[Federal Register Volume 60, Number 27 (Thursday, February 9, 1995)]
[Proposed Rules]
[Pages 7737-7742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3279]



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DEPARTMENT OF STATE

Bureau of International Narcotics Matters

22 CFR Part 140

[Public Notice 2159]


Prohibition on Assistance to Drug Traffickers

AGENCY: Bureau of International Narcotics Matters, Department of State.

ACTION: Proposed rule.

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SUMMARY: The Bureau of International Narcotics Matters plans to issue 
regulations to implement Section 487 of the Foreign Assistance Act of 
1961, as amended (22 U.S.C. Sec. 2291f). Section 487(a) directs the 
President to take all reasonable steps to ensure that assistance 
provided under the Foreign Assistance Act or the Arms Export Control 
Act is not provided to or through any individual or entity that the 
President knows or has reason to believe: (1) has been convicted of a 
violation of, or a conspiracy to violate, any law or regulation of the 
United States, a State or the District of Columbia, or a foreign 
country relating to narcotic or psychotropic drugs or other controlled 
substances; or (2) is or has been an illicit trafficker in any such 
controlled substance or is or has been a knowing assistor, abettor, 
conspirator, or colluder with others in the illicit trafficking of any 
such substance. The law further directs that regulations be issued to 
carry out the section and be submitted to Congress before they take 
effect. The proposed regulation will be set forth in a new part of the 
Code of Federal Regulations, 22 CFR part 140, which will establish a 
single governmentwide enforcement mechanism for Section 487. The 
proposed regulations seek to achieve rigorous statutory enforcement in 
a manner consistent with efficient foreign assistance program 
administration. They also seek to ensure protection of the procedural 
rights and interests of assistance recipients.

DATES: Comments due: April 10, 1995.

ADDRESSES: Send comments to: Bureau of International Narcotics and Law 
Enforcement Affairs, Room 7334, 2201 C Street NW., Washington, DC 
20520.

FOR FURTHER INFORMATION CONTACT: William R. Brownfield, Office of 
International Narcotics and Law Enforcement Affairs, Department of 
State, 202-647-0457, or Jo Brooks, Office of the Legal Adviser, 
Department of State, 202-647-7324.

