquire or develop weapons of mass 
destruction (``WMD'') or delivery systems for WMD or to provide support 
for foreign terrorist organizations or acts of international terrorism; 
(2) facilitates the activities of a person subject to financial 
sanctions pursuant to UNSCRs 1737 (2006), 1747 (2007), 1803 (2008), or 
1929 (2010), or any other resolution adopted by the Security Council 
that imposes sanctions with respect to Iran; (3) engages in money 
laundering to carry out an activity described in (1) or (2); (4) 
facilitates efforts by the Central Bank of Iran or any other Iranian 
financial institution to carry out an activity described in (1) or (2); 
or (5) facilitates a significant transaction or transactions or 
provides significant financial services for (i) the IRGC or any of its 
agents or affiliates whose property and interests in property are 
blocked pursuant to the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.) (``IEEPA''), or (ii) a financial institution whose 
property and interests in property are blocked pursuant to IEEPA in 
connection with Iran's proliferation of WMD or delivery systems for 
WMD, or Iran's support for international terrorism. Section 104(c) of 
CISADA further states that the civil and criminal penalties provided 
for in IEEPA shall apply to a person that violates the regulations 
prescribed under that section.
    Section 104(d) of CISADA requires the Secretary of the Treasury, 
not later than 90 days after the date of CISADA's enactment, to 
prescribe regulations to prohibit any person owned or controlled by a 
U.S. financial institution from knowingly engaging in transactions with 
or benefitting the IRGC or any of its agents or affiliates whose 
property or interests in property are blocked pursuant to IEEPA. 
Section 104(d) further states that the civil penalties provided for in 
IEEPA shall apply to a U.S. financial institution if a person owned or 
controlled by the U.S. financial institution violates the regulations 
prescribed under that section and the U.S. financial institution knew 
or should have known of that violation.
    Section 104(h) of CISADA requires the Secretary of the Treasury to 
consult with the Secretary of State in implementing sections 104(c) and 
104(d) of CISADA and the regulations prescribed under these 
subsections. Pursuant to section 104(h) of CISADA, the Secretary of the 
Treasury also may consult in his sole discretion with such other 
agencies and departments and such other interested parties as the 
Secretary considers appropriate.
    To implement these provisions of CISADA, OFAC is promulgating the 
Iranian Financial Sanctions Regulations, 31 CFR part 561 (the 
``Regulations'').
    Section 561.101 of the Regulations clarifies the relation of this 
part to other laws and regulations. Section 561.201 of the Regulations 
implements subsection 104(c) of CISADA, while Sec.  561.202 of the 
Regulations implements subsection 104(d) of CISADA. The names of 
foreign financial institutions that are found by the Secretary of the 
Treasury to knowingly engage in the activities described in Sec.  
561.201(a) of the Regulations, and for which U.S. financial 
institutions may not open or maintain correspondent accounts or 
payable-through accounts in the United States, will be published in the 
Federal Register and listed in appendix A to part 561.
    Subpart C of the Regulations defines key terms used throughout the 
Regulations, and subpart D contains interpretive sections regarding the 
Regulations. Section 561.404 of subpart D of the Regulations sets forth 
the types of factors that, as a general matter, the Secretary of the 
Treasury will consider in determining, for purposes of paragraph (a)(5) 
of Sec.  561.201, whether transactions or financial services are 
significant. Subpart E of the Regulations contains certain licensing 
provisions, including a general license in Sec.  561.504 authorizing 
transactions related to winding down and closing a correspondent 
account or a payable-through account.
    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 G also refers 
to appendix A of part 501 for a more complete description of these 
procedures.
    Subpart H of the Regulations refers to subpart E of part 501 for 
applicable provisions relating to administrative procedures and 
contains a delegation of authority by the Secretary of the Treasury. 
Subpart I of the Regulations sets forth a Paperwork Reduction Act 
notice.

