Updating Provisions Related to Blocking and Other Actions Related to Specific Property or Interests in Property

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Office of Foreign Assets Control</SUBAGY> <CFR>31 CFR Parts 510, 525, 526, 536, 542, 544, 546, 547, 548, 549, 550, 551, 552, 553, 555, 558, 560, 562, 569, 570, 576, 578, 579, 582, 583, 584, 585, 587, 588, 589, 590, 591, 594, 598, and 599</CFR> <SUBJECT>Updating Provisions Related to Blocking and Other Actions Related to Specific Property or Interests in Property</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Foreign Assets Control, Treasury. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of the Treasury's Office of Foreign Assets Control (OFAC) is adopting a final rule to clarify OFAC's process for issuing certain orders that block or identify as blocked specific property or interests in property, or that impose other prohibitions less than full blocking with respect to specific property or interests in property. OFAC is adding information about these orders in regulatory notes in 35 of OFAC's sanctions regulations. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective September 17, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Compliance, 202-622-2490 or <E T="03">https://ofac.treasury.gov/contact-ofac</E> . </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Electronic Availability</HD> This document and additional information concerning OFAC are available on OFAC's website: <E T="03">https://ofac.treasury.gov.</E> <HD SOURCE="HD1">Background</HD> In this rule, OFAC is updating 35 parts of 31 CFR chapter V to clarify OFAC's processes when it issues certain orders that block or identify as blocked specific property or interests in property, or that impose other non-blocking prohibitions with respect to specific property or interests in property. <HD SOURCE="HD2">International Emergency Economic Powers Act</HD> The 35 parts of 31 CFR chapter V that are the subject of this rule implement OFAC's authority to block the property and interests in property of persons pursuant to, among other authorities, the International Emergency Economic Powers Act, 50 U.S.C. 1701 <E T="03">et seq.</E> (IEEPA). IEEPA includes authority to investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transaction involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States. 50 U.S.C. 1702(a)(1)(B). Other statutes provide similar authority. OFAC's actions rely on the President's delegation of those authorities under one or more Executive orders. Such orders typically authorize the Secretary of the Treasury to designate persons who meet specified criteria, and they provide that all property and interests in property within U.S. jurisdiction of such persons is blocked. These orders also authorize the Secretary of the Treasury, in consultation with the Secretary of State, to take such actions and to employ all powers granted to the President under IEEPA or other applicable statutory authorities as may be necessary to carry out their purpose, and they provide that blocking prohibitions apply except to the extent provided in regulations, orders, directives, or licenses OFAC may issue. <E T="03">See, e.g.,</E> section 1(d) of Executive Order (E.O.) 14024. <HD SOURCE="HD2">Actions With Respect to Specific Property or Interests in Property</HD> The most common way OFAC exercises its authority is by designating a person and placing that person on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List). Once designated, all property and interests in property subject to U.S. jurisdiction of the designated person are blocked, and U.S. persons are generally prohibited from engaging in transactions involving any property or interest in property of the designated person. However, in certain cases, OFAC may exercise its authority in narrower ways. These actions include issuing orders or directives that impose prohibitions less than fully blocking the entirety of a person's property and interests in property as circumstances require. Such tailored actions are based on a combination of OFAC's authority to block all property of a designated person and its authority to narrow the scope of such broad prohibitions through orders, directives, or licenses. This rule identifies three forms that such actions by OFAC may take: (1) identifying property or interests in property as blocked pursuant to OFAC's authority due to an interest of an already blocked person, including where such interest may not be apparent to the public; (2) blocking specific property or interests in property of a person who is not already blocked but whom OFAC is investigating for potential designation; and (3) blocking or imposing other prohibitions with respect to a person's specific property or interests in property less than full blocking sanctions. First, OFAC may act to aid relevant parties by identifying the property or interests in property of already blocked persons, particularly in cases in which OFAC has access to information supporting its determination that a blocked person has an interest in specific property. In such cases, OFAC may identify specific property in which OFAC determines a blocked person has an interest and issue an order to financial institutions or other persons in possession or control of such property to block such property. OFAC may also exercise its blocking authorities in this manner upon review of financial transaction information received from U.S. financial institutions following OFAC's requirements that such financial institutions provide reports about accounts or transactions that meet specified criteria. <E T="03">See</E> note 1 to 31 CFR 501.602. Second, OFAC may identify property or interests in property of a person who is not blocked, but whom OFAC is investigating for potential designation. To ensure that this property or interest in property is not transferred before OFAC designates the person, OFAC may issue an order to financial institutions or other persons in possession or control of such property or interest in property to block it pending investigation. Third, in certain other cases, OFAC may block or impose other prohibitions with respect to specific property or interests in property less than full blocking sanctions. For example, OFAC may consider designating a person but determine U.S. national security or foreign policy interests are better served by prohibitions that may be narrower than blocking the entirety of the person's property and interests in property. In such cases, OFAC would determine that a person meets the criteria for designation but would take action less than blocking the entirety of a person's property and interests in property. This action may take various forms, including an order to the financial institutions or other persons in possession or control of the specific property or interests in property or a directive imposing non-blocking restrictions. For example, in 2014 OFAC issued directives pursuant to sec. 1(b) of Executive Order 13662 that prohibited certain dealings in debt and equity of persons operating in those sectors of the Russian Federation economy identified by the Secretary of the Treasury pursuant to sec. 1(a)(i) of Executive Order 13662. <HD SOURCE="HD2">Provision of Notice</HD> Persons affected by any type of OFAC prohibition should have an opportunity to understand the nature of OFAC's action and its impact on their property or interests in property. The form of notice may differ depending on the type of action OFAC takes or order it issues and the specific facts of an action. OFAC may publish notice of its action in the <E T="04">Federal Register</E> , which provides the public with constructive notice of the action. This is the form of notice OFAC uses for designation actions because it ensures that anyone who may come into contact with a designated person or their property or interests in property is aware of the designation. When OFAC takes more tailored action with respect to specific property or interests in property, the public may not always require notice of the action through publication in the <E T="04">Federal Register</E> , and it may be more appropriate to provide actual notice specifically to a person affected by the prohibition. OFAC may do so by providing written notice of OFAC's order to one or more persons OFAC assesses to have an interest in the property based on available information. OFAC may provide such notice directly to such affected persons or indirectly through financial institutions or other transaction intermediaries, who would be required to notify the affected persons with whom the recipient maintains direct commercial relationships. In many cases, requiring a transaction intermediary to disclose a blocking order may be the most efficient and effective means of providing notice because a transaction intermediary maintains direct commercial relationships through which affected persons may inquire about the status of their funds. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  OFAC's authority to “regulate” transactions includes the authority to require a participant in a transaction who is subject to U.S. jurisdiction to provide notice to its direct commercial counterparts when the transaction is blocked. 50 U.S.C. 1702(a)(1)(B). </FTNT> ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 112k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━