[Federal Register Volume 78, Number 51 (Friday, March 15, 2013)]
[Rules and Regulations]
[Pages 16403-16410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05766]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 561
Iranian Financial Sanctions Regulations
AGENCY: Office of Foreign Assets Control, Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Treasury's Office of Foreign Assets
Control is amending the Iranian Financial Sanctions Regulations (the
``IFSR'') to implement sections 503 and 504 of the Iran Threat
Reduction and Syria Human Rights Act of 2012, which amended section
1245 of the National Defense Authorization Act for Fiscal Year 2012;
and section 1, portions of section 6, and other related provisions of
Executive Order 13622 of July 30, 2012.
DATES: Effective Date: March 15, 2013.
FOR FURTHER INFORMATION CONTACT: Assistant Director for Sanctions
Compliance & Evaluation, tel.: 202/622-2490, Assistant Director for
Licensing, tel.: 202/622-2480, Assistant Director for Regulatory
Affairs, tel.: 202/622-4855, Assistant Director for Policy, tel.: 202/
622-, Office of Foreign Assets Control, or Chief Counsel (Foreign
Assets Control), tel.: 202/622-2410, Office of the General Counsel,
Department of the Treasury (not toll free numbers).
SUPPLEMENTARY INFORMATION:
Electronic and Facsimile Availability
This document and additional information concerning OFAC are
available from OFAC's Web site (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
The Department of the Treasury's Office of Foreign Assets Control
(``OFAC'') originally published the Iranian Financial Sanctions
Regulations, 31 CFR part 561 (the ``IFSR''), on August 16, 2010 (75 FR
49836), to implement subsections 104(c) and (d) and other related
provisions of the Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 (Pub. L. 111-195) (22 U.S.C. 8501-8551)
(``CISADA''), which had been signed into law by the President on July
1, 2010. Subsection 104(c) of CISADA required the Secretary of the
Treasury to prescribe regulations to prohibit, or impose strict
conditions on, the opening or maintaining in the United States of a
correspondent account or a payable-through account for a foreign
financial institution that the Secretary finds knowingly engages in
specified sanctionable activities.
On February 27, 2012, OFAC amended the IFSR and reissued them in
their entirety (77 FR 11724), in order to implement section 1245(d) of
the National Defense Authorization Act for Fiscal Year 2012 (Pub. L.
112-81) (22 U.S.C. 8513a) (``NDAA''), which had been signed into law by
the President on December 31, 2011. Section 1245(d)(1) of the NDAA
provides for the President to prohibit the opening, and prohibit or
impose strict conditions on the maintaining, in the United States of a
correspondent account or a payable-through account by a foreign
financial institution that the President determines has knowingly
conducted or facilitated any significant financial transaction with the
Central Bank of Iran or another Iranian financial institution
designated by the Secretary of the Treasury pursuant to the
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
(``IEEPA'').
Section 1245(d)(2) of the NDAA excepted transactions for the sale
of food, medicine, or medical devices to Iran from the imposition of
sanctions under section 1245(d)(1). Section 1245(d)(3) of the NDAA
limited the imposition of sanctions pursuant to section 1245(d)(1) on
foreign financial institutions owned or controlled by the government of
a foreign country, including the central bank of a foreign country, to
significant transactions for the sale or purchase of petroleum or
petroleum products to or from Iran. Section 1245(d)(4)(D) of the NDAA
provided for an exception from the imposition of sanctions pursuant to
section 1245(d)(1) on any foreign financial institution if the
President determines and periodically reports to Congress that the
country with primary jurisdiction over that foreign financial
institution has significantly reduced its crude oil purchases from Iran
during the 180-day period preceding the report.
On July 30, 2012, invoking the authority of, inter alia, IEEPA, the
President issued Executive Order 13622, ``Authorizing Additional
Sanctions With Respect to Iran'' (77 FR 45897, August 2, 2012) (``E.O.
13622''). The President issued E.O. 13622 to take additional steps with
respect to the national emergency declared in Executive Order 12957 of
March 15, 1995, particularly in light of the Government of Iran's use
of revenues from petroleum, petroleum products, and petrochemicals for
illicit purposes, Iran's continued attempts to evade international
sanctions through deceptive practices, and the unacceptable risk posed
to the international financial system by Iran's activities.
Section 1(a) of E.O. 13622 authorizes the Secretary of the
Treasury, in consultation with the Secretary of State and subject to
certain exceptions, to impose correspondent and payable-through account
sanctions on foreign financial institutions determined to have
knowingly conducted or facilitated any significant financial
transaction with the National Iranian Oil Company (``NIOC''); with
Naftiran Intertrade Company (``NICO''); or for the purchase or
acquisition of petroleum, petroleum products, or petrochemical products
from Iran. Section 10 of E.O. 13622 defines the terms NIOC and NICO as
including any entity owned or controlled by, or operating for or on
behalf of, respectively, NIOC and NICO.
Section 1(c) of E.O. 13622 provides that sanctions under
subsections 1(a)(i) and (ii) for transactions with NIOC or NICO or for
the purchase or acquisition of petroleum or petroleum products from
Iran will apply only if (1) the President determines under subsections
1245(d)(4)(B) and (C) of the NDAA that there is a sufficient supply of
petroleum and petroleum products from countries other than Iran to
permit a significant reduction in the purchase of petroleum and
petroleum products from Iran by or through foreign financial
institutions; and (2) a significant reduction exception under
subsection 1245(d)(4)(D) of the NDAA does not apply with respect to the
transaction.
Thus, transactions with NIOC or NICO or for the purchase or
acquisition of petroleum or petroleum products from Iran are excepted
from the imposition of sanctions under section 1(a) of E.O. 13622 if
the transaction qualifies for the significant reduction exception under
subsection 1245(d)(4)(D) of the NDAA. Transactions for the purchase or
acquisition of petrochemical products from Iran are subject to
sanctions under section 1(a) of E.O. 13622 regardless of whether the
President makes the determination that there is a sufficient supply of
petroleum and petroleum
[[Page 16404]]
products under subsections 1245(d)(4)(B) and (C) of the NDAA or whether
a significant reduction exception under subsection 1245(d)(4)(D) of the
NDAA applies. Section 1(d) of E.O. 13622 also provided an exemption
from sanctions under section 1(a) for transactions for the sale of
food, medicine, or medical devices to Iran or when the underlying
transaction has been authorized by the Secretary of the Treasury.