SUPPLEMENTARY INFORMATION: This rule will implement Section 487 of the 
Foreign Assistance Act of 1961, as amended (22 U.S.C. Sec. 2291f). The 
requirements of Section 487 are described in the Summary, above.
    The procedures prescribed by these regulations apply to assistance 
under the Foreign Assistance Act of 1961 and the Arms Export Control 
Act. The regulations are set up in three Subparts: General (Subpart A, 
Secs. 140.1-140.3); Applicability (Subpart B, Sec. 104.4); and 
Enforcement (Subpart C, Secs. 140.5-140.14).
    The General Subpart (Subpart A) provides a statement of the 
regulations' purpose (Sec. 140.1), based upon the language of Section 
487 of the Foreign Assistance Act; identifies the authorities for 
issuance of the regulations (Sec. 140.2); and defines key terms used in 
the regulations (Sec. 140.3). The broad coverage of the regulations is 
reflected in the definitions of drug trafficking (Sec. 140.3(b)), money 
laundering (Sec. 140.3(c)), and narcotics offense (Sec. 140.3(d)), 
which are intended to be comprehensive. As noted in the definition of 
drug trafficking, it encompasses drug-related money laundering.
    Two of the key terms defined in the regulations are ``covered 
country'' (Sec. 140.3(e)) and ``covered assistance'' (Sec. 140.3(f)). 
The term ``covered country'' corresponds to those countries listed on 
the ``majors list,'' i.e., the list of major illicit drug producing 
countries and major drug-transit countries, determined annually by the 
President and transmitted to the appropriate Congressional committees 
as required by Chapter 8 of Part I of the Foreign Assistance Act. The 
term ``covered assistance'' is defined broadly, while excluding 
assessed contributions to an international organization and assistance 
that by operation of law is not subject to Section 487. The definition 
further provides that assistance in amounts less than $100,000 is 
excluded unless it pertains to: recipients of scholarships, 
fellowships, or participant training; or a covered individual or entity 
reasonably suspected of being or having been involved in drug 
trafficking. These definitions are intended to ensure rigorous 
application of the statutory prohibition on assistance to drug 
traffickers, while fostering efficient program administration.
    For ease of reference, the term ``covered individual or entity'' is 
defined in Sec. 140.4, where it is used, rather than in the definition 
section. Likewise, the term ``key individual'' is described in 
Sec. 140.6(a)(3), where it is introduced.
    The Applicability Subpart (Subpart B) explains the scope of the 
regulations. Their applicability is keyed primarily to ``covered 
individuals and entities'' that receive or provide direct or first-tier 
``covered assistance'' and are located or providing assistance within a 
``covered country.'' However, the regulations have been drafted 
carefully to ensure they are given their full statutory scope, i.e., 
that they are applied whenever an affected agency has reasonable 
grounds to suspect that a proposed recipient individual or entity may 
be or may have been involved in drug trafficking or may have been 
convicted of a narcotics offense (see Sec. 140.4(c); see also 
Secs. 140.3(f)(2), 140.7(a), 140.9(a), and 140.11). They are also 
applicable where a government agency providing covered assistance has 
specifically designated a recipient beyond the first tier (see 
Secs. 140.4(c), 140.7(b)). Additionally, the regulations apply to 
individuals who receive a scholarship, fellowship, or participant 
training (unless the assistance is provided through a multilateral 
institution or international organization and the recipient has not 
been designated by the agency providing assistance). Further assurance 
that drug traffickers will not receive assistance is provided by the 
requirement that where an agency providing covered assistance to a 
multilateral institution or international [[Page 7738]] organization 
does not designate the assistance recipient, the agency's agreement 
with the multilateral institution or international organization shall 
stipulate that such entity is to make reasonable efforts to ensure that 
the assistance is not diverted in support of drug trafficking 
(Sec. 140.7(c)).
    The Enforcement Subpart (Subpart C) contains an overview 
(Sec. 140.5), which outlines the Subpart's scope. The applicable review 
procedures, criteria to be applied in deciding whether to withhold 
assistance or take other measures, and procedures concerning violations 
identified subsequent to the obligation of funds are set forth in the 
Enforcement Subpart. The applicability of these procedures varies 
depending on the nature of the proposed recipient. The general 
framework is set forth in Sec. 140.6, in the context of covered 
assistance to foreign government entities. Variations of that framework 
are set forth in separate sections for: multilateral institutions and 
international organizations (Sec. 140.7); recipients of scholarships, 
fellowships, and participant training (Sec. 140.8); non-governmental 