Public Participation

    Because the Regulations involve a foreign affairs function, the 
provisions of Executive Order 12866 and the Administrative Procedure 
Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity 
for public participation, and delay in effective date are inapplicable. 
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, 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 in 31 CFR Part 561

    Administrative practice and procedure, Banks, Banking, Brokers, 
Foreign Trade, Investments, Loans, Securities, Iran. 0
For the reasons set forth in the preamble, the Department of the 
Treasury's Office of Foreign Assets Control adds part 561 to 31 CFR 
chapter V to read as follows:

PART 561--IRANIAN FINANCIAL SANCTIONS REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations
Sec.
561.101 Relation of this part to other laws and regulations.
Subpart B--Prohibitions
561.201 Prohibitions with respect to correspondent accounts or 
payable-through accounts of certain foreign financial institutions.
561.202 Prohibitions on persons owned or controlled by U.S. 
financial institutions.
Subpart C--General Definitions
561.301 Effective date.
561.302 UNSC Resolution 1737.
561.303 UNSC Resolution 1747.
561.304 UNSC Resolution 1803.
561.305 UNSC Resolution 1929.
561.306 Correspondent account.
561.307 Payable-through account.
561.308 Foreign financial institution.
561.309 U.S. financial institution.
561.310 Money laundering.
561.311 Agent.
561.312 Act of international terrorism.
561.313 Financial services.
561.314 Knowingly.
561.315 Person.
561.316 Entity.
561.317 Money service businesses.
Subpart D--Interpretations
561.401 Reference to amended sections.
561.402 Effect of amendment.
561.403 Facilitation of certain efforts, activities, or transactions 
by foreign financial institutions.
561.404 Significant transaction or transactions; significant 
financial services.
561.405 Entities owned by a person whose property and interests in 
property are blocked.
Subpart E--Licenses, Authorizations, and Statements of Licensing Policy
561.501 General and specific licensing procedures.
561.502 Effect of license or authorization.
561.503 Exclusion from licenses.
561.504 Transactions related to closing a correspondent account or 
payable-through account.
Subpart F--Reports
561.601 Records and reports.
Subpart G--Penalties
561.701 Penalties.
561.702 Pre-Penalty Notice; settlement.
561.703 Penalty imposition.
561.704 Administrative collection; referral to United States 
Department of Justice.
Subpart H--Procedures
561.801 Procedures.
561.802 Delegation by the Secretary of the Treasury.
561.803 Consultations.
Subpart I--Paperwork Reduction Act
561.901 Paperwork Reduction Act notice.
Appendix A to Part 561--[Reserved]

    Authority:  3 U.S.C. 301; 31 U.S.C. 321(b); Pub. L. 101-410, 104 
Stat. 890 (28 U.S.C. 2461 note); Pub. L. 111-195, 124 Stat. 1312.

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


Sec.  561.101  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 or the conditions imposed pursuant to 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.  561.201  Prohibitions or strict conditions with respect to 
correspondent accounts or payable-through accounts of certain foreign 
financial institutions identified by the Secretary of the Treasury.

    Upon a finding by the Secretary of the Treasury that a foreign 
financial institution knowingly engages in one or more of the 
activities described in paragraphs (a)(1) through (a)(5) of this 
section, consistent with the Secretary of the Treasury's authorities 
under the Comprehensive Iran Sanctions, Accountability, and Divestment 
Act of 2010 (Pub. L. 111-195), either the Secretary of the Treasury 
will issue an order or regulation imposing one or more strict 
conditions, as set forth in paragraph (b) of this section, on the 
opening or maintaining of a correspondent account or a payable-through 
account in the United States for that foreign financial institution, 
or, as set forth in paragraph (c) of this section, the name of that 
foreign financial institution will be added to Appendix A to this part, 
and a U.S. financial institution shall be prohibited from opening or 
maintaining a correspondent account or a payable-through account in the 
United States for that foreign financial institution.
    (a) A foreign financial institution engages in an activity 
described in this paragraph if, in any location or currency, the 
foreign financial institution knowingly:
    (1) Facilitates the efforts of the Government of Iran (including 
efforts of Iran's Islamic Revolutionary Guard Corps or any of its 
agents or affiliates)--
    (i) To acquire or develop weapons of mass destruction or delivery 
systems for weapons of mass destruction; or
    (ii) To provide support for organizations designated as foreign 
terrorist organizations under section 219(a) of the Immigration and 
Nationality Act (8 USC 1189(a)) or support for acts of international 
terrorism, as defined in section 561.312 of this part;
    (2) Facilitates the activities of a person subject to financial 
sanctions pursuant to United Nations Security Council Resolutions 1737, 
1747, 1803, or 1929, or any other resolution adopted by the Security 
Council that imposes sanctions with respect to Iran;

