81 FR 22185 - Hizballah Financial Sanctions Regulations

DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control

Federal Register Volume 81, Issue 73 (April 15, 2016)

The Department of the Treasury's Office of Foreign Assets Control (OFAC) is adding new part 566 to 31 CFR chapter V to implement the Hizballah International Financing Prevention Act of 2015, which requires the President to prescribe certain regulations.

[Federal Register Volume 81, Number 73 (Friday, April 15, 2016)]
[Rules and Regulations]
[Pages 22185-22192]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-08720]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 566


Hizballah Financial Sanctions Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury's Office of Foreign Assets 
Control (OFAC) is adding new part 566 to 31 CFR chapter V to implement 
the Hizballah International Financing Prevention Act of 2015, which 
requires the President to prescribe certain regulations.

DATES: Effective: April 15, 2016.

FOR FURTHER INFORMATION CONTACT: The Department of the Treasury's 
Office of Foreign Assets Control: Assistant Director for Licensing, 
tel.: 202-622-2480, Assistant Director for Regulatory Affairs, tel.: 
202-622-4855, Assistant Director for Sanctions Compliance & Evaluation, 
tel.: 202-622-2490; or the Department of the Treasury's Office of the 
Chief Counsel (Foreign Assets Control), Office of the General Counsel, 
tel.: 202-622-2410.

SUPPLEMENTARY INFORMATION: 

Electronic and Facsimile Availability

    This document and additional information concerning OFAC are 
available from OFAC's Web site (www.treasury.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 December 18, 2015, the President signed the Hizballah 
International Financing Prevention Act of 2015, Public Law 114-102 
(HIFPA), into law. Section 102(a)(1) of HIFPA requires the President, 
within 120 days of the enactment of HIFPA, 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 by a foreign financial institution that the President 
determines, on or after December 18, 2015, engages in one or more of 
the following activities: (1) Knowingly facilitating a significant 
transaction or transactions for Hizballah; (2) knowingly facilitating a 
significant transaction or transactions of a person identified on the 
List of Specially Designated Nationals and Blocked Persons (SDN List) 
maintained by OFAC, the property and interests in property of which are 
blocked pursuant to the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.) for acting on behalf of or at the direction of, or 
being owned or controlled by, Hizballah; (3) knowingly engaging in 
money laundering to carry out an activity described in (1) or (2); or 
(4) knowingly facilitating a significant transaction or transactions or 
providing significant financial services to carry out an activity 
described in (1), (2), or (3).
    Pursuant to Presidential Memorandum of March 18, 2016: Delegation 
of Functions Under Sections 102(a), 102(c), 204, and 302 of HIFPA, the 
President delegated certain functions and authorities, with respect to 
the determinations provided for therein, to the Secretary of the 
Treasury, in consultation with the Secretary of State. In furtherance 
of HIFPA's requirement and the Presidential delegation of functions and 
authorities noted above, OFAC is promulgating the Hizballah Financial 
Sanctions Regulations, 31 CFR part 566 (the ``Regulations'').
    Subpart A of the Regulations clarifies the relation of this part to 
other laws and regulations. Subpart B of the Regulations implements 
section 102(a) of HIFPA. The names of foreign financial institutions 
that are determined by the Secretary of the Treasury, in consultation 
with the Secretary of State, to engage in the activities described in 
Sec.  566.201(a) of the Regulations, and which are subject to 
prohibitions or strict conditions on the opening or maintaining of 
correspondent or payable-through accounts as set forth in Sec.  
566.201(b) of the Regulations, will be listed on the Hizballah 
Financial Sanctions Regulations List (HFSR List) on OFAC's Web site 
(www.treasury.gov/ofac) on the Counter Terrorism Sanctions page and 
published in the Federal Register.
    Subpart C of the Regulations defines key terms used throughout the 
Regulations, and subpart D contains interpretive sections regarding the 
Regulations. Section 566.404 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) of 
Sec.  566.201, whether transactions or financial services are 
significant.
    Transactions otherwise prohibited under the Regulations but found 
to be consistent with U.S. policy may be authorized by the general 
licenses contained in subpart E of the Regulations or by a specific 
license issued pursuant to the procedures described in subpart E of 31 
CFR part 501. Subpart E of the Regulations includes a general license 
in Sec.  566.504 authorizing transactions related to winding down and 
closing a correspondent account or a payable-through account. Section 
566.504 authorizes transactions related to closing a correspondent 
account or payable-through account for a foreign financial institution 
whose name is added to the HFSR List during the 10-day period beginning 
on the effective date of the prohibition in Sec.  566.201. This general 
license includes a reporting requirement pursuant to which a U.S. 
financial institution that maintained a correspondent account or a 
payable-through account for a foreign financial institution whose name 
is added to the HFSR List must file a report with OFAC that provides 
full details on the closing of each such account within 30 days of the 
closure of the account. The report must include complete information on 
all transactions processed or executed in winding down and closing the 
account.
    Subpart F of the Regulations refers to subpart C of part 501 for 
recordkeeping