entities (Sec. 140.9); and intermediate credit institutions (140.10). 
(Note: In Sec. 140.9 the use of the phrase ``non-governmental entity'' 
is meant to encompass a broader category of organizations than might be 
encompassed by the term ``non-governmental organization'' or its 
acronym, ``NGO.'' As explained in Sec. 140.9, it includes not only 
private voluntary agencies and educational institutions, but also for-
profit firms and any other non-governmental organization.)
    The review procedures set forth in the regulations are applied by 
the Country Narcotics Coordinator (as defined in Sec. 140.3(a)), who is 
responsible in the first instance for reviewing available information 
to determine whether a proposed assistance recipient is to be denied 
assistance or whether other measures are to be taken as a result of 
Section 487 of the Foreign Assistance Act (see Sec. 140.6(a)). An 
agency proposing assistance is responsible for providing the Country 
Narcotics Coordinator with the name of each key individual within a 
prospective recipient entity who may be expected to control or benefit 
from assistance as well as other relevant information that is readily 
available (Sec. 140.6(a)(3)).
    The regulations provide a two-week period, extendable if necessary 
for another two weeks, within which the Country Narcotics Coordinator, 
in consultation with the head of the agency proposing assistance or the 
agency head's designee, is to make a final determination whether to 
provide or withhold assistance or take other measures. Section 140.6(b) 
outlines the factors to be considered in determining whether to 
withhold assistance or take other measures.
    Section 140.6(b)(4) further provides that it is the Assistant 
Secretary for International Narcotics Matters (rather than the Country 
Narcotics Coordinator), in consultation with affected bureaus and 
agencies, who shall make any decision to withhold assistance or take 
other measures based on information or allegations that a key 
individual who is a senior government official of a foreign government 
has been convicted of a narcotics offense or has been engaged in drug 
trafficking (Sec. 140.6(b)(4)). Personal involvement at the Assistant 
Secretary level is appropriate in such a case because it involves 
inherently sensitive foreign policy issues.
    The enforcement procedures applicable to recipients of 
scholarships, fellowships, and participant training (Sec. 140.8) and 
U.S. and foreign non-governmental entities (Sec. 140.9) include a pre-
approval certification process. The regulations specify that false 
certification may subject the signatory to U.S. criminal prosecution 
under 18 U.S.C. Sec. 1001. (See Secs. 140.8(b), 140.9(c).) Although 
this penalty is described in the regulations, it is established 
independently by the referenced statute. The identification of a 
penalty in the regulations is not meant to limit the application of any 
criminal or civil penalty otherwise applicable.
    Section 140.10 concerns the procedures applicable to intermediate 
credit institutions. Such institutions are to be treated as either 
foreign government entities or non-governmental entities, depending on 
the nature of the particular institution. Section 140.10 also requires 
that agreements with such intermediate credit institutions include a 
contract clause concerning a refund procedure applicable to loans 
exceeding $1,000 made by any intermediate credit institution.
    Section 140.11 clarifies that the enforcement procedures 
established by Secs. 140.6-140.10 are not exhaustive, but represent 
only the minimum applicable procedures implementing Section 487 of the 
Foreign Assistance Act.
    The remaining provisions of the regulations, Secs. 140.11-140.14, 
establish notification and appeal procedures. Special care has been 
taken to ensure that notification will not be done in a manner that 
would interfere with any criminal investigation that may be ongoing 
(Sec. 140.13(b)). A Country Narcotics Coordinator's decision to 
withhold assistance or take other measures may be appealed by the 
agency proposing such assistance (Sec. 140.12). In addition, where the 
prospective assistance recipient is a U.S. entity, U.S. citizen, or 
permanent U.S. resident, a Country Narcotics Coordinator's preliminary 
decision to withhold assistance is referred to the Assistant Secretary 
of State for International Narcotics Matters for review and action. An 
adverse decision affecting a U.S. entity, U.S. citizen, or permanent 
U.S. resident may be contested in accordance with applicable agency 
regulations regarding governmentwide debarment and suspension 
(nonprocurement) and governmentwide requirements for drug-free 
workplace (grants).
    This amendment involves a foreign affairs function of the United 
States. It is exempt from review under Executive Order 12866 but has 
been reviewed internally by the Department to ensure consistency with 
the purposes thereof. It is also excluded from the procedures of 5 
U.S.C. Secs. 553 and 554.