Executive Order 13628 of October 9, 2012 (77 FR 62139, October 12,
2012), amended E.O. 13622 by adding the sale of agricultural
commodities to Iran to the list of exempt transactions in section 1(d)
and by making other conforming changes to E.O. 13622.
Section 6 of E.O. 13622 provides that section 1(a) of the order,
among other specified provisions, shall not apply to any person for
conducting or facilitating a transaction involving a natural gas
development and pipeline project initiated prior to July 31, 2012, to
bring gas from Azerbaijan to Europe and Turkey, as described in section
6. Although it is not named in the section, section 6 refers to the
Shah Deniz natural gas field in Azerbaijan's sector of the Caspian Sea
and related pipeline projects to bring the gas from Azerbaijan to
Europe and Turkey.
On August 10, 2012, the President signed into law the Iran Threat
Reduction and Syria Human Rights Act of 2012 (Pub. L. 112-158) (22
U.S.C. 8701-8795) (``TRA''), which, inter alia, amends section 1245(d)
of the NDAA. Section 503(a) of the TRA adds sales of agricultural
commodities to Iran to the list of excepted transactions under section
1245(d)(2) of the NDAA, effective as if originally included in the
NDAA. Section 503(b) of the TRA revises the timing of the reports on
the availability and price of petroleum and petroleum products produced
in countries other than Iran that, pursuant to section 1245(d)(4)(A) of
the NDAA, the Administrator of the Energy Information Administration is
required to submit to Congress. Beginning September 1, 2012, this
report is to be submitted to Congress not later than October 25, 2012,
and the last Thursday of every other month thereafter.
Section 504 of the TRA revises the types of foreign financial
institutions and transactions that can be sanctioned under section
1245(d)(1) of the NDAA. Specifically, section 504(a)(1)(A) of the TRA
amends the limitation on the imposition of sanctions in section
1245(d)(3) of the NDAA so that it only applies to foreign central banks
and not to other government-owned or -controlled foreign financial
institutions. As a result, foreign financial institutions owned or
controlled by the government of a foreign country, other than central
banks, are subject to sanctions under section 1245(d)(1) of the NDAA
(with certain exceptions, including the sale of agricultural
commodities, food, medicine and medical devices) with respect to any
significant financial transaction conducted or facilitated on or after
February 6, 2013, including transactions that are not for the sale or
purchase of petroleum or petroleum products to or from Iran.
Section 504(a)(1)(B) of the TRA amends section 1245(d)(4)(D) of the
NDAA to limit the exception from sanctions imposed pursuant to section
1245(d)(1) previously available for countries determined to have
significantly reduced their crude oil purchases from Iran to certain
transactions conducted or facilitated by foreign financial institutions
located in significantly reducing jurisdictions. This amendment applies
with respect to financial transactions conducted or facilitated on or
after February 6, 2013. As amended, the exception from sanctions set
forth in NDAA section 1245(d)(4)(D) applies to a financial transaction
conducted or facilitated by a foreign financial institution if (1) the
financial transaction is only for bilateral trade in goods or services
between the country with primary jurisdiction over the foreign
financial institution and Iran; and (2) any funds owed to Iran as a
result of such trade are credited to an account located in the country
with primary jurisdiction over the foreign financial institution.
Furthermore, in order for this exception to apply to the financial
transaction, there must be in effect a determination from the President
either that the country with primary jurisdiction over the foreign
financial institution has significantly reduced its crude oil purchases
from Iran; or, in the case of a country that has previously received an
exception under section 1245(d)(4)(D) of the NDAA, that, after
receiving the exception, it has reduced its crude oil purchases from
Iran to zero.
In addition, section 504 of the TRA amends section 1245(h) of the
NDAA by adding a definition of the terms ``reduce significantly,''
``significant reduction,'' and ``significantly reduced.'' The
definition provides that these terms, used with respect to purchases
from Iran of petroleum and petroleum products, include a reduction in
such purchases in terms of price or volume toward a complete cessation
of such purchases.
Today, OFAC is making a number of changes to the IFSR to implement
the amendments to section 1245(d) of the NDAA made by sections 503 and
504 of the TRA, as well as to implement section 1 and related
provisions of E.O. 13622. To implement section 503 of the TRA, OFAC is
amending redesignated paragraph (g) (formerly paragraph (f)) of section
561.203 in Subpart B to add the sale of agricultural commodities to
Iran to the list of transactions exempt from the sanctions imposed
pursuant to section 561.203(a). OFAC also is amending section 561.327
in subpart C to add a definition of the term agricultural commodities.
In addition, the Note to redesignated paragraph (h) (formerly paragraph
(g)) of section 561.203 is being revised to reflect the change in the
due dates of reports that the Administrator of the Energy Information
Administration is required to submit to Congress, pursuant to section
1245(d)(4)(A) of the NDAA, regarding the availability and price of
petroleum and petroleum products produced in countries other than Iran.
To implement section 504 of the TRA, OFAC is amending section
561.203 in subpart B by revising paragraph (d) and redesignated
paragraph (f) (formerly paragraph (e)), and adding new paragraph (e),
to eliminate the distinction between foreign government-owned or -
controlled financial institutions (other than central banks) and
privately owned financial institutions with respect to the types of
transactions that would subject them to sanctions. Both types of
financial institutions are now subject to sanctions under section
561.203(a) for any significant transactions knowingly conducted or
facilitated with the Central Bank of Iran or other designated Iranian
financial institutions, whether or not the transactions are for the
sale or purchase of petroleum or petroleum products to or from Iran.
The revision to redesignated paragraph (f) (formerly paragraph (e)) of
section 561.203 clarifies that foreign central banks are the only
institutions on which sanctions may be imposed only insofar as they
engage in financial transactions for the sale or purchase of petroleum
or petroleum products to or from Iran.