    Note to paragraph (a)(2) of Sec.  561.201:  Persons subject to 
financial sanctions pursuant to the United Nations Security Council 
resolutions listed in paragraph (a)(2) of Sec.  561.201 include 
individuals and entities listed in the Annex to UNSC Resolution 
1737, Annex I of UNSC Resolution 1747, Annexes I and III of UNSC 
Resolution 1803, and Annexes I, II, and III of UNSC Resolution 1929; 
and individuals and entities designated by the Security Council or 
by the Committee established pursuant to UNSC Resolution 1737 (the 
``Committee'') as being engaged in, directly associated with or 
providing support for Iran's proliferation sensitive nuclear 
activities, or the development of nuclear weapon delivery systems; 
and individuals and entities acting on behalf of or at the direction 
of those so listed or designated; and entities owned or controlled 
by those so listed or designated; and individuals and entities 
determined by the Security Council or the Committee to have assisted 
listed or designated individuals or entities in evading sanctions 
of, or in violating the provisions of, UNSC Resolutions 1737, 1747, 
1803, or 1929.

    (3) Engages in money laundering to carry out an activity described 
in paragraphs (a)(1) or (a)(2) of this section;
    (4) Facilitates efforts by the Central Bank of Iran or any other 
Iranian financial institution to carry out an activity described in 
paragraphs (a)(1) or (a)(2) of this section; or (5) Facilitates a significant transaction or transactions or 
provides significant financial services for--
    (i) Iran's Islamic Revolutionary Guard Corps or any of its agents 
or affiliates whose property and interests in property are blocked 
pursuant to the International Emergency Economic Powers Act (50 USC 
1701 et seq.); or
    (ii) A financial institution whose property and interests in 
property are blocked pursuant to parts 544 or 594 of this chapter in 
connection with Iran's proliferation of weapons of mass destruction or 
delivery systems for weapons of mass destruction or Iran's support for 
international terrorism.

    Note to paragraph (a)(5) of Sec.  561.201:  The names of persons 
whose property and interests in property are blocked pursuant to the 
International Emergency Economic Powers Act (50 USC 1701 et seq.) 
are published on the Office of Foreign Assets Control's Specially 
Designated Nationals and Blocked Persons List (``SDN'' list) (which 
is accessible via the Office of Foreign Assets Control's Web site), 
published in the Federal Register, and incorporated into Appendix A 
to this chapter. Agents or affiliates of Iran's Islamic 
Revolutionary Guard Corps (``IRGC'') whose property and interests in 
property are blocked pursuant to the International Emergency 
Economic Powers Act are identified by a special reference to the 
``IRGC'' at the end of their entries on the SDN list, in addition to 
the reference to the regulatory part of this chapter pursuant to 
which their property and interests in property are blocked. For 
example, an affiliate of the IRGC whose property and interests in 
property are blocked pursuant to the Weapons of Mass Destruction 
Proliferators Sanctions Regulations, 31 CFR part 544, will have the 
tag ``[NPWMD][IRGC]'' at the end of its entry on the SDN list. 
Financial institutions whose property and interests in property are 
blocked pursuant to parts 544 or 594 of this chapter in connection 
with Iran's proliferation of weapons of mass destruction or delivery 
systems for weapons of mass destruction or Iran's support for 
international terrorism also are identified by tags which reference 
this part in addition to part 544 or part 594, as the case may be, 
located at the end of their entries on the SDN list (e.g., 
[NPWMD][IFSR] or [SDGT][IFSR]). OFAC's electronic SDN list can be 
found at the following URL: http://www.treas.gov/offices/enforcement/ofac/sdn/sdnlist.txt. In addition, see Sec.  561.405 
concerning entities that may not be listed on the SDN list but whose 
property and interests in property are nevertheless blocked.

    (b) The Secretary of the Treasury by order or regulation may impose 
one or more strict conditions on the opening or maintaining by a U.S. 
financial institution of a correspondent account or a payable-through 
account in the United States for a foreign financial institution that 
the Secretary finds engages in one or more of the activities described 
in paragraph (a) of this section. The prohibition in paragraph (c) of 
this section on the opening or maintaining of a correspondent account 
or a payable-through account in the United States for a foreign 
financial institution shall not apply if the Secretary of the Treasury 
has imposed one or more strict conditions pursuant to this paragraph on 
the opening or maintaining of a correspondent account or payable-
through account for that foreign financial institution, and such 
condition or conditions remain in effect. Such conditions may include, 
but are not limited to, the following:
    (1) Prohibiting any provision of trade finance through the 
correspondent account or payable-through account of the foreign 
financial institution;
    (2) Restricting the transactions that may be processed through the 
correspondent account or payable-through account of the foreign 
financial institution to certain types of transactions, such as 
personal remittances;
    (3) Placing monetary limits on the transactions that may be 
processed through the correspondent account or payable-through account 
of the foreign financial institution; or
    (4) Requiring pre-approval from the U.S. financial institution for 
all transactions processed through the correspondent account or 
payable-through account of the foreign financial institution.