[[Page 22186]]

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

    With respect to section 2 of the Paperwork Reduction Act of 1995, 
44 U.S.C. 3507, the collection of information in Sec.  566.601 of the 
Regulations is made pursuant to OFAC's Reporting, Procedures and 
Penalties Regulations, 31 CFR part 501, and has been approved by OMB 
under control number 1505-0164. See 31 CFR 501.901. The collection of 
information in Sec.  566.504(b) of the Regulations has been submitted 
to OMB under Information Collection Request (ICR) number 201603-1505-
002 and is pending approval. Section 566.504(b) specifies that a U.S. 
financial institution that maintained a correspondent account or 
payable-through account for a foreign financial institution listed on 
the HFSR List must file a report with OFAC that provides full details 
on the closing of each such account within 30 days of the closure of 
the account. This collection of information assists in verifying that 
U.S. financial institutions are complying with prohibitions on 
maintaining correspondent accounts or payable-through accounts for 
foreign financial institutions listed on the HFSR List, and the 
information collected will be used to further OFAC's compliance and 
enforcement functions.
    With respect to all of the foregoing collections of information, 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. The likely respondents and 
recordkeepers affected by the new collection of information in Sec.  
566.504(b) are U.S. financial institutions operating correspondent 
accounts or payable-through accounts for foreign financial 
institutions. Because this is a new collection of information, OFAC 
cannot predict the response rate for the Sec.  566.504(b) reporting 
requirement at this time. For future submissions, OFAC will report 
retrospectively on the response rate during the previous reporting 
period.
    The estimated average reporting/recordkeeping burden is 2 hours per 
response.
    Comments are invited on: (a) Whether this collection of information 
is necessary for the proper performance of the functions of the agency, 
including whether the information has practical utility; (b) the 
accuracy of the agency's estimate of the burden of the collection of 
information; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; (d) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques and other forms of information 
technology; and (e) the estimated capital or start-up costs of the 
operation, maintenance, and/or purchase of services to provide 
information.
    Comments concerning the above information and the accuracy of these 
burden estimates, and suggestions for reducing this burden, should be 
directed to OMB, Attention: Desk Officer for the Department of the 
Treasury, Office of Information and Regulatory Affairs, Washington, DC 
20503, with a copy to Chief of Records, Attention: Request for 
Comments, Office of Foreign Assets Control, Department of the Treasury, 
1500 Pennsylvania Avenue NW., Freedman's Bank Building, Washington, DC 
20220. Any such comments should be submitted not later than June 14, 
2016. All comments on the collection of information in Sec.  566.504(b) 
will be a matter of public record.

List of Subjects in 31 CFR Part 566

    Administrative practice and procedure, Banking, Banks, Brokers, 
Foreign trade, Hizballah, Investments, Loans, Money laundering, 
Securities, Services.

