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DEPARTMENT OF THE TREASURYOffice of Foreign Assets Control31 CFR Part 561Iranian Financial SanctionsRegulations
AGENCY
:
Office of Foreign AssetsControl, Treasury.
ACTION
:
Final rule.
SUMMARY
:
The Department of theTreasury’s Office of Foreign AssetsControl (‘‘OFAC’’) is amending theIranian Financial Sanctions Regulationsand reissuing them in their entirety, inorder to implement section 1245(d) of the National Defense Authorization Actfor Fiscal Year 2012, which provides forthe imposition of sanctions with respectto the Central Bank of Iran anddesignated Iranian financial institutions.
DATES
:
Effective Date:
February 27,2012.
FOR FURTHER INFORMATION CONTACT
:
Assistant Director for SanctionsCompliance & Evaluation, tel.: 202/622–2490, Assistant Director for Licensing,tel.: 202/622–2480, Assistant Directorfor 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 freenumbers).
SUPPLEMENTARY INFORMATION
:
Electronic and Facsimile Availability
This document and additionalinformation concerning OFAC areavailable from OFAC’s Web site(
).Certain generalinformation pertaining to OFAC’ssanctions programs also is available viafacsimile through a 24-hour fax-on-demand service, tel.: 202/622–0077.
Background
On July 1, 2010, the President signedinto law the Comprehensive IranSanctions, Accountability, andDivestment Act of 2010 (Pub. L. 111–195) (22 U.S.C. 8501–8551)(‘‘CISADA’’). Subsection 104(c) of CISADA required the Secretary of theTreasury, not later than 90 days after thedate of CISADA’s enactment, toprescribe regulations to prohibit, orimpose strict conditions on, the openingor maintaining in the United States of acorrespondent account or a payable-through account for a foreign financialinstitution that the Secretary findsknowingly engages in specifiedsanctionable activities, subject to certainwaiver authorities provided to theSecretary in subsection 104(f) of CISADA. Subsection 104(d) of CISADArequired the Secretary of the Treasury,not later than 90 days after the date of CISADA’s enactment, to prescriberegulations to prohibit any personowned or controlled by a U.S. financialinstitution from knowingly engaging intransactions with or benefitting Iran’sIslamic Revolutionary Guard Corps(‘‘IRGC’’) or any of its agents or affiliateswhose property and interests inproperty are blocked pursuant to theInternational Emergency EconomicPowers Act (50 U.S.C. 1701
et seq.
)(‘‘IEEPA’’). On August 16, 2010, theDepartment of the Treasury’s Office of Foreign Assets Control (‘‘OFAC’’)published the Iranian FinancialSanctions Regulations, 31 CFR Part 561(the ‘‘IFSR’’), to implement subsections104(c) and (d) and other relatedprovisions of CISADA (75 FR 49836).On September 28, 2010, the Presidentissued Executive Order 13553 (75 FR60567, October 1, 2010) (‘‘E.O. 13553’’),invoking the authority of,
inter alia
,IEEPA and CISADA, and in order to takeadditional steps with respect to thenational emergency declared inExecutive Order 12957 of March 15,1995, with respect to Iran.Section 8 of E.O. 13553 authorizes theSecretary of the Treasury, inconsultation with the Secretary of State,to take such actions, including thepromulgation of rules and regulations,and to employ all powers granted to thePresident by IEEPA, as may benecessary to carry out section 104 of CISADA. In addition, section 8 of E.O.13553 authorizes the Secretary of theTreasury to redelegate these functions toother officers and agencies of the UnitedStates Government consistent withapplicable law. E.O. 13553 therebyprovided IEEPA authority for the IFSR.On December 31, 2011, the Presidentsigned into law the National DefenseAuthorization Act for Fiscal Year 2012(Pub. L. 112–81) (‘‘NDAA’’). Section1245(d)(1) of the NDAA requires thePresident to prohibit the opening, andprohibit or impose strict conditions onthe maintaining, in the United States of a correspondent account or a payable-through account by a foreign financialinstitution that the President determineshas knowingly conducted or facilitatedany significant financial transactionwith the Central Bank of Iran or anotherIranian financial institution designated by the Secretary of the Treasurypursuant to IEEPA. Pursuant to section1245(d)(2), a foreign financialinstitution conducting or facilitating atransaction for the sale of food,medicine, or medical devices to Iranwill not be subject to sanctions underthe NDAA for such transactions.For a private foreign financialinstitution, section 1245(d)(1) of theNDAA calls for sanctions beginning 60days after the date of enactment of theNDAA for transactions other than thosefor the purchase of petroleum orpetroleum products from Iran. Fortransactions by a private foreignfinancial institution for the purchase of petroleum or petroleum products fromIran, section 1245(d)(4)(C) calls forsanctions pursuant to section 1245(d)(1) beginning 180 days after the date of enactment of the NDAA (or later, asfurther described below). For a foreignfinancial institution owned orcontrolled by the government of aforeign country, including the central bank of