    Note to paragraph (b) of Sec.  561.201:  The actual condition(s) 
to be imposed will be specified upon the identification of the 
foreign financial institution in the order or regulation issued by 
the Secretary of the Treasury.

    (c) Except to the extent paragraph (b) of this section applies, and 
except as otherwise authorized pursuant to this part, a U.S. financial 
institution shall not open or maintain a correspondent account or a 
payable-through account in the United States for a foreign financial 
institution that the Secretary of the Treasury finds engages in one or 
more of the activities described in paragraph (a) of this section. The 
names of foreign financial institutions that are found by the Secretary 
of the Treasury to engage in one or more of the activities described in 
paragraph (a) of this section, and for which U.S. financial 
institutions may not open or maintain correspondent accounts or 
payable-through accounts as provided in this paragraph, will be listed 
in Appendix A to this part.


Sec.  561.202   Prohibitions on persons owned or controlled by U.S. 
financial institutions.

    Except as otherwise authorized pursuant to this part, any person 
that is owned or controlled by a U.S. financial institution is 
prohibited from knowingly engaging in any transaction with or 
benefitting Iran's Islamic Revolutionary Guard Corps or any of its 
agents or affiliates whose property and interests in property are 
blocked pursuant to the International Emergency Economic Powers Act (50 
USC 1701 et seq.).

    Note 1 to Sec.  561.202:  The names of persons whose property 
and interests in property are blocked pursuant to the International 
Emergency Economic Powers Act (50 USC 1701 et seq.) are published on 
the Office of Foreign Assets Control's Specially Designated 
Nationals and Blocked Persons List (``SDN'' list) (which is 
accessible via the Office of Foreign Assets Control's Web site), 
published in the Federal Register, and incorporated into Appendix A 
to this chapter. Agents or affiliates of Iran's Islamic 
Revolutionary Guard Corps (``IRGC'') whose property and interests in 
property are blocked pursuant to the International Emergency 
Economic Powers Act (50 USC 1701 et seq.) are identified by a 
special reference to the ``IRGC'' at the end of their entries on the 
SDN list, in addition to the reference to the regulatory part of 
this chapter pursuant to which their property and interests in 
property are blocked. For example, an affiliate of the IRGC whose 
property and interests in property are blocked pursuant to the 
Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 
CFR part 544, will have the tag ``[NPWMD][IRGC]'' at the end of its 
entry on the SDN list. OFAC's electronic SDN list can be found at 
the following URL: http://www.treas.gov/offices/enforcement/ofac/sdn/sdnlist.txt. In addition, see Sec.  561.405 concerning entities 
that may not be listed on the SDN list but whose property and 
interests in property are nevertheless blocked.


    Note 2 to Sec.  561.202:  A U.S. financial institution is 
subject to the civil penalties provided for in section 206(b) of the 
International Emergency Economic Powers Act (50 U.S.C. 1705(b)) if 
any person that it owns or controls violates the prohibition set 
forth in this section and the U.S. financial institution knew or 
should have known of such violation. See Sec.  561.701(a)(2).

Subpart C-General Definitions


Sec.  561.301  Effective date.

    (a) The effective date of a prohibition or condition imposed 
pursuant to Sec.  561.201 on the opening or maintaining of a 
correspondent account or a payable-through account in the United States 
by a U.S. financial institution for a particular foreign financial 
institution is the earlier of the date the U.S. financial institution 
receives actual or constructive notice of such prohibition or 
condition. (b) The effective date of the prohibition contained in Sec.  
561.202 with respect to Iran's Islamic Revolutionary Guard Corps and 
any of its agents or affiliates whose property and interests in 
property are blocked as of August 16, 2010 is August 16, 2010;
    (c) The effective date of the prohibition contained in Sec.  
561.202 with respect to an agent or affiliate of Iran's Islamic 
Revolutionary Guard Corps whose property and interests in property 
become blocked after August 16, 2010 is the earlier of the date of 
actual or constructive notice that such person's property and interests 
in property are blocked.


Sec.  561.302  UNSC Resolution 1737.

    The term UNSC Resolution 1737 means United Nations Security Council 
Resolution 1737, adopted December 23, 2006.


Sec.  561.303  UNSC Resolution 1747.

    The term UNSC Resolution 1747 means United Nations Security Council 
Resolution 1747, adopted March 24, 2007.