    For the reasons set forth in the preamble, the Department of the 
Treasury's Office of Foreign Assets Control adds part 566 to 31 CFR 
chapter V to read as follows:

PART 566--HIZBALLAH FINANCIAL SANCTIONS REGULATIONS

Subpart A--Relation of This Part to Other Laws and Regulations
Sec.
566.101 Relation of this part to other laws and regulations.
Subpart B--Prohibitions
566.201 Prohibitions or strict conditions with respect to 
correspondent or payable-through accounts of certain foreign 
financial institutions identified by the Secretary of the Treasury.
566.202 Evasions; attempts; causing violations; conspiracies.
Subpart C--General Definitions
566.300 Applicability of definitions.
566.301 Agent.
566.302 Correspondent account.
566.303 Covered financial institution.
566.304 Effective date.
566.305 Entity.
566.306 Financial institution.
566.307 Financial services.
566.308 Financial transaction.
566.309 Foreign financial institution.
566.310 HIFPA.
566.311 Hizballah.
566.312 Knowingly.
566.313 Licenses; general and specific.
566.314 Money laundering.
566.315 OFAC.
566.316 Payable-through account.
566.317 Person.
566.318 Transaction account.
566.319 United States.
566.320 U.S. financial institution.
Subpart D--Interpretations
566.401 Reference to amended sections.
566.402 Effect of amendment.
566.403 Facilitation of certain efforts, activities, or transactions 
by foreign financial institutions.
566.404 Significant transaction or transactions; significant 
financial services.
Subpart E--Licenses, Authorizations, and Statements of Licensing Policy
566.501 General and specific licensing procedures.
566.502 Effect of license or authorization.
566.503 Exclusion from licenses.
566.504 Transactions related to closing a correspondent or payable-
through account.
Subpart F--Reports
566.601 Records and reports.
Subpart G--Penalties
566.701 Penalties.
566.702 Pre-Penalty Notice; settlement.
566.703 Penalty imposition.
566.704 Administrative collection; referral to United States 
Department of Justice.
Subpart H--Procedures
566.801 Procedures.
566.802 Delegation by the Secretary of the Treasury.

[[Page 22187]]

Subpart I--Paperwork Reduction Act
566.901 Paperwork Reduction Act notice.

    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 (50 U.S.C. 1705 note); Pub. L. 114-
102.

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


Sec.  566.101  Relation of this part to other laws and regulations.

    This part is separate from, and independent of, the other parts of 
this chapter, with the exception of part 501 of this chapter, the 
recordkeeping and reporting requirements and license application and 
other procedures of which apply to this part. Actions taken pursuant to 
part 501 of this chapter with respect to the prohibitions contained in 
this part are considered actions taken pursuant to this part. Differing 
foreign policy and national security circumstances may result in 
differing interpretations of similar language among the parts of this 
chapter. No license or authorization contained in or issued pursuant to 
those other parts authorizes any transaction prohibited by this part. 
No license or authorization contained in or issued pursuant to any 
other provision of law or regulation authorizes any transaction 
prohibited by this part. No license or authorization contained in or 
issued pursuant to this part relieves the involved parties from 
complying with any other applicable laws or regulations.

Subpart B--Prohibitions


Sec.  566.201  Prohibitions or strict conditions with respect to 
correspondent or payable-through accounts of certain foreign financial 
institutions identified by the Secretary of the Treasury.

    Upon a determination 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)(4) of this 
section, the Secretary of the Treasury may, as set forth in paragraph 
(b) of this section, impose one or more strict conditions 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, prohibit a U.S. 
financial institution 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, on or after December 18, 2015, 
knowingly:
    (1) Facilitates a significant transaction or transactions for 
Hizballah;
    (2) Facilitates a significant transaction or transactions of a 
person identified on OFAC's Specially Designated Nationals and Blocked 
Persons List (SDN List), the property and interests in property of 
which are blocked pursuant to the International Emergency Economic 
Powers Act (50 U.S.C. 1701 et seq.) (IEEPA) for acting on behalf of or 
at the direction of, or being owned or controlled by, Hizballah;