a foreign country, section1245(d)(3) calls for sanctions pursuantto section 1245(d)(1) beginning 180 daysafter the date of enactment of the NDAA(or later, as further described below) andonly for transactions for the sale orpurchase of petroleum or petroleumproducts to or from Iran.For all foreign financial institutions,section 1245(d)(4)(C) of the NDAAprovides that the sanctions in section1245(d)(1) shall apply for transactionsfor the purchase of petroleum orpetroleum products from Iran only if thePresident makes required periodicdeterminations that there is sufficientsupply of petroleum and petroleumproducts from countries other than Iranto permit a significant reduction in thevolume of petroleum and petroleumproducts purchased from Iran by orthrough foreign financial institutions.Section 1245(d)(4)(D) of the NDAAprovides for an exception to theimposition of sanctions on any foreignfinancial institution if the Presidentdetermines and periodically reports toCongress that the country with primaryjurisdiction over that foreign financialinstitution has significantly reduced itsvolume of crude oil purchases from Iranduring a specified period of timepreceding the report.Pursuant to section 1245(d)(5) of theNDAA, the President may waive theimposition of sanctions in section1245(d)(1) for a period of not more than120 days, and may renew that waiver foradditional periods of not more than 120days, provided the President determinesthat such a waiver is in the nationalsecurity interest of the United Statesand submits a report to Congressproviding justification for the waiverand that includes any concretecooperation that the President hasreceived or expects to receive as a resultof the waiver.Finally, section 1245(g) of the NDAAprovides that the President may exerciseall authorities under sections 203 and
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205 of IEEPA and may impose thepenalties provided in section 206(b) and(c) of IEEPA to implement and enforcesection 1245 of the NDAA.Section 1245(d) of the NDAA does notrepeal or amend section 104(c) of CISADA. Though section 1245(d) of theNDAA imposes sanctions on foreignfinancial institutions similar to thefinancial sanctions under CISADA andthe IFSR prior to this regulatoryamendment (i.e., prohibiting and/orimposing strict conditions on openingor maintaining correspondent accountsor payable-through accounts in theUnited States), there are differences inthe underlying financial transactionsthat serve as the trigger for theimposition of sanctions. Therefore,section 1245(d) of the NDAA andsection 104(c) of CISADA, asimplemented, respectively, by new§561.203 and by §561.201 of the IFSR,are separate from, and independent of,each other.On February 5, 2012, the President,invoking the authority of,
inter alia,
IEEPA and section 1245 of the NDAA,issued Executive Order 13599(‘‘Blocking Property of the Governmentof Iran and Iranian FinancialInstitutions’’) (‘‘E.O. 13599’’), in order totake additional steps with respect to thenational emergency declared inExecutive Order 12957 of March 15,1995, with respect to Iran, particularlyin light of the deceptive practices of theCentral Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies inIran’s anti-money laundering regimeand the weaknesses in itsimplementation, and the continuing andunacceptable risk posed to theinternational financial system by Iran’sactivities.Section 1 of E.O. 13599 blocks allproperty and interests in property thatare in the United States, that comewithin the United States, or that are orcome within the possession or control of any United States person, including anyoverseas branch, of the Government of Iran (including the Central Bank of Iran), any Iranian financial institution,and any person determined by theSecretary of the Treasury, inconsultation with the Secretary of State,to be owned or controlled by, or to haveacted or purported to act for or on behalf of, directly or indirectly, any personwhose property and interests inproperty are blocked pursuant to E.O.13599. The property and interests inproperty of the persons described abovemay not be transferred, paid, exported,withdrawn, or otherwise dealt in.In addition, Section 10 of E.O. 13599delegates to the Secretary of theTreasury, in consultation with theSecretary of State, the authority toexercise the relevant functions andauthorities conferred upon the President by sections 1245(d)(1)(A) and (g)(1) of the NDAA.Today, OFAC is amending the IFSR toaccomplish several purposes. First,OFAC is amending the IFSR toimplement section 1245(d) and otherrelated provisions of section 1245 of theNDAA. Section 561.203 of the IFSRadds the prohibitions and exceptions setforth in section 1245(d) of the NDAA.Sections 561.318 through 561.327 of theIFSR define new key terms used in§561.203 of the IFSR, and §§561.406and 561.407 of the IFSR contain newinterpretive provisions regarding§561.203 of the IFSR. In particular,§§561.318 and 561.319 of the IFSRdefine the terms
petroleum
and
petroleum products,
and §561.327 of the IFSR defines the term
food,medicine, and medical devices.