Sec.  561.304   UNSC Resolution 1803.

    The term UNSC Resolution 1803 means United Nations Security Council 
Resolution 1803, adopted March 3, 2008.


Sec.  561.305  UNSC Resolution 1929.

    The term UNSC Resolution 1929 means United Nations Security Council 
Resolution 1929, adopted June 9, 2010.


Sec.  561.306  Correspondent account.

    For purposes of this part, the term correspondent account means an 
account established by a U.S. financial institution for a foreign 
financial institution to receive deposits from, or to make payments on 
behalf of, the foreign financial institution, or to handle other 
financial transactions related to such foreign financial institution.


Sec.  561.307  Payable-through account.

    For purposes of this part, the term payable-through account means a 
correspondent account maintained by a U.S. financial institution for a 
foreign financial institution by means of which the foreign financial 
institution permits its customers to engage, either directly or through 
a subaccount, in banking activities usual in connection with the 
business of banking in the United States.


Sec.  561.308  Foreign financial institution.

    For purposes of this part, the term foreign financial institution 
means any foreign entity 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. It includes but is not limited to 
depository institutions, banks, savings banks, money service 
businesses, 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 holding 
companies, affiliates, or subsidiaries of any of the foregoing. The 
term does not include the international financial institutions 
identified in 22 U.S.C. 262r(c)(2), the International Fund for 
Agricultural Development, or the North American Development Bank.


Sec.  561.309  U.S. financial institution.

    For purposes of this part, the term U.S. financial institution 
means any U.S. entity 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. It includes but is not limited to 
depository institutions, banks, savings banks, money service 
businesses, trust companies, insurance 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.  561.310  Money laundering.

    For purposes of this part, the term money laundering means engaging 
in deceptive practices to obscure the nature of transactions involving 
the movement of illicit cash or illicit cash equivalent proceeds into, 
out of, or through a country, or into, out of, or through a financial 
institution, such that the transactions are made to appear legitimate.


Sec.  561.311  Agent.

    For purposes of this part, the term agent includes an entity 
established by a person for purposes of conducting transactions on 
behalf of the person in order to conceal the identity of the person.


Sec.  561.312  Act of international terrorism.

    For purposes of this part, the term act of international terrorism 
has the same definition as that provided under section 14 of the Iran 
Sanctions Act of 1996 (50 U.S.C. 1701 note). As of the date of 
publication in the Federal Register of the final rule adding this part 
to 31 CFR chapter V, August 16, 2010, the term act of international 
terrorism means an act which is violent or dangerous to human life and 
that is a violation of the criminal laws of the United States or of any 
state or that would be a criminal violation if committed within the 
jurisdiction of the United States or any state and which appears to be 
intended to intimidate or coerce a civilian population; to influence 
the policy of a government by intimidation or coercion; or to affect 
the conduct of a government by assassination or kidnapping.


Sec.  561.313  Financial services.

    For purposes of paragraph (a)(5) of Sec.  561.201, the term 
financial services includes loans, transfers, accounts, insurance, 
investments, securities, guarantees, foreign exchange, letters of 
credit, and commodity futures or options.


Sec.  561.314  Knowingly.

    For purposes of this part, the term knowingly, with respect to 
conduct, a circumstance, or a result, means that a person has actual 
knowledge, or should have known, of the conduct, the circumstance, or 
the result.


Sec.  561.315  Person.

    The term person means an individual or entity.


Sec.  561.316  Entity.

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


Sec.  561.317  Money service businesses.

    For purposes of this part, the term money service businesses means 
any agent, agency, branch, or office of any person doing business, 
whether or not on a regular basis or as an organized business concern, 
in one or more of the capacities listed in 31 CFR 103.11(uu)(1) through 
(uu)(5). The term does not include a bank or a person registered with, 
and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission.

Subpart D--Interpretations


Sec.  561.401  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, directive, or license issued pursuant to this part refers 
to the same as currently amended.


Sec.  561.402  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 the Office of Foreign Assets Control does not affect 
any act done or omitted, or any civil or criminal 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.  561.403  Facilitation of certain efforts, activities, or 
transactions by foreign financial institutions.

    For purposes of Sec.  561.201, the term facilitate used with 
respect to certain efforts, activities, or transactions refers to the 
provision of assistance by a foreign financial institution for those 
efforts, activities, or transactions, including, but not limited to, 
the provision of currency, financial instruments, securities, or any 
other transmission of value; purchasing; selling; transporting; 
swapping; brokering; financing; approving; guaranteeing; or the 
provision of other services of any kind; or the provision of personnel; 
or the provision of software, technology, or goods of any kind.


