Reporting, Procedures and Penalties Regulations

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Office of Foreign Assets Control</SUBAGY> <CFR>31 CFR Part 501</CFR> <SUBJECT>Reporting, Procedures and Penalties Regulations</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Foreign Assets Control, Treasury. <HD SOURCE="HED">ACTION:</HD> Interim final rule; request for comments. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of the Treasury's Office of Foreign Assets Control (OFAC) is issuing this interim final rule to amend the Reporting, Procedures and Penalties Regulations (the “Regulations”), to require electronic filing of certain submissions to OFAC and to describe and modify certain reporting requirements related to blocked property and rejected transactions. In particular, the rule would require use of the electronic OFAC Reporting System for submission of reports related to blocked property and rejected transactions, remove the mail option for certain other types of OFAC submissions, describe reports OFAC may require from financial institutions for transactions that meet specified criteria, and add a reporting requirement for any blocked property that is unblocked or transferred. Additionally, OFAC is clarifying the scope of the reporting requirement for rejected transactions, in part to respond to comments received on the interim final rule OFAC published on June 21, 2019 to amend the Regulations. Further, OFAC is modifying the procedures for requests relating to property that is blocked in error and updating the Regulations with respect to the availability of information under the Freedom of Information Act (FOIA) for certain categories of records. OFAC is also clarifying that persons may submit a petition for administrative reconsideration to seek removal of a person or property from the List of Specially Designated Nationals and Blocked Persons or any other list of sanctioned persons maintained by OFAC. OFAC is also adding a description of reports OFAC may require financial institutions to provide about transactions that meet specified criteria to aid in the identification of blocked property. Finally, OFAC is making several technical and conforming edits. OFAC is soliciting public comments for 30 days on this interim final rule. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This interim final rule is effective August 8, 2024. Written comments may be submitted on or before June 10, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments via the following methods, electronic is preferred: <E T="03">Federal eRulemaking Portal: www.regulations.gov.</E> Follow the instructions on the website for submitting comments. Refer to Docket Number OFAC-2024-0002. <E T="03">Mail:</E> Office of Foreign Assets Control, U.S. Department of the Treasury, Treasury Annex/Freedman's Bank Building, 1500 Pennsylvania Avenue NW, Washington, DC 20220. Refer to Docket Number OFAC-2024-0002. <E T="03">Instructions:</E> All submissions received must include the agency name and the <E T="04">Federal Register</E> Doc. number that appears at the end of this document. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. Comments generally will not be edited to remove any identifying or contact information. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; Assistant Director for Compliance, 202-622-2490. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> The Regulations (31 CFR part 501), originally issued August 25, 1997 (62 FR 45098), set forth standard reporting and recordkeeping requirements, license application procedures, and other procedures relevant to the economic sanctions programs administered by OFAC. As described further below, OFAC is providing updates within nine sections of the Regulations: §§ 501.602, 501.603, 501.604, 501.605, 501.801, 501.804, 501.805, 501.806, and 501.807. <HD SOURCE="HD1">Electronic Filing of Submissions</HD> <E T="03">OFAC Reporting System for reports of blocked property and rejected transactions.</E> This interim final rule would generally require filers to use the electronic OFAC Reporting System (ORS) for submission to OFAC of initial reports of blocked property and Annual Reports of Blocked Property pursuant to § 501.603(d) and reports of rejected transactions pursuant to § 501.604(d), beginning on August 8, 2024. Electronic submission of reports improves efficiencies in reporting and reviewing data, and thus reduces the overall burden on both filers and the U.S. government over the long term. Many filers currently use ORS, on a voluntary basis, to submit initial reports of blocked property, Annual Reports of Blocked Property, and reports of rejected transactions. OFAC encourages filers to become familiar with ORS and to submit reports using that system in advance of the August 8, 2024 deadline. If a submitter can provide evidence of unique and extraordinary circumstances that would not permit the electronic filing of reports, such as lack of access to the internet, the submitter may request to submit reports in an alternative manner by calling 202-622-2490. Such requests will be subject to a presumption of denial and granted only in writing. <E T="03">Email Submission of Other Reports.</E> OFAC is amending several sections of the Regulations to require electronic submissions and to remove options for mail submission. OFAC is amending § 501.603(d)(2) to require electronic submission of reports of unblocked or transferred blocked property, as required pursuant to revised § 501.603(b)(3)(i). OFAC will accept such reports of unblocked or transferred blocked property pursuant to revised § 501.603(b)(3)(i) via either email or ORS. OFAC is also amending § 501.605(a) of the Regulations to require submission of the documentation and notifications required therein by email, given the time sensitivity of these reports, and to remove the options for submission by facsimile or mail. Finally, OFAC is requiring email submission or removing the options for mail submission in the following sections of the Regulations: §§ 501.804, 501.805, 501.806, and 501.807. Electronic submission and use of OFAC's website will allow for more efficient receipt and processing of reports and requests from the public. <HD SOURCE="HD1">Reports of Unblocked or Transferred Blocked Property</HD> OFAC is revising § 501.603(b)(3)(i) to require reports within 10 business days of when blocked property is unblocked or transferred, including pursuant to a valid order issued by a U.S. government agency or U.S. court, as set out in that paragraph. This amendment will enable OFAC to ascertain the current status of blocked and unblocked property. Reports need not be submitted for credits of interest payments that would not be transfers of blocked property or debits to blocked accounts for normal service charges, in each case as authorized pursuant to OFAC sanctions. As noted above, filers must submit reports pursuant to this section electronically, either via email to <E T="03">OFACReport@treasury.gov</E> or via ORS. Additionally, in revised § 501.603(d)(1), OFAC is expanding the retention requirement previously in § 501.603(b)(2)(iii) for Annual Reports of Blocked Property to extend to initial reports of blocked property. <HD SOURCE="HD1">Reports of Rejected Transactions</HD> OFAC is revising elements of § 501.604 in response to public comments received on the June 21, 2019, interim final rule (84 FR 29055), which expanded the scope of the reporting requirement for rejected transactions. <E T="03">Clarifying the definition of “transaction.”</E> Several commenters requested clarity on the scope and types of rejected transactions that need to be reported to OFAC by non-financial institutions. In response to these comments, OFAC is amending § 501.604(a) to clarify the scope of the term “transaction” for purposes of that section by specifying that the term includes transactions related to securities, checks, or foreign exchange, as well as sales or purchases of goods or services, thereby clarifying that securities, checks, foreign exchange, and goods and services are not in and of themselves transactions, when not provided as part of a transaction. <E T="03">Confirmation of the scope of the term “U.S. persons.”</E> OFAC received several comments that requested clarity about whether the term “U.S. persons,” as used in § 501.604, includes U.S. persons other than U.S. financial institutions. OFAC confirms that this reporting requirement applies to all U.S. persons, as identified in the relevant parts of this chapter (or in the case of part 515, persons subject to U.S. jurisdiction), not only U.S. financial institutions. <E T="03">Clarifying information that must be reported for rejected transactions.</E> Comments received by OFAC also noted that not all information required by OFAC may be readily available at the time a transaction is rejected, and, in many cases, it would be burdensome and sometimes impractical for filers to seek out additional information about transactions that they have already rejected. In light of these concerns, OFAC is amending § 501.604(b) to clarify that the information required therein must be reported only to the extent the information is available to the filer at the time the transactions was rejected. <E T="03">Additional responses to public comments.</E> Many comments received by OFAC anticipated that the interim final rule would cause a large increase in the volume of rejected transaction reports from non-financial institutions, which the comments suggest would be ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 47k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━