List of Subjects in 22 CFR Part 140

    Drug traffic control, Foreign aid.

    For the reasons set out in the preamble, 22 CFR subchapter N is 
proposed to be amended by adding part 140 to read as follows:

PART 140--PROHIBITION ON ASSISTANCE TO DRUG TRAFFICKERS

Subpart A--General

140.1  Purpose.
140.2  Authorities.
140.3  Definitions.

Subpart B--Applicability

140.4  Applicability.

Subpart C--Enforcement

140.5  Overview.
140.6  Foreign government entities.
140.7  Multilateral institutions and international organizations.
140.8  Recipients of scholarships, fellowships, and participant 
training.
140.9  Non-governmental entities.
140.10  Intermediate credit institutions.
140.11  Minimum enforcement procedures.
140.12  Interagency appeal procedures.
140.13  Notification to foreign entities and individuals.
140.14  Notification to and opportunity to contest for U.S. entities 
and individuals.

    Authority: 22 U.S.C. 2651a.

Subpart A--General


Sec. 140.1  Purpose.

    (a) These regulations implement Section 487 of the Foreign 
Assistance Act of 1961, as amended (22 U.S.C. Sec. 2291f). 
[[Page 7739]] 
    (b) Section 487(a) directs the President to ``take all reasonable 
steps'' to ensure that assistance under the Foreign Assistance Act of 
1961 (FAA) and the Arms Export Control Act (AECA) ``is not provided to 
or through any individual or entity that the President knows or has 
reason to believe'':
    (1) has been ``convicted of a violation of, or a conspiracy to 
violate, any law or regulation of the United States, a State or the 
District of Columbia, or a foreign country relating [to] narcotic or 
psychotropic drugs or other controlled substances''; or
    (2) ``is or has been an illicit trafficker in any such controlled 
substance or is or has been a knowing assistor, abettor, conspirator, 
or colluder with others in the illicit trafficking in any such 
substance.''


Sec. 140.2  Authorities.

    Authority to implement FAA Section 487 was delegated by the 
President to the Secretary of State by E.O. 12163, as amended, and 
further delegated by the Secretary to the Assistant Secretary for 
International Narcotics Matters by Delegation of Authority No. 145, 
dated Feb. 4, 1980 (45 FR 11655), as amended.


Sec. 140.3  Definitions.

    The following definitions shall apply for purposes of these 
regulations:
    (a) Country Narcotics Coordinator. The individual assigned by the 
chief of mission in each foreign country to coordinate United States 
government policies and activities within a country related to 
counternarcotics efforts. As determined by the State Department's 
Bureau of International Narcotics Matters, these responsibilities may, 
as necessary, be performed by another person.
    (b) Drug trafficking. Any activity undertaken illicitly to 
cultivate, produce, manufacture, distribute, sell, finance or 
transport, or otherwise assist, abet, conspire, or collude with others 
in illicit activities relating to, narcotic or psychotropic drugs, 
precursor chemicals, or other controlled substances, including drug-
related money laundering.
    (c) Money laundering. The process whereby proceeds of criminal 
activity, are transported, transferred, transformed, converted, or 
intermingled with legally acquired funds, for the purpose of concealing 
or disguising the true nature, source, disposition, movement, or 
ownership of those proceeds. The goal of money laundering is to make 
funds derived from or associated with illicit activity appear legally 
acquired.
    (d) Narcotics offense. A violation of, or a conspiracy to violate, 
any law or regulation of the United States, a State or the District of 
Columbia, or a foreign country relating to narcotic or psychotropic 
drugs or other controlled substances.
    (e) Covered country. A country that has been determined by the 
President to be either a ``major illicit drug producing'' or ``major 
drug-transit'' country under Chapter 8 of Part I of the FAA. The list 
of covered countries is maintained by the State Department's Bureau of 
International Narcotics matters.
    (f) Covered assistance. Any assistance provided by an agency of the 
United States government under the FAA or AECA, except that it does not 
include:
    (1) Assistance that by operation of the law is not subject to FAA 
Section 487, including:
     (i) Disaster relief and rehabilitation provided under Chapter 9 of 
Part I of the FAA; and
     (ii) Assistance provided to small farmers when part of a 
community-based alternative development program under Part I or Chapter 
4 of Part II of the FAA;
    (2) Assistance in an amount less than $100,000, except that the 
procedures in Sec. 140.8 for recipients of scholarships, fellowships, 
and participant training shall apply regardless of amount. However, 
assistance shall be deemed covered assistance regardless of amount if 
the agency has reasonable grounds to suspect that a covered individual 
or entity may be or may have been involved in drug trafficking; or
    (3) Assessed contributions to an international organization.

Subpart B--Applicability


Sec. 140.4  Applicability.

    (a) Except as otherwise provided herein or as otherwise determined 
by the Secretary of State or the Secretary's designee, the procedures 
prescribed by these regulations apply to any ``covered individual or 
entity,'' i.e., any individual or entity, including any foreign 
government entity and any U.S. or foreign non-governmental entity, that 
is:
    (1) (i) Receiving or providing covered assistance under a direct or 
first-tier grant, loan, guarantee, cooperative agreement, contract, or 
other direct agreement with an agency of the United States; or
    (ii) Receiving covered assistance in the form of a scholarship, 
fellowship, or participant training, except as provided in 
Sec. 140.7(c); and
    (2) Located in or providing assistance within a covered country.

