[Federal Register Volume 71, Number 176 (Tuesday, September 12, 2006)]
[Rules and Regulations]
[Pages 53569-53571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7620]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 560


Iranian Transactions Regulations

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule; amendment.

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SUMMARY: The Office of Foreign Assets Control of the U.S. Department of 
the Treasury (``OFAC'') is amending the Iranian Transactions 
Regulations, 31 CFR part 560, to revoke the authorizations contained in 
Sec.  560.516 with respect to Bank Saderat and to except Bank Saderat 
from the scope of Sec.  560.405 and Sec.  560.532(b). These amendments 
effectively prohibit all transactions directly or indirectly involving 
Bank Saderat. In addition, OFAC is making a technical amendment to 
paragraph (a)(1) of Sec.  560.516.

DATES: Effective Date: September 8, 2006.

FOR FURTHER INFORMATION CONTACT: Assistant Director of Compliance 
Outreach & Implementation, tel.: 202/622-2490, Assistant Director of 
Licensing, tel.: 202/622-2480, Assistant Director of Policy, tel.: 202/
622-4855, or Chief Counsel, tel.: 202/622-2410, Office of Foreign 
Assets Control, Department of the Treasury, Washington, DC 20220 (not 
toll free numbers).

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

    This document and additional information concerning the Office of 
Foreign Assets Control (``OFAC'') are available from OFAC's Web site 
(http://www.treas.gov/ofac) or via facsimile through a 24-hour fax-on 
demand service, tel.: (202) 622-0077.

Background

    The Iranian Transactions Regulations, 31 CFR part 560 (the 
``ITR''), implement a series of Executive orders, beginning with 
Executive Order 12957, issued on March 15, 1995, under the authority of 
the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) 
(``IEEPA''). In that order, the President declared a national emergency 
with respect to the actions and policies of the Government of Iran, 
including its support for international terrorism, its efforts to 
undermine the Middle East peace process, and its efforts to acquire 
weapons of mass destruction and the means to deliver them. To deal with 
that threat, Executive Order 12957 imposed prohibitions on certain 
transactions with respect to the development of Iranian petroleum 
resources. On May 6, 1995, the President issued Executive Order 12959 
imposing comprehensive trade sanctions to further respond to this 
threat, and on August 19, 1997, the President issued Executive Order 
13059 consolidating and clarifying the previous orders.
    The Office of Foreign Assets Control (``OFAC'') is amending the ITR 
to cut off Bank Saderat, one of the largest Iranian government-owned 
banks, from the U.S. financial system. Bank Saderat has been a 
significant facilitator of Hizballah's financial activities and has 
served as a conduit between the Government of Iran and Hizballah, 
Hamas, the Popular Front for the Liberation of Palestine-General 
Command, and Palestinian Islamic Jihad.
    To cut off Bank Saderat from the U.S. financial system, OFAC is 
making three amendments to the ITR that effectively prohibit all 
transactions directly or indirectly involving Bank Saderat. OFAC is 
amending Sec.  560.516, a general license authorizing payment and U.S. 
dollar clearing transactions involving Iran, to revoke its 
applicability to Bank Saderat. OFAC is also amending Sec.  560.405, an 
interpretive section, and Sec.  560.532(b), a statement of licensing 
policy, to exclude Bank Saderat from the scope of these provisions.
    Section 560.516(a) authorizes U.S. depository institutions to 
process transfers of funds to or from Iran, or for the direct or 
indirect benefit of persons in Iran or the Government of Iran, if the 
transfer is covered in full by any of the following conditions and does 
not involve debiting or crediting an Iranian account: (1) The transfer 
is by order of a non-Iranian foreign bank from its own account in a 
domestic bank to an account held by a domestic bank for a second non-
Iranian foreign bank; (2) the transfer arises from an underlying 
transaction that has been authorized by a specific or general license 
issued pursuant to the ITR; (3) the transfer arises from an underlying 
transaction that is not prohibited by the ITR; or (4) the transfer 
arises from an underlying transaction that is exempted from regulation 
pursuant to Sec.  203(b) of IEEPA. Section 560.516(b) authorizes U.S. 
registered brokers or dealers in securities to process transfers of 
funds to or from Iran, or for the direct or indirect benefit of persons 
in Iran or the Government of Iran, if the transfer is covered in full 
by any of the conditions set forth in (2)-(4) above and does not 
involve debiting or crediting an Iranian account. The term Iranian 
account is defined in Sec.  560.320 to mean an account of a person 
located in Iran or of the Government of Iran maintained on the books of 
either a U.S. depository institution or a U.S. registered broker or 
dealer in securities.
    OFAC is adding a new paragraph (f) to Sec.  560.516 to revoke the 
applicability to Bank Saderat of the general licenses in paragraphs (a) 
and (b) of Sec.  560.516. Effective September 8, 2006, transactions 
directly or indirectly involving Bank Saderat are excluded from the 
scope of these authorizations. OFAC is also including an exception in 
this amendment to provide 90 days to wind down or complete performance 
of transactions involving Bank Saderat that are described in paragraphs 
(a)(2) through (4) or (b) of Sec.  560.516 and that were entered into 
before September 8, 2006, except for specific licenses issued pursuant 
to Sec.  560.532(b) that were being used before September 8, 2006 to 
obtain letters of credit issued by Bank Saderat, for which OFAC is 
providing a 180-day wind-down period.
    Section 560.405 is an interpretive section providing that 
transactions ordinarily incident to licensed transactions and necessary 
to give them effect are also authorized, with certain exceptions. OFAC 
is adding a new exception to Sec.  560.405 for transactions directly or 
indirectly involving Bank Saderat. Effective September 8, 2006, such 
transactions will not be authorized