    Note to paragraph (a)(2):  The SDN List is accessible through 
the following page on OFAC's Web site: www.treasury.gov/sdn. 
Additional information pertaining to the SDN List can be found in 
appendix A to this chapter. Persons whose property and interests in 
property are blocked pursuant to IEEPA for acting on behalf of or at 
the direction of or being owned or controlled by Hizballah are 
identified by a special reference to Hizballah 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, a person whose 
property and interests in property are blocked pursuant to the 
Global Terrorism Sanctions Regulations, 31 CFR part 594, and 
identified on the SDN List, will have the program tag ``[SDGT]'' and 
descriptive text [``Subject to secondary sanctions pursuant to the 
Hizballah Financial Sanctions Regulations''].

    (3) Engages in money laundering to carry out an activity described 
in paragraphs (a)(1) or (a)(2) of this section; or
    (4) Facilitates a significant transaction or transactions or 
provides significant financial services to carry out an activity 
described in paragraphs (a)(1), (a)(2), or (a)(3) of this section.
    (b) The Secretary of the Treasury 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. Except as otherwise authorized pursuant 
to this part, a U.S. financial institution shall not open or maintain a 
correspondent account or payable-through account in the United States 
in a manner that is inconsistent with any strict condition imposed and 
in effect pursuant to this paragraph. Such conditions may include the 
following:
    (1) Prohibiting or restricting 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, or limiting the volume of, the 
transactions that may be processed through the correspondent account or 
payable-through account of the foreign financial institution;
    (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; or
    (5) Prohibiting or restricting the processing of foreign exchange 
transactions through the correspondent account or payable-through 
account of the foreign financial institution.

    Note to paragraph (b):  The name of the foreign financial 
institution, together with the actual strict condition(s) to be 
imposed, will be added to the HFSR List on the Office of Foreign 
Assets Control's Web site (www.treasury.gov/ofac) on the Counter 
Terrorism Sanctions page, and published in the Federal Register.

    (c) If the Secretary of the Treasury does not impose one or more 
strict conditions, pursuant to paragraph (b) of this section, 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 determines 
engages in one or more of the activities described in paragraph (a) of 
this section, the Secretary may prohibit the opening or maintaining by 
a U.S. financial institution of a correspondent account or a payable-
through account in the United States for that foreign financial 
institution. 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 for which the opening or maintaining of such an 
account is prohibited pursuant to this paragraph.

    Note to paragraph (c):  The names of foreign financial 
institutions for which the opening or maintaining of a correspondent 
account or a payable-through account in the United States is 
prohibited will be listed on the HFSR List on OFAC's Web site 
(www.treasury.gov/ofac) on the Counter Terrorism Sanctions page, and 
published in the Federal Register.


[[Page 22188]]




Sec.  566.202  Evasions; attempts; causing violations; conspiracies.

    (a) Any transaction on or after the effective date that evades or 
avoids, has the purpose of evading or avoiding, causes a violation of, 
or attempts to violate any of the prohibitions set forth in this part 
is prohibited.
    (b) Any conspiracy formed to violate any of the prohibitions set 
forth in this part is prohibited.

Subpart C--General Definitions


Sec.  566.300  Applicability of definitions.

    The definitions in this subpart apply throughout the entire part.


Sec.  566.301  Agent.

    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.  566.302  Correspondent account.

    The term correspondent account means an account established to 
receive deposits from, make payments on behalf of, or handle other 
financial transactions related to a foreign financial institution.


Sec.  566.303  Covered financial institution.

    The term covered financial institution means a broker or dealer in 
securities registered, or required to be registered, with the 
Securities and Exchange Commission under the Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.), except persons who register pursuant to 
section 15(b)(11) of the Securities Exchange Act of 1934; a futures 
commission merchant or an introducing broker registered, or required to 
be registered, with the Commodity Futures Trading Commission under the 
Commodity Exchange Act (7 U.S.C. 1 et seq.), except persons who 
register pursuant to section 4(f)(a)(2) of the Commodity Exchange Act; 
or a mutual fund.