OFAC is revising redesignated paragraph (i) (formerly paragraph
(h)) of section 561.203 to clarify that the significant reduction
exception extends to countries that, having previously received a
significant reduction determination, are determined to have reduced
their imports of Iranian crude oil to zero during a subsequent
reporting period. OFAC is adding new section 561.328 to Subpart C to
define the terms
[[Page 16405]]
reduce significantly, significantly reduced, and significant reduction,
used with respect to purchases from Iran of petroleum and petroleum
products, as set forth in section 504(a)(2)(B) of the TRA.
In addition, OFAC is adding new paragraphs (j) and (k) to section
561.203 to implement the narrowing of the scope of the significant
reduction exception, mandated by section 504(a)(1)(B) of the TRA, to
cover only certain financial transactions for bilateral trade between
Iran and the significantly reducing country. As set forth in new
paragraphs (j) and (k) of section 561.203, the significant reduction
exception is applicable to a qualifying bilateral trade transaction
only if any funds owed to the country with primary jurisdiction over
the foreign financial institution are paid to specified classes of
payees and certain restrictions are placed on the funds owed to Iran in
order to ensure that they remain in that country. Paragraph (k) of
section 561.203 further specifies that funds owed to Iran from Iranian-
origin exports to the country with primary jurisdiction over the
foreign financial institution facilitating the transaction under the
significant reduction exception may now be used only to pay for exports
to Iran of goods or services that originate in that country. New Note 2
to section 561.203 explains that since transactions for the sale of
agricultural commodities, food, medicine, or medical devices to Iran
are not sanctionable under the section 561.203(a), the funds owed to
Iran from Iranian-origin exports to the significantly reducing country
may also be used to pay for the sale and export to Iran of agricultural
commodities, food, medicine, or medical devices from third countries.
OFAC is adding new interpretive section 561.408 to Subpart D of the
IFSR to explain what is meant by the requirement that goods or services
originate in a country.
To implement section 1 of E.O. 13622, OFAC is adding new section
561.204 to Subpart B of the IFSR. Subject to certain exceptions,
section 561.204 authorizes the Secretary of the Treasury to prohibit or
impose strict conditions 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 foreign financial institution
determined to have knowingly conducted or facilitated any significant
financial transaction with NIOC, NICO, or any entity owned or
controlled by, or operating for or on behalf of, NIOC or NICO, or for
the purchase or acquisition of petroleum, petroleum products, or
petrochemical products from Iran.
In addition, OFAC is adding new section 561.205 to Subpart B of the
IFSR. This section sets forth the prohibition on any transaction, on or
after the applicable effective date, that evades or avoids, has the
purpose of evading or avoiding, or attempts to violate any of the
prohibitions in the IFSR and on any conspiracy formed to violate any
such prohibitions. Finally, OFAC is amending the IFSR to add
definitions and make other technical and conforming changes.
Public Participation
Because the amendment of the IFSR involves a foreign affairs
function, the provisions of Executive Order 12866 and the
Administrative Procedure Act (5 U.S.C. 553) requiring notice of
proposed rulemaking, opportunity for public participation, and delay in
effective date are inapplicable. Because no notice of proposed
rulemaking is required for this rule, the Regulatory Flexibility Act (5
U.S.C. 601-612) does not apply.
Paperwork Reduction Act
The collections of information related to the IFSR are contained in
31 CFR part 501 (the ``Reporting, Procedures and Penalties
Regulations''). Pursuant to the Paperwork Reduction Act of 1995 (44
U.S.C. 3507), those collections of information have been approved by
the Office of Management and Budget under control number 1505-0164. An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of
information displays a valid control number.
List of Subjects in 31 CFR Part 561
Administrative practice and procedure, Banks, Banking, Brokers,
Foreign trade, Investments, Loans, Petrochemicals, Petroleum, Petroleum
products, Securities, Iran.
For the reasons set forth in the preamble, the Department of the
Treasury's Office of Foreign Assets Control amends part 561 of 31 CFR
chapter V as follows:
PART 561--IRANIAN FINANCIAL SANCTIONS REGULATIONS
0
1. The authority citation for part 561 is revised to read as follows:
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. 111-
195, 124 Stat. 1312 (22 U.S.C. 8501-8551); Pub. L. 112-81, 125 Stat.
1298 (22 U.S.C. 8513a); Pub. L. 112-158, 126 Stat. 1214 (22 U.S.C.
8701-8795); E.O. 12957, 60 FR 14615, 3 CFR, 1995 Comp., p. 332; E.O.
13553, 75 FR 60567, 3 CFR, 2010 Comp., p. 253; E.O. 13599, 77 FR
6659, February 8, 2012; E.O. 13622, 77 FR 45897, August 2, 2012;
E.O. 13628, 77 FR 62139, October 12, 2012.
Subpart B--Prohibitions
0
2. Amend Sec. 561.203 by:
0
a. Revising paragraphs (a) introductory text and (d).
0
b. Redesignating paragraphs (e) through (h) as paragraphs (f) through
(i) and revising redesignated paragraphs (f) through (i).
0
c. Adding new paragraphs (e), (j), and (k) and a new Note to paragraphs
(j) and (k).
0
d. Redesignating the Note to Sec. 561.203 as Note 1 to Sec. 561.203
and revising redesignated Note 1.
0
e. Adding a new Note 2 to Sec. 561.203.
The revisions and additions read as follows:
Sec. 561.203 NDAA-based sanctions on certain foreign financial
institutions.
(a) Imposition of sanctions. Subject to the limitations,
exceptions, and conditions set forth in paragraphs (d) through (k) of
this section, upon a determination by the Secretary of the Treasury
that a foreign financial institution has knowingly conducted or
facilitated any significant financial transaction with the Central Bank
of Iran or a designated Iranian financial institution, consistent with
section 1245 of the National Defense Authorization Act for Fiscal Year
2012 (Pub. L. 112-81) (22 U.S.C. 8513a) (the ``2012 NDAA''), as amended
by the Iran Threat Reduction and Syria Human Rights Act of 2012 (Pub.