Section561.406 of the IFSR provides aninterpretation of the phrase
country with primary jurisdiction over the foreign financial institution
for purposes of §561.203 of the IFSR. An amended§561.404 of the IFSR sets forth the typesof factors that, as a general matter, theSecretary of the Treasury will considerin determining whether a transaction issignificant, for purposes of both§§561.201 and 561.203 of the IFSR.Second, to implement section 8 of E.O. 13553, OFAC is adding IEEPA tothe authority citation for the IFSR. As arelated change, OFAC is amending§561.802 of the IFSR to add adelegation of IEEPA authorities to theDirector of OFAC or any other person towhom the Secretary of the Treasury hasdelegated authority to act. With theamendments to the authority citationand §561.802 of the IFSR, OFAC isclarifying that it may exercise the sameIEEPA authorities that are used inOFAC’s other IEEPA-based sanctionsprograms—in addition to authoritiesunder section 104 of CISADA—toinvestigate, regulate, or prohibittransactions under the IFSR.Third, OFAC is amending §561.201 of the IFSR to remove references toAppendix A to Part 561 throughout thesection. Section 561.201 provided thatif, upon a finding by the Secretary of theTreasury that a foreign financialinstitution knowingly engaged in one ormore of the sanctionable activities setforth in paragraph (a) of §561.201, theSecretary decided to prohibit a U.S.financial institution from opening ormaintaining a correspondent account ora payable-through account in the UnitedStates for that foreign financialinstitution, the name of that foreignfinancial institution would be added toAppendix A to Part 561. Today’samendment removes the references toAppendix A throughout §561.201 andinstead provides that the names of theforeign financial institutions sanctionedunder either §561.201 or §561.203 will be added to the List of Foreign FinancialInstitutions Subject to Part 561 (the‘‘Part 561 List’’), which is a new list to be maintained on the Office of ForeignAssets Control’s Web site(
Federal Register
. This list also will statethe prohibition or strict condition(s) thatapply with respect to each sanctionedforeign financial institution. In addition,OFAC is making conformingamendments to §561.504 of the IFSR toremove references to Appendix Athroughout the section and substitutetherefor references to the Part 561 Liston OFAC’s Web site, as described below. In a final related amendment,OFAC is removing Appendix A to Part561, which had been reserved.Fourth, OFAC is amending the IFSRto add a reporting requirement to thegeneral license in §561.504, whichauthorizes transactions related toclosing a correspondent account or apayable-through account for a foreignfinancial institution. OFAC is alsoamending §561.504 to make the generallicense and reporting requirementapplicable when correspondentaccounts or payable-through accountsfor a foreign financial institution arerequired to be closed pursuant to new§561.203, as well as §561.201. As setforth in amended §561.201 and new§561.203 of the IFSR, if the Secretary of the Treasury decides to prohibit theopening or maintaining of correspondent accounts or payable-through accounts in the United Statesfor a foreign financial institution, thename of the foreign financial institutionwill be added to the Part 561 List.Amended paragraph (a) of §561.504authorizes transactions related toclosing a correspondent account or apayable-through account for a foreignfinancial institution whose name isadded to the Part 561 List during the 10-day period beginning on the effectivedate of the prohibition in §561.201(c) or§561.203(c). Under new paragraph (b)of §561.504, a U.S. financial institutionthat maintained a correspondentaccount or a payable-through accountfor a foreign financial institution whosename is added to the Part 561 List onOFAC’s Web site must file a report withOFAC that provides full details on theclosing of each such account within 30days of the closure of the account. The
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report must include completeinformation on all transactionsprocessed or executed in winding downand closing the account. Formerparagraphs (b) and (c) of §561.504 are being redesignated as paragraphs (c) and(d), respectively.In connection with the new reportingrequirement in §561.504(b), OFAC alsois amending §561.901 of the IFSR toadd a statement that the informationcollection in §561.504(b) has beenapproved by the Office of Managementand Budget (‘‘OMB’’) and assignedcontrol number 1505–0243 (
see
discussion under Paperwork ReductionAct, below).Finally, OFAC is amending§§561.702(b)(3) and 561.802 of the IFSRto make technical changes orcorrections.
Public Participation and PaperworkReduction Act
Because the IFSR involve a foreignaffairs function, the provisions of Executive Order 12866 and theAdministrative Procedure Act (5 U.S.C.553) requiring notice of proposedrulemaking, opportunity for publicparticipation, and delay in effective dateare inapplicable. Because no notice of proposed rulemaking is required for thisrule, the Regulatory Flexibility Act (5U.S.C. 601–612) does not apply.With respect to section 2 (44 U.S.C.3507) of the Paperwork Reduction Actof 1995 (44 U.S.C. 3501
et seq.