Sec.  566.304  Effective date.

    The effective date refers to the effective date of a prohibition or 
strict condition imposed pursuant to Sec.  566.201 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 and is the earlier of the date the U.S. 
financial institution receives actual or constructive notice of such 
prohibition or condition.


Sec.  566.305  Entity.

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


Sec.  566.306  Financial institution.

    The term financial institution means:
    (a) An insured bank (as defined in section 3(h) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(h));
    (b) A commercial bank or trust company;
    (c) A private banker;
    (d) An agency or branch of a foreign bank in the United States;
    (e) Any credit union;
    (f) A thrift institution;
    (g) A broker or dealer registered with the Securities and Exchange 
Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.);
    (h) A broker or dealer in securities or commodities;
    (i) An investment banker or investment company;
    (j) A currency exchange;
    (k) An issuer, redeemer, or cashier of travelers' checks, checks, 
money orders, or similar instruments;
    (l) An insurance company;
    (m) A dealer in precious metals, stones, or jewels;
    (n) A loan or finance company;
    (o) A licensed sender of money or any other person who engages as a 
business in the transmission of funds including any person who engages 
as a business in an informal money transfer system or any network of 
people who engage as a business in facilitating the transfer of money 
domestically or internationally outside of the conventional financial 
institutions system;
    (p) A business engaged in vehicle sales, including automobile, 
airplane, and boat sales;
    (q) Any business or agency which engages in any activity which the 
Secretary of the Treasury determines, by regulation, to be an activity 
which is similar to, related to, or a substitute for any activity in 
which any business described in this paragraph is authorized to engage; 
or
    (r) Any other business designated by the Secretary whose cash 
transactions have a high degree of usefulness in criminal, tax, or 
regulatory matters.


Sec.  566.307  Financial services.

    The term financial services includes loans, transfers, accounts, 
insurance, investments, securities, guarantees, foreign exchange, 
letters of credit, and commodity futures or options.


Sec.  566.308  Financial transaction.

    The term financial transaction means any transfer of value 
involving a financial institution.


Sec.  566.309  Foreign financial institution.

    (a) The term foreign financial institution means:
    (1) A foreign bank;
    (2) Any branch or office located outside the United States of a 
covered financial institution, as defined in Sec.  566.304;
    (3) Any other person organized under foreign law (other than a 
branch or office of such person in the United States) that, if it were 
located in the United States, would be a covered financial institution, 
as defined in Sec.  566.304; and
    (4) Any person organized under foreign law (other than a branch or 
office of such person in the United States) that is engaged in the 
business of, and is readily identifiable as, a dealer in foreign 
exchange or a money transmitter.
    (b) For purposes of paragraph (a)(4) of this section, a person is 
not ``engaged in the business'' of a dealer in foreign exchange or a 
money transmitter if such transactions are merely incidental to the 
person's business.


Sec.  566.310  HIFPA.

    The term HIFPA means the Hizballah International Financing 
Prevention Act of 2015, Public Law 114-102.


Sec.  566.311  Hizballah.

    The term Hizballah means:
    (a) The entity known as Hizballah and designated by the Secretary 
of State as a foreign terrorist organization pursuant to section 219 of 
the Immigration and Nationality Act (8 U.S.C. 1189); or
    (b) Any person:
    (1) The property and interests in property of which are blocked 
pursuant to the International Emergency Economic Powers Act (50 U.S.C. 
1701 et seq.); and
    (2) Who is identified on the Specially Designated Nationals and 
Blocked Persons List (SDN List) maintained by OFAC as an agent, 
instrumentality, or affiliate of Hizballah.