L. 112-158) (22 U.S.C. 8701-8795) (the ``TRA''), the Secretary of the
Treasury:
* * * * *
(d) Privately owned foreign financial institutions. (1) Subject to
the exceptions set forth in paragraphs (g) and (i) through (k) of this
section, sanctions may be imposed pursuant to paragraph (a) of this
section beginning on February 29, 2012, with respect to any significant
financial transaction conducted or facilitated by a privately owned
foreign financial institution that is not for the purchase of petroleum
or petroleum products from Iran.
(2) Subject to the exceptions and conditions set forth in
paragraphs (h) through (k) of this section, sanctions may be imposed
pursuant to paragraph (a) of this section with respect to any
significant financial transaction conducted or facilitated by a
privately owned foreign financial institution on or after June 28,
2012, for the purchase
[[Page 16406]]
of petroleum or petroleum products from Iran.
(e) Government-owned or -controlled foreign financial institutions,
excluding foreign central banks. (1) Subject to the exceptions and
conditions set forth in paragraphs (h) through (k) of this section,
sanctions may be imposed pursuant to paragraph (a) of this section with
respect to any significant financial transaction conducted or
facilitated by a foreign financial institution owned or controlled by
the government of a foreign country, excluding a central bank of a
foreign country, on or after June 28, 2012, for the sale or purchase of
petroleum or petroleum products to or from Iran.
(2) Subject to the exceptions and conditions set forth in
paragraphs (g) and (i) through (k) of this section, sanctions may be
imposed pursuant to paragraph (a) of this section with respect to any
significant financial transaction conducted or facilitated by a foreign
financial institution owned or controlled by the government of a
foreign country, excluding a central bank of a foreign country, on or
after February 6, 2013, that is not for the sale or purchase of
petroleum or petroleum products to or from Iran.
(f) Foreign central banks. Subject to the exceptions and conditions
set forth in paragraphs (h) through (k) of this section, sanctions may
be imposed pursuant to paragraph (a) of this section on a central bank
of a foreign country only insofar as it engages in a financial
transaction for the sale or purchase of petroleum or petroleum products
to or from Iran conducted or facilitated on or after June 28, 2012.
(g) Sanctions will not be imposed under paragraph (a) of this
section with respect to any foreign financial institution for
conducting or facilitating a transaction for the sale of agricultural
commodities, food, medicine, or medical devices to Iran.
(h) The Secretary of the Treasury may impose sanctions pursuant to
paragraph (a) of this section with respect to any significant financial
transaction conducted or facilitated by a foreign financial institution
on or after June 28, 2012, for the purchase of petroleum or petroleum
products from Iran only if the President determines, not later than
March 30, 2012, and every 180 days thereafter, that there is a
sufficient supply of petroleum and petroleum products from countries
other than Iran to permit a significant reduction in petroleum and
petroleum products purchased from Iran by or through foreign financial
institutions. Such successive sufficiency determinations by the
President shall render subject to sanctions under paragraph (a) of this
section those financial transactions conducted or facilitated by a
foreign financial institution for the purchase of petroleum or
petroleum products from Iran during each successive 180-day period
beginning 90 days after the President's determination.
Note to paragraph (h) of Sec. 561.203: Under Section
1245(d)(4)(B) of the 2012 NDAA, the President is to make a
determination, not later than March 30, 2012, and every 180 days
thereafter, of whether the price and supply of petroleum and
petroleum products produced in countries other than Iran is
sufficient to permit purchasers of petroleum and petroleum products
from Iran to reduce significantly their purchases from Iran. This
determination is to be based on reports on the availability and
price of petroleum and petroleum products produced in countries
other than Iran that, pursuant to section 1245(d)(4)(A) of the 2012
NDAA, the Administrator of the Energy Information Administration, in
consultation with the Secretary of the Treasury, the Secretary of
State, and the Director of National Intelligence, was to submit to
Congress beginning not later than February 29, 2012, and every 60
days thereafter. Beginning September 1, 2012, pursuant to section
1245(d)(4)(A) of the 2012 NDAA, as amended by section 503(b) of the
TRA, the report of the Administrator of the Energy Information
Administration is to be submitted to Congress not later than October
25, 2012, and the last Thursday of every other month thereafter.
(i) Sanctions will not be imposed under paragraph (a) of this
section with respect to a financial transaction described in paragraph
(j) of this section that is conducted or facilitated by a foreign
financial institution if, for the 180-day period during which the
financial transaction is conducted or facilitated, the Secretary of
State has determined and reported to Congress:
(1) That the country with primary jurisdiction over the foreign
financial institution has significantly reduced its crude oil purchases
from Iran, thus qualifying for a ``significant reduction exception''
for the 180-day period during which the financial transaction is
conducted or facilitated; or
(2) That the country with primary jurisdiction over the foreign
financial institution has received a significant reduction exception
described in this paragraph in a previous period and, after receiving
the exception, has reduced its crude oil purchases from Iran to zero
during a subsequent 180-day reporting period.
Note to paragraph (i) of Sec. 561.203: The Secretary of State
is to determine whether a country qualifies for the ``significant
reduction exception'' and report such determination to Congress not
later than 90 days after the date on which the President makes the
initial determination referenced in paragraph (h) of this section,
and every 180 days thereafter. Accordingly, a significant reduction
exception covers a period of 180 days.
(j) A financial transaction conducted or facilitated by a foreign
financial institution is described in this paragraph (j) if:
(1) The financial transaction is only for trade in goods or
services that either originate in the country with primary jurisdiction
over the foreign financial institution and are exported and sold
directly to Iran or originate in Iran and are exported and sold
directly to the country with primary jurisdiction over the foreign
financial institution;
(2) Any funds owed to the country with primary jurisdiction over
the foreign financial institution as a result of such trade are paid
to:
(i) Individuals who are citizens, nationals, or permanent residents
of the country with primary jurisdiction over the foreign financial
institution; or
(ii) Entities organized under the laws of the country with primary
jurisdiction over the foreign financial institution that are not the
Government of Iran, as defined in Sec. 561.321;
(3) Any funds owed to Iran as a result of such trade are subject to
the terms and conditions set forth in paragraph (k) of this section;
and
(4) Funds owed as a result of such trade are not credited to an
account held at any financial institution whose name appears on the
List of Foreign Financial Institutions Subject to Part 561 (the ``Part
561 List''), which is maintained on the Office of Foreign Assets
Control's Web site (www.treasury.gov/ofac) on the Iran Sanctions page.