), thecollection of information in §561.601 of the IFSR is made pursuant to OFAC’sReporting, Procedures and PenaltiesRegulations, 31 CFR part 501, and has been approved by OMB under controlnumber 1505–0164.
See
31 CFR501.901. The collection of informationin §561.504(b) of the IFSR has beensubmitted to and approved by OMBpending public comment and has beenassigned OMB control number 1505–0243. Section 561.504(b) specifies that aU.S. financial institution thatmaintained a correspondent account orpayable-through account for a foreignfinancial institution listed on the Part561 List on OFAC’s Web site(
)must file areport with OFAC that provides fulldetails on the closing of each suchaccount within 30 days of the closure of the account. This collection of information assists in verifying that U.S.financial institutions are complyingwith prohibitions on maintainingcorrespondent accounts or payable-through accounts for foreign financialinstitutions listed on the Part 561 List,and the information collected will beused to further OFAC’s compliance andenforcement functions.With respect to all of the foregoingcollections of information, an agencymay not conduct or sponsor, and aperson is not required to respond to, acollection of information, unless thecollection of information displays avalid control number.The likely respondents andrecordkeepers affected by the newcollection of information in §561.504(b)are U.S. financial institutions operatingcorrespondent accounts or payable-through accounts for foreign financialinstitutions. Because this is a newcollection of information, OFAC cannotpredict the response rate for the§561.504(b) reporting requirement atthis time. For future submissions, OFACwill report retrospectively on theresponse rate during the previousreporting period.The estimated average reporting/recordkeeping burden is 2 hours perresponse.Comments are invited on: (a) Whetherthis collection of information isnecessary for the proper performance of the functions of the agency, includingwhether the information has practicalutility; (b) the accuracy of the agency’sestimate of the burden of the collectionof information; (c) ways to enhance thequality, utility, and clarity of theinformation to be collected; (d) ways tominimize the burden of the collection of information on respondents, includingthrough the use of automated collectiontechniques and other forms of information technology; and (e) theestimated capital or start-up costs of theoperation, maintenance, and/orpurchase of services to provideinformation.Comments concerning the aboveinformation and the accuracy of these burden estimates, and suggestions forreducing this burden, should bedirected to OMB, Attention: DeskOfficer for the Department of theTreasury, Office of Information andRegulatory Affairs, Washington, DC20503, with a copy to Chief of Records,Attention: Request for Comments, Officeof Foreign Assets Control, Departmentof the Treasury, 1500 PennsylvaniaAvenue NW., Washington, DC 20220.Any such comments should besubmitted not later than April 27, 2012.All comments on the collection of information in §561.504(b) will be amatter of public record.
List of Subjects in 31 CFR Part 561
Administrative practice andprocedure, Banks, Banking, Brokers,Foreign trade, Investments, Loans,Securities, Iran.For the reasons set forth in thepreamble, the Department of theTreasury’s Office of Foreign AssetsControl is revising part 561 of 31 CFRchapter V to read as follows:
PART 561—IRANIAN FINANCIALSANCTIONS REGULATIONS
Subpart A—Relation of This Part to OtherLaws and Regulations
Sec.561.101Relation of this part to other lawsand regulations.
Subpart B—Prohibitions
561.201CISADA-based sanctions on certainforeign financial institutions.561.202Prohibitions on persons owned orcontrolled by U.S. financial institutions.561.203NDAA-based sanctions on certainforeign financial institutions.
Subpart C—General Definitions
561.301Effective date.561.302UNSC Resolution 1737.561.303UNSC Resolution 1747.561.304UNSC Resolution 1803.561.305UNSC Resolution 1929.561.306Correspondent account.561.307Payable-through account.561.308Foreign financial institution.561.309U.S. financial institution.561.310Money laundering.561.311Agent.561.312Act of international terrorism.561.313Financial services.561.314Knowingly.561.315Person.561.316Entity.561.317Money service businesses.561.318Petroleum.561.319Petroleum products.561.320Iranian financial institution.561.321Government of Iran.561.322Entity owned or controlled by theGovernment of Iran.561.323Foreign financial institution ownedor controlled by the government of aforeign country.561.324Designated Iranian financialinstitution.561.325Financial transaction.561.326Privately owned foreign financialinstitution.561.327Food, medicine, and medicaldevices.
Subpart D—Interpretations
561.401Reference to amended sections.561.402Effect of amendment.561.403Facilitation of certain efforts,activities, or transactions by foreignfinancial institutions.561.404Significant transaction ortransactions; significant financialservices; significant financialtransaction.561.405Entities owned by a person whoseproperty and interests in property are blocked.561.406Country with primary jurisdictionover the foreign financial institution.561.407Conducting or facilitating afinancial transaction with the CentralBank of Iran or a designated Iranianfinancial institution.
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