    Note to Sec.  566.311:  The SDN List is accessible through the 
following page on OFAC's Web site: www.treasury.gov/sdn. Additional 
information pertaining to the SDN List can be found in Appendix A to 
this chapter. Persons on the SDN List that fall within the 
definition of Hizballah set forth in this section are identified by 
a special reference to Hizballah 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, a person whose property and 
interests in property are blocked pursuant to the Global Terrorism 
Sanctions Regulations, 31 CFR part 594, and identified on the SDN 
List will have the program tag ``[SDGT]'' and

[[Page 22189]]

descriptive text [``Subject to secondary sanctions pursuant to the 
Hizballah Financial Sanctions Regulations''].

Sec.  566.312  Knowingly.

    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.  566.313  Licenses; general and specific.

    (a) Except as otherwise provided in this part, the term license 
means any license or authorization contained in or issued pursuant to 
this part.
    (b) The term general license means any license or authorization the 
terms of which are set forth in subpart E of this part or made 
available on OFAC's Web site: www.treasury.gov/ofac.
    (c) The term specific license means any license or authorization 
issued pursuant to this part but not set forth in subpart E of this 
part or made available on OFAC's Web site: www.treasury.gov/ofac.

    Note to Sec.  566.313:  See Sec.  501.801 of this chapter on 
licensing procedures.

Sec.  566.314  Money laundering.

    The term money laundering includes the movement of illicit cash or 
cash equivalent proceeds into, out of, or through a country, or into, 
out of, or through a financial institution.


Sec.  566.315  OFAC.

    The term OFAC means the Department of the Treasury's Office of 
Foreign Assets Control.


Sec.  566.316  Payable-through account.

    The term payable-through account means an account, including a 
transaction account as defined in Sec.  566.317, opened at a depository 
institution by 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.  566.317  Person.

    The term person means an individual or entity.


Sec.  566.318  Transaction account.

    The term transaction account means a deposit or account on which 
the depositor or account holder is permitted to make withdrawals by 
negotiable or transferable instrument, payment orders of withdrawal, 
telephone transfers, or other similar items for the purpose of making 
payments or transfers to third persons or others. Such term includes 
demand deposits, negotiable order of withdrawal accounts, savings 
deposits subject to automatic transfers, and share draft accounts.


Sec.  566.319  United States.

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


Sec.  566.320  U.S. financial institution.

    The term U.S. financial institution means a financial institution 
located in or organized under the laws of the United States or any 
jurisdiction within the United States.

Subpart D--Interpretations


Sec.  566.401  Reference to amended sections.

    Except as otherwise provided in this part, 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.  566.402  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 regulations, ruling, order, instruction, or 
license issued by OFAC 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 regulation, ruling, order, instruction, or 
license continue and may be enforced as if such amendment, 
modification, or revocation had not been made.


Sec.  566.403  Facilitation of certain efforts, activities, or 
transactions by foreign financial institutions.

    For purposes of Sec.  566.201, 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 the provision of 
currency, financial instruments, securities, or any other transmission 
of value; purchasing; selling; transporting; swapping; brokering; 
financing; approving; guaranteeing; the provision of other services of 
any kind; the provision of personnel; or the provision of software, 
technology, or goods of any kind.


Sec.  566.404  Significant transactions; significant financial 
services.