Sec.  561.404  Significant transaction or transactions; significant 
financial services.

    In determining, for purposes of paragraph (a)(5) of Sec.  561.201, 
whether a transaction is significant, whether transactions are 
significant, or whether financial services are significant, the 
Secretary of the Treasury may consider the totality of the facts and 
circumstances. As a general matter, the Secretary may consider some or 
all of the following factors:
    (a) Size, Number, and Frequency: The size, number, and frequency of 
transactions or financial services performed over a period of time, 
including whether the transactions or financial services are increasing 
or decreasing over time and the rate of increase or decrease.
    (b) Nature: The nature of the transaction(s) or financial services, 
including the type, complexity, and commercial purpose of the 
transaction(s) or financial services.
    (c) Level of Awareness; Pattern of Conduct:
    (1) Whether the transaction(s) or financial service(s) are 
performed with the involvement or approval of management or only by 
clerical personnel; and
    (2) Whether the transaction(s) or financial services are part of a 
pattern of conduct or the result of a business development strategy.
    (d) Nexus: The proximity between the party to the transaction or 
transactions or the provider of the financial services and a blocked 
person described in paragraph (a)(5)(i) or (ii) of Sec.  561.201. For 
example, a transaction or financial service in which a foreign 
financial institution provides brokerage or clearing services to such a 
blocked person in a direct customer relationship generally would be of 
greater significance than a transaction or financial service a foreign 
financial institution provides to such a blocked person in an indirect 
or tertiary relationship.
    (e) Impact: The impact of the transaction(s) or financial services 
on the objectives of the Comprehensive Iran Sanctions, Accountability, 
and Divestment Act of 2010, including:
    (1) The economic or other benefit conferred or attempted to be 
conferred on a blocked person described in paragraph (a)(5)(i) or (ii) 
of Sec.  561.201;
    (2) Whether and how the transaction(s) or financial services 
contribute to the proliferation of weapons of mass destruction or 
delivery systems for such weapons, to support for international 
terrorism, or to the suppression of human rights; and
    (3) Whether the transaction(s) or financial services support 
humanitarian activity or involve the payment of basic expenses as 
specified in and authorized pursuant to UNSC Resolution 1737 or the 
payment of extraordinary expenses that have been authorized by the 
Sanctions Committee established pursuant to UNSC Resolution 1737.
    (f) Deceptive Practices: Whether the transaction(s) or financial 
services involve an attempt to obscure or conceal the actual parties or 
true nature of the transaction(s) or financial service(s).
    (g) Other Relevant Factors: Such other factors that the Secretary 
deems relevant on a case-by-case basis in determining the significance 
of a transaction, transactions, or financial services.


Sec.  561.405  Entities owned by a person whose property and interests 
in property are blocked.

    A person whose property and interests in property are blocked 
pursuant to the International Emergency Economic Powers Act (50 U.S.C. 
1701 et seq.) has an interest in all property and interests in property 
of an entity in which it owns, directly or indirectly, a 50 percent or 
greater interest. The property and interests in property of such an 
entity, therefore, are blocked, and such an entity is a person whose 
property and interests in property are blocked pursuant to the 
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), 
regardless of whether the entity itself is listed in Appendix A to this 
chapter.

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


Sec.  561.501  General and specific licensing procedures.

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


Sec.  561.502  Effect of license or authorization.

    (a) No license or other authorization contained in this part, or 
otherwise issued by the Office of Foreign Assets Control, authorizes or 
validates any transaction effected prior to the issuance of such 
license or other authorization, 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 other part of this chapter 
unless the regulation, ruling, instruction, or license specifically 
refers to such part.
    (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.  561.503  Exclusion from licenses.

    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 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 actual or constructive notice of 
the exclusions or restrictions.


Sec.  561.504  Transactions related to closing a correspondent account 
or payable-through account.