(k) In order for a transaction to qualify for the significant
reduction exception from the sanctions imposed under paragraph (a) of
this section described in paragraph (i), all funds owed to Iran as a
result of a trade transaction described in paragraph (j)(1) of this
section must be subject to the following conditions and restrictions:
(1) The funds must be credited to an account held at a foreign
financial institution that conducted or facilitated the trade
transaction described in paragraph (j)(1) of this section;
(2) The funds must be credited to an account held in the country
with primary jurisdiction over that foreign financial institution;
(3) The funds must be credited to an account held in the name of
the Central Bank of Iran, the Iranian party to the trade transaction,
or an Iranian financial institution that is not a designated Iranian
financial institution;
[[Page 16407]]
(4) Payments from the funds may be made only in the manner and to
the persons specified in paragraph (k)(5) of this section for amounts
owed to such persons for the direct exportation and sale to Iran of
goods or services originating in the country with primary jurisdiction
over the foreign financial institution holding the funds (but see Note
2 to Sec. 561.203);
(5) Payments from the funds for the goods or services exported and
sold to Iran, as described in paragraph (k)(4) of this section, may be
made only by check payable to or to the order of, or by transfer to an
account at a foreign financial institution in the country with primary
jurisdiction over the foreign financial institution holding the funds
that is held in the name of:
(i) Individuals who are citizens, nationals, or permanent residents
of the country with primary jurisdiction over the foreign financial
institution holding the funds; or
(ii) Entities that are organized under the laws of that country;
(6) The funds may not be withdrawn in cash, remitted to Iran or
paid to anyone that is the Government of Iran, as defined in Sec.
561.321, or credited to an account held at a financial institution
whose name appears on the Part 561 List (see paragraph (j)(4) of this
section); and
(7) Other than in payment for goods or services exported and sold
to Iran as set forth in paragraphs (k)(4) through (k)(6) of this
section, the funds may be transferred from the initial account
described in paragraphs (k)(1) through (k)(3) of this section only to
another account that is held at the same foreign financial institution,
located in the country with primary jurisdiction over that foreign
financial institution, and subject to the following conditions and
restrictions:
(i) The account must be a separate, special purpose account holding
only funds owed to Iran as a result of trade transactions that qualify
for the significant reduction exception described in paragraph (i) of
this section and that are conducted or facilitated by the foreign
financial institution holding the account; and
(ii) The conditions and restrictions on the funds owed to Iran set
forth in paragraphs (k)(1) through (k)(6) of this section apply in full
to the account described in this paragraph, except that the account
must be held only in the name of the Central Bank of Iran or an Iranian
financial institution that is not a designated Iranian financial
institution.
Note to paragraphs (j) and (k) of Sec. 561.203:
See Sec. 561.408 for a provision interpreting the phrases goods
or services originating in the country with primary jurisdiction
over the foreign financial institution and goods or services
originating in Iran.
Note 1 to Sec. 561.203: The sanctions regime described in Sec.
561.203 is separate from the sanctions regimes described in
Sec. Sec. 561.201 and 561.204 and applies in addition to, and
independently of, the sanctions regimes imposed under Sec. Sec.
561.201 and 561.204.
Note 2 to Sec. 561.203: Paragraph (g) of this section excepts
transactions for the sale of agricultural commodities, food,
medicine, or medical devices to Iran from the imposition of
sanctions under paragraph (a) of this section. Therefore, funds owed
to Iran as a result of a trade transaction described in paragraph
(j)(1) of this section may be used for the purchase and export to
Iran of agricultural commodities, food, medicine, or medical devices
regardless of the country from which such goods are purchased and
regardless of where such goods originate, and payment from the funds
for such goods may be made to exporters in countries other than the
country with primary jurisdiction over the foreign financial
institution holding the funds.
0
3. Add new Sec. 561.204 to subpart B to read as follows:
Sec. 561.204 Additional petroleum-related sanctions on certain
foreign financial institutions.
(a) Imposition of sanctions. Subject to the limitations,
exceptions, and conditions set forth in paragraphs (d) through (f) of
this section, upon a determination by the Secretary of the Treasury
that a foreign financial institution has knowingly engaged in one or
more of the activities described in paragraph (b) of this section, the
Secretary of the Treasury may:
(1) Prohibit U.S. financial institutions from opening a
correspondent account or a payable-through account in the United States
for the foreign financial institution with respect to which the
determination has been made; and either
(2)(i) Prohibit U.S. financial institutions from maintaining a
correspondent account or a payable-through account in the United States
for the foreign financial institution with respect to which the
determination has been made; or
(ii) Impose one or more strict conditions on the maintaining of any
correspondent account or payable-through account that had been opened
in the United States for the foreign financial institution prior to the
Secretary of the Treasury's determination with respect to the foreign
financial institution.
Note 1 to paragraph (a) of Sec. 561.204: The name of any
foreign financial institution with respect to which a determination
has been made pursuant to this paragraph (a), along with the
relevant sanctions to be imposed (prohibition(s) and/or strict
condition(s)), will be added to the List of Foreign Financial
Institutions Subject to Part 561 (the ``Part 561 List''), which is
maintained on the Office of Foreign Assets Control's Web site
(www.treasury.gov/ofac) on the Iran Sanctions page, and published in
the Federal Register.
Note 2 to paragraph (a) of Sec. 561.204: See Sec. 561.203(b)
for examples of strict conditions that might be imposed, pursuant to
paragraph (a)(2)(ii) of this section, on the maintaining of a pre-
existing correspondent account or payable-through account for a
foreign financial institution with respect to which the Secretary of
the Treasury's determination has been made.