[[Page 53570]]

as transactions ordinarily incident to a licensed transaction. As with 
Sec.  560.516, OFAC is providing 90 days to wind down or complete 
performance of all transactions involving Bank Saderat that were 
entered into before September 8, 2006, except for specific licenses 
issued pursuant to Sec.  560.532(b) that were being used before 
September 8, 2006 to obtain letters of credit issued by Bank Saderat, 
for which OFAC is providing a 180-day wind-down period.
    Section 560.532 of the ITR deals with payment for and financing of 
commercial sales and exportation or reexportation of agricultural 
commodities and products, medicine, and medical devices that are 
licensed pursuant to Sec.  560.530. Section 560.532(a) sets forth a 
general license authorizing certain payment terms. Section 560.532(b) 
provides that specific licenses may be issued on a case-by-case basis 
for payment terms and trade financing not authorized by the general 
license in paragraph (a). Pursuant to Sec.  560.532(b), OFAC has issued 
specific licenses authorizing the use of letters of credit issued by 
Iranian banks to pay for authorized agricultural and medical sales. 
OFAC is adding a new sentence to Sec.  560.532(b) providing that, 
effective September 8, 2006, specific licenses that have been or will 
be issued pursuant to this paragraph will not authorize any 
transactions involving Bank Saderat. However, with respect to specific 
licenses that were being used as of September 8, 2006 to obtain letters 
of credit issued by Bank Saderat, OFAC is further amending Sec.  
560.532(b) to provide a 180-day wind-down period to complete 
performance on any letters of credit issued by Bank Saderat or to 
obtain a letter of credit from a different issuing bank.
    In addition to the amendments relating to Bank Saderat, OFAC is 
also making a technical amendment to Sec.  560.516. Paragraph (a)(1) of 
Sec.  560.516 authorizes U.S. depository institutions to process 
transfers of funds to or from Iran, or for the direct or indirect 
benefit of persons in Iran or the Government of Iran, if the transfer 
is by order of a non-Iranian foreign bank from its own account in a 
domestic bank to an account held by a domestic bank for a second non-
Iranian foreign bank. OFAC is amending this paragraph by deleting the 
word ``second'' to clarify that U.S. depository institutions are 
authorized to make transfers between accounts held by different 
branches of the same non-Iranian foreign bank.

Public Participation

    Because the amendments of the ITR 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

    The collections of information related to the ITR 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 560

    Administrative practice and procedure, Banks, Banking, Brokers, 
Foreign Trade, Investments, Loans, Securities, Iran.