    In determining, for purposes of paragraph (a) of Sec.  566.201, 
whether a transaction(s) or financial service(s) is 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 
transaction(s) or financial service(s) performed over a period of time, 
including whether the transaction(s) or financial service(s) is 
increasing or decreasing over time and the rate of increase or 
decrease.
    (b) Nature. The nature of the transaction(s) or financial 
service(s), including the type, complexity, and commercial purpose of 
the transaction(s) or financial service(s).
    (c) Level of awareness; pattern of conduct. (1) Whether the 
transaction(s) or financial service(s) is performed with the 
involvement or approval of management or only by clerical personnel; 
and
    (2) Whether the transaction(s) or financial service(s) is part of a 
pattern of conduct or the result of a business development strategy.
    (d) Nexus. The proximity between the foreign financial institution 
engaging in the transaction(s) or providing the financial service(s) 
and Hizballah or a blocked person described in paragraph (a)(2) of 
Sec.  566.201. For example, a transaction or financial service in which 
a foreign financial institution provides brokerage or clearing services 
to, or maintains an account or makes payments for, Hizballah or such a 
blocked person generally would be of greater significance than a 
transaction or financial service a foreign financial institution 
conducts for or provides to Hizballah or such a blocked person 
indirectly or in a tertiary relationship.
    (e) Impact. The impact of the transaction(s) or financial 
service(s) on the objectives of the Hizballah International Financing 
Prevention Act of 2015, including:
    (1) The economic or other benefit conferred or attempted to be 
conferred on Hizballah or a blocked person described in paragraph 
(a)(2) of Sec.  566.201; and
    (2) Whether and how the transaction(s) or financial service(s) 
contributes to support for international terrorism.
    (f) Deceptive practices. Whether the transaction(s) or financial 
service(s) involves an attempt to obscure or conceal the actual parties 
or true nature

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of the transaction(s) or financial service(s) to evade sanctions.
    (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(s) or financial service(s).

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


Sec.  566.501  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 
are considered actions taken pursuant to this part. General licenses 
and statements of licensing policy relating to this part also may be 
available through the Counter Terrorism Sanctions page on OFAC's Web 
site: www.treasury.gov/ofac.


Sec.  566.502  Effect of license or other authorization.

    (a) No license or other authorization contained in this part, or 
otherwise issued by OFAC, authorizes or validates any transaction or 
financial service 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 or financial service prohibited under this part unless the 
regulation, ruling, instruction, or license is issued by OFAC and 
specifically refers to this part. No regulation, ruling, instruction, 
or license referring to this part shall be deemed to authorize any 
transaction or financial services 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 or financial service 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 
that would not otherwise exist under ordinary principles of law.
    (d) Nothing contained in this part shall be construed to supersede 
the requirements established under any other provision of law or to 
relieve a person from any requirement to obtain a license or other 
authorization from another department or agency of the U.S. Government 
in compliance with applicable laws and regulations subject to the 
jurisdiction of that department or agency.


Sec.  566.503  Exclusion from licenses.

    OFAC reserves the right to exclude any person, property, 
transaction, or class thereof from the operation of any license or from 
the privileges conferred by any license. OFAC 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.  566.504  Transactions related to closing a correspondent or 
payable-through account.

    (a) During the 10-day period beginning on the effective date of the 
prohibition in Sec.  566.201(c) on the opening or maintaining of a 
correspondent account or a payable-through account for a foreign 
financial institution listed in the HFSR List, 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) A report must be filed with OFAC within 30 days of the closure 
of an account, providing full details on the closing of each 
correspondent account or payable-through account maintained by a U.S. 
financial institution for a foreign financial institution whose name is 
added to the HFSR List, maintained on OFAC's Web site 
(www.treasury.gov/ofac) on the Hizballah Sanctions page. Such report 
must include complete information on the closing of the account and on 
all transactions processed or executed through the account pursuant to 
this section, including the account outside of the United States to 
which funds remaining in the account were transferred. Reports should 
be addressed to the attention of the Sanctions, Compliance & Evaluation 
Division, Office of Foreign Assets Control, U.S. Department of the 
Treasury, 1500 Pennsylvania Avenue NW., Freedman's Bank Building, 
Washington, DC 20220.
    (c) Specific licenses may be issued on a case-by-case basis to 
authorize transactions outside the scope or time period authorized in 
paragraph (a) 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 whose 
name is added to the HFSR List. License applications should be filed in 
conformance with Sec.  501.801 of the Reporting, Procedures and 
Penalties Regulations, 31 CFR part 501.
    (d) Nothing in this section authorizes the opening of a 
correspondent account or a payable-through account for a foreign 
financial institution whose name appears on the HFSR List.

    Note to Sec.  566.504:  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 whose name has been 
added to the HFSR List, maintained on OFAC's Web site 
(www.treasury.gov/ofac) on the Counter Terrorism Sanctions page. See 
Sec.  566.101.