(b) Sanctionable activity. A foreign financial institution engages
in an activity described in this paragraph if it knowingly conducts or
facilitates any significant financial transaction:
(1) With the National Iranian Oil Company (``NIOC''), the Naftiran
Intertrade Company (``NICO''), or any entity owned or controlled by, or
operating for or on behalf of, NIOC or NICO, except for a sale or
provision to any of the foregoing of the products described in section
5(a)(3)(A)(i) of the Iran Sanctions Act of 1996 (Pub. L. 104-172) (50
U.S.C. 1701 note), as amended, provided that the fair market value of
such products is lower than the applicable dollar threshold specified
in that provision;
Note to paragraph (b)(1) of Sec. 561.204: As of March 15, 2013,
the products described in section 5(a)(3)(A)(i) of the Iran
Sanctions Act of 1996 (Pub. L. 104-172) (50 U.S.C. 1701 note), as
amended, are refined petroleum products, and for the fair market
value of such products to be lower than the applicable dollar
threshold specified in that provision the products sold or provided
to NIOC, NICO, or any entity owned or controlled by, or operating
for or on behalf of, NIOC or NICO, must have a fair market value of
less than $1,000,000, and, during a 12-month period, an aggregate
fair market value of less than $5,000,000.
(2) For the purchase or acquisition of petroleum or petroleum
products from Iran; or
(3) For the purchase or acquisition of petrochemical products from
Iran.
(c) Prohibitions. (1) A U.S. financial institution shall not open a
correspondent account or payable-through account in the United States
for a foreign financial institution for which the opening of such an
account is prohibited pursuant to paragraph (a)(1) of this section.
(2) A U.S. financial institution shall not maintain a correspondent
account or payable-through account in the United
[[Page 16408]]
States for a foreign financial institution for which the maintaining of
such an account is prohibited pursuant to paragraph (a)(2)(i) of this
section.
(3) A U.S. financial institution shall not maintain a correspondent
account or payable-through account in the United States for a foreign
financial institution in a manner that is inconsistent with any strict
condition imposed and in effect pursuant to paragraph (a)(2)(ii) of
this section.
(4) The prohibitions in paragraphs (c)(1) through (c)(3) of this
section apply except to the extent transactions are authorized by
regulations, orders, directives, or licenses that may be issued
pursuant to this part, and notwithstanding any contracts entered into
or any license or permit granted prior to the effective date of the
prohibition.
(d) Exempt activity. Sanctions will not be imposed under paragraph
(a) of this section with respect to any foreign financial institution
for:
(1) Conducting or facilitating a transaction for the sale of
agricultural commodities, food, medicine, or medical devices to Iran or
when the underlying transaction has been authorized by the Office of
Foreign Assets Control pursuant to any part of this chapter V; or
(2) Conducting or facilitating a transaction involving a natural
gas development and pipeline project initiated prior to July 31, 2012,
to bring gas from Azerbaijan to Europe and Turkey in furtherance of a
production sharing agreement or license awarded by a sovereign
government other than the Government of Iran before July 31, 2012.
Note to paragraph (d)(2) of Sec. 561.204: The natural gas
development and pipeline project referred to in this paragraph is
the project to develop the Shah Deniz natural gas field in
Azerbaijan's sector of the Caspian Sea and related pipeline projects
to bring the gas from Azerbaijan to Europe and Turkey.
(e) The Secretary of the Treasury may impose sanctions pursuant to
paragraph (a) of this section with respect to any significant financial
transaction described in paragraphs (b)(1) and (b)(2) of this section
only if the President makes the successive determinations that there is
a sufficient supply of petroleum and petroleum products from countries
other than Iran described in paragraph (h) of Sec. 561.203.
(f) Sanctions will not be imposed under paragraph (a) of this
section with respect to any significant financial transaction described
in paragraphs (b)(1) and (b)(2) of this section that is conducted or
facilitated by a foreign financial institution if:
(1) For the 180-day period during which the financial transaction
is conducted or facilitated, the Secretary of State has determined and
reported to Congress:
(i) That the country with primary jurisdiction over the foreign
financial institution has significantly reduced its crude oil purchases
from Iran, thus qualifying for the ``significant reduction exception''
for the 180-day period during which the financial transaction is
conducted or facilitated; or
(ii) That the country with primary jurisdiction over the foreign
financial institution has received a significant reduction exception
described in this paragraph in a previous period, and, after receiving
the exception, has reduced its crude oil purchases from Iran to zero
during a subsequent 180-day reporting period; and
(2) The transaction satisfies the conditions and restrictions set
forth in paragraphs (j) and (k) of Sec. 561.203.
Note to paragraph (f) of Sec. 561.204: The Secretary of State
is to determine whether a country qualifies for the ``significant
reduction exception'' and report such determination to Congress not
later than 90 days after the date on which the President makes the
initial determination referenced in paragraph (h) of this section,
and every 180 days thereafter. Accordingly, a significant reduction
exception covers a period of 180 days.
Note to Sec. 561.204: The sanctions regime described in this
section is separate from the sanctions regimes described in
Sec. Sec. 561.201 and 561.203 and applies in addition to, and
independently of, the sanctions regimes imposed under Sec. Sec.
561.201 and 561.203.
0
4. Add new Sec. 561.205 to subpart B to read as follows:
Sec. 561.205 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
0
5. Revise paragraph (a) of Sec. 561.301 to read as follows:
Sec. 561.301 Effective date.
(a) The effective date of a prohibition or condition imposed
pursuant to Sec. Sec. 561.201, 561.203, or 561.204 on the opening or
maintaining of a correspondent account or a payable-through account in
the United States by a U.S. financial institution for a particular
foreign financial institution is the earlier of the date the U.S.
financial institution receives actual or constructive notice of such
prohibition or condition.
* * * * *
0
6. Revise Sec. 561.318 to read as follows:
Sec. 561.318 Petroleum.
The term petroleum (also known as crude oil) means a mixture of
hydrocarbons that exists in liquid phase in natural underground
reservoirs and remains liquid at atmospheric pressure after passing
through surface separating facilities.