    (a) During the 10-day period beginning on the effective date of the 
prohibition in Sec.  561.201(c) on the opening or maintaining of a 
correspondent account or a payable-through account for a foreign 
financial institution listed in Appendix A to this part, U.S. financial 
institutions that maintain correspondent accounts or payable-through 
accounts for the foreign financial institution are authorized to:
    (1) Process only those transactions through the account, or permit 
the foreign financial institution to execute only those transactions 
through the account, that are for the purpose of, and necessary for, 
closing the account; and
    (2) Transfer the funds remaining in the correspondent account or 
the payable-through account to an account of the foreign financial 
institution located outside of the United States and close the 
correspondent account or the payable-through account.
    (b) Specific licenses may be issued on a case-by-case basis to 
authorize transactions by a U.S. financial institution with respect to 
a correspondent account or a payable-through account maintained by the 
U.S. financial institution for a foreign financial institution listed 
in Appendix A to this part that are outside the scope of the 
transactions authorized in paragraph (a) of this section and/or that 
occur beyond the [10-day] period authorized in that paragraph.
    (c) Nothing in this section authorizes the opening of a 
correspondent account or payable-through account for a foreign 
financial institution listed in Appendix A to this part.

    Note to Sec.  561.504:  This section does not authorize a U.S. 
financial institution to unblock property or interests in property, 
or to engage in any transaction or dealing in property or interests 
in property, blocked pursuant to any other part of this chapter in 
the process of closing a correspondent account or a payable-through 
account for a foreign financial institution listed in Appendix A to 
this part. See Sec.  561.101.

Subpart F--Reports


Sec.  561.601  Records and reports.

    For provisions relating to required records and reports, see part 
501, subpart C, of this chapter.

Subpart G--Penalties


Sec.  561.701  Penalties.

    (a) Civil Penalties. (1) As set forth in section 104(c) of the 
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 
2010 (Pub. L. 111-195) (``CISADA''), a civil penalty not to exceed the 
amount set forth in section 206(b) of the International Emergency 
Economic Powers Act (``IEEPA'')(50 U.S.C. 1705(b)) may be imposed on 
any person who violates, attempts to violate, conspires to violate, or 
causes a violation of any order or regulation issued pursuant to Sec.  
561.201(b) or of the prohibition in Sec.  561.201(c) or of any license 
set forth in or issued pursuant to this part concerning such order, 
regulation, or prohibition.
    (2) As set forth in section 104(d) of CISADA, a civil penalty not 
to exceed the amount set forth in section 206(b) of IEEPA may be 
imposed on a U.S. financial institution if:
    (i) A person owned or controlled by the U.S. financial institution 
violates, attempts to violate, conspires to violate, or causes a 
violation of the prohibition in Sec.  561.202 or of any order, 
regulation, or license set forth in or issued pursuant to this part 
concerning such prohibition; and
    (ii) The U.S. financial institution knew or should have known that 
the person violated, attempted to violate, conspired to violate, or 
caused a violation of such prohibition.

    Note to paragraph (a) of Sec.  561.701:  As of the date of 
publication in the Federal Register of the final rule adding this 
part to 31 CFR chapter V, August 16, 2010, IEEPA provides for a 
maximum civil penalty not to exceed the greater of $250,000 or an 
amount that is twice the amount of the transaction that is the basis 
of the violation with respect to which the penalty is imposed.

    (b) Criminal Penalty. As set forth in section 104(c) of CISADA, a 
person who willfully commits, willfully attempts to commit, or 
willfully conspires to commit, or aids or abets in the commission of a 
violation of any order or regulation issued pursuant to Sec.  
561.201(b) or of the prohibition in Sec.  561.201(c) shall, upon 
conviction, be fined not more than $1,000,000, or if a natural person, 
be imprisoned for not more than 20 years, or both.
    (c) Adjustments to penalty amounts. (1) The civil penalties 
provided in IEEPA are subject to adjustment pursuant to the Federal 
Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as 
amended, 28 U.S.C. 2461 note).
    (2) The criminal penalties provided in IEEPA are subject to 
adjustment 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; 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, imprisoned, or both.
    (e) Violations of this part may also be subject to relevant 
provisions of other applicable laws.


Sec.  561.702  Pre-Penalty Notice; settlement.