Subpart F--Reports


Sec.  566.601  Records and reports.

    For provisions relating to required records and reports, see part 
501, subpart C, of this chapter. Recordkeeping and reporting 
requirements imposed by part 501 of this chapter with respect to the 
prohibitions contained in this part are considered requirements arising 
pursuant to this part.

Subpart G--Penalties


Sec.  566.701  Penalties.

    (a) Civil penalties. As set forth in section 102(a)(3) of the 
Hizballah International Financing Prevention Act of 2015 (Pub. L. 114-
102, 129 Stat. 2205 (50 U.S.C. 1701 note)), 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 license, order, regulation, or 
prohibition set forth in or issued pursuant to this part.

    Note to paragraph (a):  As of the date of publication in the 
Federal Register of the final rule adding this part to 31 CFR 
chapter V, April 15, 2016), IEEPA provides for a maximum civil 
penalty not to exceed the

[[Page 22191]]

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 penalties. As set forth in section 102(a)(3) of HIFPA, 
a person who willfully commits, willfully attempts to commit, or 
willfully conspires to commit a violation of any license, order, 
regulation, or prohibition set forth in or issued pursuant to this part 
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; or makes any materially false, 
fictitious, or fraudulent statement or representation; or makes or uses 
any false writing or document knowing the same to contain any 
materially false, fictitious, or fraudulent statement or entry'' shall 
be fined under title 18, United States Code, imprisoned, or both.
    (e) Violations of this part may also be subject to other applicable 
laws.


Sec.  566.702  Pre-Penalty Notice; settlement.

    (a) When required. If OFAC 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, directive, or 
instruction issued by or pursuant to the direction or authorization of 
the Secretary of the Treasury pursuant to this part and determines that 
a civil monetary penalty or finding of violation is warranted, OFAC 
will issue a Pre-Penalty Notice informing the alleged violator of the 
agency's intent to impose a monetary penalty or finding of violation. 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 
OFAC. 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 as set forth below. The failure to submit a 
response within 30 days 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 OFAC 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 OFAC, 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 OFAC, only upon specific request to OFAC.
    (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 OFAC 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 OFAC's 
Enforcement Division by mail or courier and must be postmarked or date-
stamped in accordance with paragraph (b)(2) of this section.
    (c) Settlement. Settlement discussions may be initiated by OFAC, 
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 or finding of violations by OFAC are contained in 
Appendix A to part 501 of this chapter.
    (e) Representation. A representative may act on behalf of the 
alleged violator, but any oral communication with OFAC 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 PrePenalty Notice was served upon the 
alleged violator in care of the representative.


Sec.  566.703  Penalty imposition.

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


Sec.  566.704  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 or make payment arrangements acceptable to OFAC, 
the matter may be referred for administrative collection measures by 
the Department of the Treasury or to the United States Department of 
Justice for appropriate action to recover the penalty in a civil suit 
in a federal district court.

Subpart H--Procedures


Sec.  566.801  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.  566.802  Delegation by the Secretary of the Treasury.

    Any action that the Secretary of the Treasury is authorized to take 
pursuant to the Hizballah International Financing Prevention Act of 
2015 (Pub. L. 114-102, 129 Stat. 2205 (50 U.S.C. 1701 note)) may be 
taken by the Director of OFAC or by any other person to whom the 
Secretary of the Treasury has delegated authority to so act.

[[Page 22192]]

Subpart I--Paperwork Reduction Act


Sec.  566.901  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.

    Dated: April 11, 2016.
John E. Smith,
Acting Director, Office of Foreign Assets Control.
    Approved:

    Dated: April 11, 2016.
Adam J. Szubin,
Acting Under Secretary, Office of Terrorism and Financial Intelligence, 
Department of the Treasury.
[FR Doc. 2016-08720 Filed 4-14-16; 8:45 am]
BILLING CODE P