0
7. Amend Sec. 561.327 by revising the section heading, redesignating
paragraphs (a) through (c) as paragraphs (b) through (d), and adding
new paragraph (a) to read as follows:
Sec. 561.327 Agricultural commodities, food, medicine, and medical
devices.
(a) The term agricultural commodities means:
(1) Products not listed on the Commerce Control List in the Export
Administration Regulations, 15 CFR part 774, supplement no. 1, that
fall within the term ``agricultural commodity'' as defined in section
102 of the Agricultural Trade Act of 1978 (7 U.S.C. 5602); and
(2) Products not listed on the Commerce Control List in the Export
Administration Regulations, 15 CFR part 774, supplement no. 1, that are
intended for ultimate use in Iran as:
(i) Food for humans (including raw, processed, and packaged foods;
live animals; vitamins and minerals; food additives or supplements; and
bottled drinking water) or animals (including animal feeds);
(ii) Seeds for food crops;
(iii) Fertilizers or organic fertilizers; or
(iv) Reproductive materials (such as live animals, fertilized eggs,
embryos, and semen) for the production of food animals.
* * * * *
0
8. Add new Sec. 561.328 to subpart C to read as follows:
Sec. 561.328 Reduce significantly, significantly reduced, and
significant reduction.
The terms reduce significantly, significantly reduced, and
significant reduction, used with respect to purchases from Iran of
petroleum and petroleum products, include a reduction in such purchases
in terms of price or volume toward a complete cessation of such
purchases.
0
9. Add new Sec. 561.329 to subpart C to read as follows:
[[Page 16409]]
Sec. 561.329 Iran.
The term Iran means the Government of Iran and the territory of
Iran and any other territory or marine area, including the exclusive
economic zone and continental shelf, over which the Government of Iran
claims sovereignty, sovereign rights, or jurisdiction, provided that
the Government of Iran exercises partial or total de facto control over
the area or derives a benefit from economic activity in the area
pursuant to international arrangements.
0
10. Add new Sec. 561.330 to subpart C to read as follows:
Sec. 561.330 Petrochemical products.
The term petrochemical products includes any aromatic, olefin, and
synthesis gas, and any of their derivatives, including ethylene,
propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and
urea.
Subpart D--Interpretations
0
11. Revise Sec. 561.403 to read as follows:
Sec. 561.403 Facilitation of certain efforts, activities, or
transactions by foreign financial institutions.
For purposes of Sec. Sec. 561.201, 561.203, and 561.204, the term
facilitate or facilitated used with respect to certain efforts,
activities, or transactions refers to the provision of assistance by a
foreign financial institution for those efforts, activities, or
transactions, including, but not limited to, the provision of currency,
financial instruments, securities, or any other transmission of value;
purchasing; selling; transporting; swapping; brokering; financing;
approving; guaranteeing; or the provision of other services of any
kind; or the provision of personnel; or the provision of software,
technology, or goods of any kind.
0
12. Amend Sec. 561.404 by:
0
a. Revising the introductory text.
0
b. Revising paragraph (d).
0
c. Revising the introductory text of paragraph (e).
0
d. Revising paragraph (e)(1).
The revisions read as follows:
Sec. 561.404 Significant transaction or transactions; significant
financial services; significant financial transaction.
In determining, for purposes of paragraph (a)(5) of Sec. 561.201,
whether a transaction is significant, whether transactions are
significant, or whether financial services are significant, or, for
purposes of paragraph (a) of Sec. 561.203 and paragraph (b) of Sec.
561.204, whether a financial transaction 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:
* * * * *
(d) Nexus. The proximity between the foreign financial institution
engaging in the transaction(s) or providing the financial services and
a blocked person described in paragraph (a)(5) of Sec. 561.201, or
between the foreign financial institution conducting or facilitating
the financial transaction described in paragraph (a) of Sec. 561.203
and the Central Bank of Iran or a designated Iranian financial
institution, as defined in Sec. 561.324, or between the foreign
financial institution conducting or facilitating the financial
transaction described in paragraph (b) of Sec. 561.204 and the
National Iranian Oil Company (``NIOC''), the Naftiran Intertrade
Company (``NICO''), any entity owned or controlled by, or operating for
or on behalf of, NIOC or NICO, or the activities described in
paragraphs (b)(2) and (b)(3) of that section. 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, a blocked person described in paragraph
(a)(5) of Sec. 561.201, the Central Bank of Iran, a designated Iranian
financial institution, NIOC, or NICO in a direct customer relationship
generally would be of greater significance than a transaction or
financial service a foreign financial institution conducts for or
provides to a blocked person described in paragraph (a)(5) of Sec.
561.201, the Central Bank of Iran, a designated Iranian financial
institution, NIOC, or NICO indirectly or in a tertiary relationship.
(e) Impact. The impact of the transaction(s) or financial services
on the objectives of the Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, as amended by the Iran Threat Reduction and
Syria Human Rights Act of 2012 (``TRA''), or of the financial
transaction on the objectives of the National Defense Authorization Act
for Fiscal Year 2012, as amended by TRA, or of the financial
transaction on the objectives of Executive Order 13622 of July 30,
2012, including:
(1) The economic or other benefit conferred or attempted to be
conferred on a blocked person described in paragraph (a)(5) of Sec.
561.201, on the Central Bank of Iran or a designated Iranian financial
institution, or on NIOC, NICO, any entity owned or controlled by, or
operating for or on behalf of, NIOC or NICO, or any person engaged in
the activities described in paragraphs (b)(2) and (b)(3) of Sec.
561.204;
* * * * *
0
13. Revise Sec. 561.406 to read as follows:
Sec. 561.406 Country with primary jurisdiction over the foreign
financial institution.
For purposes of Sec. 561.203(i) and Sec. 561.204(f), a country
includes any jurisdiction that has its own central bank or contains a
separate financial sector authority, and a foreign financial
institution (including its foreign branches outside of the United
States) is under a country's primary jurisdiction if the foreign
financial institution is organized under the laws of the country or any
jurisdiction within that country.