0
For the reasons set forth in the preamble, the Office of Foreign Assets 
Control amends 31 CFR part 560 as follows:

PART 560--IRANIAN TRANSACTIONS REGULATIONS

0
1. The authority citation of part 560 continues to read as follows:

    Authority: 3 U.S.C. 301; 18 U.S.C. 2339B, 2332d; 22 U.S.C. 
2349aa-9; 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. 106-387, 114 
Stat. 1549; E.O. 12613, 52 FR 41940, 3 CFR, 1987 Comp., p. 256; E.O. 
12957, 60 FR 14615, 3 CFR, 1995 Comp., p. 332; E.O. 12959, 60 FR 
24757, 3 CFR, 1995, Comp., 356; E.O. 13059, 62 FR 44531, 3 CFR, 1997 
Comp., p. 217.

Subpart D--Interpretations

0
2. In Sec.  560.405, republish the introductory text, redesignate 
paragraphs (a) through (e) as paragraphs (b) through (f), respectively, 
and add a new paragraph (a) to read as follows:


Sec.  560.405  Transactions incidental to a licensed transaction 
authorized.

    Any transaction ordinarily incident to a licensed transaction and 
necessary to give effect thereto is also authorized, except:
    (a) Effective September 8, 2006, transactions directly or 
indirectly involving Bank Saderat, except that transactions involving 
Bank Saderat that were entered into before September 8, 2006 may be 
performed according to their terms until December 7, 2006.

    Note to paragraph (a):  But see Sec.  560.532(b), which provides 
a 180-day wind-down period for specific licenses that were being 
used before September 8, 2006 to obtain letters of credit issued by 
Bank Saderat.

* * * * *

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

0
3. In Sec.  560.516, revise paragraph (a)(1) and add a new paragraph 
(f) to read as follows:


Sec.  560.516  Payment and United States dollar clearing transactions 
involving Iran.

    (a) * * *
    (1) The transfer is by order of a foreign bank which is not an 
Iranian entity from its own account in a domestic bank (directly or 
through a foreign branch or subsidiary of a domestic bank) to an 
account held by a domestic bank (directly or through a foreign branch 
or subsidiary of a domestic bank) for a foreign bank which is not an 
Iranian entity. For purposes of this section, ``foreign bank'' includes 
a foreign subsidiary, but not a foreign branch of a domestic bank;
* * * * *
    (f) Effective September 8, 2006, this section does not authorize 
transactions directly or indirectly involving Bank Saderat, except that 
transactions described in paragraphs (a)(2) through (a)(4) or (b) of 
this section involving Bank Saderat that were entered into before 
September 8, 2006 may be performed according to their terms until 
December 7, 2006.

    Note to paragraph (f): But see Sec.  560.532(b), which provides 
a 180-day wind-down period for specific licenses that were being 
used before September 8, 2006 to obtain letters of credit issued by 
Bank Saderat.


0
4. In Sec.  560.532, revise paragraph (b) to read as follows:


Sec.  560.532  Payment for and financing of exports and reexports of 
commercial commodities, medicine, and medical devices.

* * * * *
    (b) Specific licenses for alternate payment terms. Specific 
licenses may be issued on a case-by-case basis for payment terms and 
trade financing not authorized by the general license in paragraph (a) 
of this section for sales pursuant to Sec.  560.530. Effective 
September 8, 2006, specific licenses that have been or will be issued 
pursuant to this paragraph will not authorize any payment terms or 
trade financing involving Bank Saderat, except that, in the case of 
specific licenses that were

[[Page 53571]]

being used before September 8, 2006 to obtain letters of credit issued 
by Bank Saderat, such letters of credit may continue to be performed 
according to their terms until March 7, 2007. See Sec.  501.801(b) of 
this chapter for specific licensing procedures.
* * * * *

    Dated: September 7, 2006.
Adam J. Szubin,
Director, Office of Foreign Assets Control.
[FR Doc. 06-7620 Filed 9-8-06; 3:20 pm]
BILLING CODE 4811-37-P