    (a) When required. If the Office of Foreign Assets Control has 
reason to believe that there has occurred a violation of any provision 
of this part or a violation of the provisions of any license, ruling, 
regulation, order, direction, or instruction issued by or pursuant to 
the direction or authorization of the Secretary of the Treasury 
pursuant to this part or otherwise under IEEPA and determines that a 
civil monetary penalty may be warranted, the Office of Foreign Assets 
Control may issue a Pre-Penalty Notice informing the alleged violator 
of the agency's intent to impose a monetary penalty. A Pre-Penalty 
Notice shall be in writing. The Pre-Penalty Notice may be issued 
whether or not another agency has taken any action with respect to the 
matter. For a description of the contents of a Pre-Penalty Notice, see 
Appendix A to part 501 of this chapter.
    (b)(1) Right to respond. An alleged violator has the right to 
respond to a Pre-Penalty Notice by making a written presentation to the 
Office of Foreign Assets Control. For a description of the information 
that should be included in such a response, see Appendix A to part 501 
of this chapter.
    (2) Deadline for response. A response to a Pre-Penalty Notice must 
be made within 30 days of the date of service of the Pre-Penalty Notice. The failure to submit a response within the 
applicable time period set forth in this paragraph (b) shall be deemed 
to be a waiver of the right to respond.
    (i) Computation of time for response. A response to a Pre-Penalty 
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 the Office of Foreign Assets Control by 
courier) on or before the 30th day after the postmark date on the 
envelope in which the Pre-Penalty Notice was mailed. If the Pre-Penalty 
Notice was personally delivered by a non-U.S. Postal Service agent 
authorized by the Office of Foreign Assets Control, a response must be 
postmarked or date-stamped on or before the 30th day after the date of 
delivery.
    (ii) 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 discretion of the Office of Foreign Assets Control, only upon 
specific request to the Office of Foreign Assets Control.
    (3) Form and method of response. A response to a Pre-Penalty Notice 
need not be in any particular form, but it must be typewritten and 
signed by the alleged violator or a representative thereof, must 
contain information sufficient to indicate that it is in response to 
the Pre-Penalty Notice, and must include the Office of Foreign Assets 
Control identification number listed on the Pre-Penalty Notice. 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 Enforcement 
Penalties Division by mail or courier and must be postmarked or date-
stamped in accordance with paragraph (b)(2) of this section.
    (c) Settlement. Settlement discussion may be initiated by the 
Office of Foreign Assets Control, the alleged violator, or the alleged 
violator's authorized representative. For a description of practices 
with respect to settlement, see Appendix A to part 501 of this chapter.
    (d) Guidelines. Guidelines for the imposition or settlement of 
civil penalties by the Office of Foreign Assets Control are contained 
in Appendix A to part 501 of this chapter.
    (e) Representation. A representative of the alleged violator may 
act on behalf of the alleged violator, but any oral communication with 
the Office of Foreign Assets Control prior to a written submission 
regarding the specific allegations contained in the Pre-Penalty Notice 
must be preceded by a written letter of representation, unless the Pre-
Penalty Notice was served upon the alleged violator in care of the 
representative.


Sec.  561.703  Penalty imposition.

    If, after considering any timely written response to the Pre-
Penalty Notice and any relevant facts, the Office of Foreign Assets 
Control determines that there was a violation by the alleged violator 
named in the Pre-Penalty Notice and that a civil monetary penalty is 
appropriate, the Office of Foreign Assets Control may issue a Penalty 
Notice to the violator containing a determination of the violation and 
the imposition of the monetary penalty. For additional details 
concerning issuance of a Penalty Notice, see Appendix A to part 501 of 
this chapter. The issuance of the Penalty Notice shall constitute final 
agency action. The violator has the right to seek judicial review of 
that final agency action in federal district court.


Sec.  561.704  Administrative collection; referral to United States 
Department of Justice.

    In the event that the violator does not pay the penalty imposed 
pursuant to this part, 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 G--Procedures


Sec.  561.801  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 E, of this chapter.


Sec.  561.802  Delegation by the Secretary of the Treasury.

    Any action that the Secretary of the Treasury is authorized to take 
pursuant to section 104(c), (d), or (i) of the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act of 2010 (Pub. L. 111-
195), and any action of the Secretary of the Treasury described in this 
part, 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.


Sec.  561.803  Consultations.

    In implementing section 104 of the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act of 2010 (Pub. L. 111-195) and this 
part, the Secretary of the Treasury shall consult with the Secretary of 
State and may, in the sole discretion of the Secretary of the Treasury, 
consult with such other agencies and departments and such other 
interested parties as the Secretary considers appropriate.

Subpart I--Paperwork Reduction Act


Sec.  561.901  Paperwork Reduction Act notice.

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

Appendix A to Part 561--[Reserved]

    Dated: August 11, 2010.
John E. Smith,
Associate Director, Office of Foreign Assets Control.

    Approved: August 11, 2010.
Stuart A. Levey,
Under Secretary, Office of Terrorism and Financial Intelligence, 
Department of the Treasury.
[FR Doc. 2010-20238 Filed 8-13-10; 8:45 am]
BILLING CODE 4810-45-P  

References

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