0
14. Add new Sec. 561.408 to subpart D to read as follows:
Sec. 561.408 Goods or services originating in a country.
(a) Goods originating in a country are goods that have been grown,
produced, manufactured, extracted, or processed, and goods that have
been substantially transformed, in the country.
(b) Services originating in a country are services performed in
that country or services performed in the country to which the services
are being exported by a citizen, national, or permanent resident of the
country from which the services originate who is ordinarily resident in
that country.
(c) For purposes of this part, services originating in a country do
not include the brokering of transactions for the sale and exportation
of goods or services not originating in that country.
Subpart E--Licenses, Authorizations, and Statements of Licensing
Policy
0
15. Amend Sec. 561.504 by revising the introductory text of paragraph
(a) to read as follows:
Sec. 561.504 Transactions related to closing a correspondent account
or payable-through account.
(a) During the 10-day period beginning on the effective date of the
prohibition in Sec. 561.201(c), Sec. 561.203(c)(2), or Sec.
561.204(c)(2) on the maintaining of a correspondent account or a
payable-through account for a foreign financial institution whose name
is added to the Part 561 List, which is maintained on the Office of
Foreign Assets Control's Web site (www.treasury.gov/ofac) on the Iran
Sanctions page, U.S. financial institutions that maintain correspondent
accounts or payable-through accounts
[[Page 16410]]
for the foreign financial institution are authorized to:
* * * * *
Subpart G--Penalties
0
16. Amend Sec. 561.701 by:
0
a. Revising paragraph (a)(1).
0
b. Adding new paragraph (a)(3).
0
c. Revising the Note to paragraph (a) of Sec. 561.701.
0
d. Revising paragraph (b).
The revisions and additions read as follows:
Sec. 561.701 Penalties.
(a) Civil Penalties. (1) As set forth in section 104(c) of the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of
2010 (Pub. L. 111-195) (22 U.S.C. 8501-8551) (``CISADA'') and section
1245(g)(2) of the National Defense Authorization Act for Fiscal Year
2012 (Pub. L. 112-81) (22 U.S.C. 8513a) (``2012 NDAA''), 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 prohibition
contained in Sec. 561.201 or Sec. 561.203 or of any order,
regulation, or license set forth in or issued pursuant to this part
concerning such prohibitions.
* * * * *
(3) Pursuant to section 206 of IEEPA (50 U.S.C. 1705), which is
applicable to violations 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 under
IEEPA, a civil penalty not to exceed the amount set forth in section
206(b) of IEEPA may be imposed on any person who violates, attempts to
violate, conspires to violate, or causes a violation of any prohibition
contained in Sec. 561.204 or of any order, regulation, or license set
forth in or issued pursuant to this part concerning such prohibition.
Note to paragraph (a) of Sec. 561.701: As of the date of
publication in the Federal Register of the final rule amending this
part to implement sections 503 and 504 of the Iran Threat Reduction
and Syria Human Rights Act of 2012 and section 1 and other related
provisions of Executive Order 13622 of July 30, 2012 (March 15,
2013), IEEPA provides for a maximum civil penalty not to exceed the
greater of $250,000 or an amount that is twice the amount of the
transaction that is the basis of the violation with respect to which
the penalty is imposed.
(b) Criminal Penalty. (1) As set forth in section 104(c) of CISADA
and section 1245(g)(2) of the 2012 NDAA, a person who willfully
commits, willfully attempts to commit, or willfully conspires to
commit, or aids or abets in the commission of a violation of any
prohibition contained in Sec. Sec. 561.201 or 561.203 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.
(2) Pursuant to section 206 of IEEPA (50 U.S.C. 1705), a person who
willfully commits, willfully attempts to commit, or willfully conspires
to commit, or aids or abets in the commission of a violation of any
prohibition contained in Sec. 561.204 or of any order, regulation, or
license set forth in or issued pursuant to this part concerning such
prohibition may, 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.
* * * * *
Subpart H--Procedures
0
17. Revise Sec. 561.802 to read as follows:
Sec. 561.802 Delegation by the Secretary of the Treasury.
Any action that the Secretary of the Treasury is authorized to take
pursuant to subsections 104(c), (d), (h), or (i), or section 104A of
the Comprehensive Iran Sanctions, Accountability, and Divestment Act of
2010 (Pub. L. 111-195) (22 U.S.C. 8501-8551), as amended by the Iran
Threat Reduction and Syria Human Rights Act of 2012 (Pub. L. 112-158)
(22 U.S.C. 8701-8795), pursuant to section 8 of Executive Order 13553
of September 28, 2010 (75 FR 60567, October 1, 2010), pursuant to
section 10 of Executive Order 13599 of February 5, 2012 (77 FR 6659,
February 8, 2012), pursuant to sections 1 and 12 of Executive Order
13622 of July 30, 2012 (77 FR 45897, August 2, 2012), or pursuant to
section 16 of Executive Order 13628 of October 9, 2012 (77 FR 62139,
October 12, 2012), and any action of the Secretary of the Treasury
described in this part, may be taken by the Director of the Office of
Foreign Assets Control or by any other person to whom the Secretary of
the Treasury has delegated authority so to act.
0
18. Revise Sec. 561.803 to read as follows:
Sec. 561.803 Consultations.
In implementing sections 104 and 104A of the Comprehensive Iran
Sanctions, Accountability, and Divestment Act of 2010 (Pub. L. 111-195)
(22 U.S.C. 8501-8551), as amended by the Iran Threat Reduction and
Syria Human Rights Act of 2012 (Pub. L. 112-158) (22 U.S.C. 8701-8795),
the Secretary of the Treasury shall consult with the Secretary of State
and may, in the sole discretion of the Secretary of the Treasury,
consult with such other agencies and departments and such other
interested parties as the Secretary considers appropriate.
Dated: March 7, 2013.
Adam J. Szubin,
Director, Office of Foreign Assets Control.
[FR Doc. 2013-05766 Filed 3-14-13; 8:45 am]
BILLING CODE 4810-AL-P