    Examples:
    (1) Under a $500,000 project grant agreement with the Agency for 
International Development providing covered assistance, Government A 
enters into a $150,000 contract with Corporation X. Government A is 
a covered entity. However, Corporation X is not a covered entity 
because the contract is not a direct contract with an agency of the 
United States.
    (2) Under a $1,000,000 grant from the Department of State 
providing covered assistance, Corporation B makes a $120,000 
subgrant to University Y for the training of 12 individuals. 
Corporation B is a covered entity and the 12 individuals receiving 
participant training are covered individuals. University Y is not a 
covered entity.
    (3) University C receives a $1 million regional assistance 
research project grant from the Agency for International 
Development, but only $80,000 is provided for research in covered 
countries. University C is not a covered entity. (However, if 
$100,000 or more were provided for research in a covered country or 
countries, then University C would be a covered entity.)

    (b) For purposes of Sec. 140.4(a), where a government agency 
providing covered assistance specifically designates a recipient of 
such assistance, the recipient shall be deemed a covered individual or 
entity.
    (c) Unless otherwise determined by the Secretary of State or the 
Secretary's designee, these regulations do not apply to assistance to 
or through individuals and entities in non-covered countries. However, 
an affected agency shall apply these regulations if the agency has 
reasonable grounds to suspect that an individual or entity located in 
or providing covered assistance in a non-covered country may be or may 
have been involved in drug trafficking or may have been convicted of a 
narcotics offense.

Subpart C--Enforcement


Sec. 140.5  Overview.

    This subpart sets forth the enforcement procedures applicable 
pursuant to Sec. 140.4 to the various types of covered individuals and 
entities with respect to covered assistance. Section 140.6 establishes 
the procedures applicable to foreign government entities, including any 
such entity that is covered by the definition of a ``foreign state'' 
set forth in the Foreign Sovereign Immunities Act, 28 U.S.C. Sec. 
1603(a). Section 140.7 establishes the procedures applicable to 
multilateral institutions and international organizations. Section 
140.8 establishes the procedures applicable to recipients of 
scholarships and fellowships and participant trainees. Section 140.9 
establishes the procedures applicable to non-governmental entities. 
Section 140.10 [[Page 7740]] sets forth additional procedures 
applicable to intermediate credit institutions. Sections 140.11 through 
140.14 contain general provisions related to the enforcement process.


Sec. 140.6  Foreign government entities.

    (a) Review procedures. (1) The Country Narcotics Coordinator shall 
be responsible for establishing a system for reviewing available 
information regarding narcotics offense convictions and drug 
trafficking of proposed assistance recipients under this section and, 
except under the circumstances described in Sec. 140.6(b)(4), 
determining whether a proposed recipient is to be denied such 
assistance or other measures are to be taken as a result of the 
application of FAA Section 487.
    (2) Prior to providing assistance to or through a proposed 
recipient, the head of the agency providing the assistance, or the 
agency head's designee, shall provide the Country Narcotics Coordinator 
in the country in which the proposed recipient is located or, as 
appropriate, where assistance is to be provided, the information 
specified in Sec. 140.6(a)(3) in order that the Country Narcotics 
Coordinator may carry out his or her responsibilities under these 
regulations.
    (3) In each case, the agency proposing the assistance shall provide 
to the Country Narcotics Coordinator the name of each key individual 
within the entity who may be expected to control or benefit from 
assistance as well as other relevant identifying information (e.g., 
address, date of birth) that is readily available. If a question arises 
concerning who should be included within the group of key individuals 
of an entity, the head of the agency providing the assistance, or the 
agency head's designee, shall consult with the Country Narcotics 
Coordinator, and the final decision shall be made by the Country 
Narcotics Coordinator.
    (4) Within fourteen calendar days after receiving the name of a 
proposed recipient and other relevant information, the Country 
Narcotics Coordinator shall determine whether any available information 
may warrant withholding assistance or taking other measures under these 
regulations, based on the criteria set forth in Sec. 140.6(b). If, 
during that period, the Country Narcotics Coordinator determines that 
available information does not so indicate, he or she shall notify the 
proposing agency that the assistance may be provided to the proposed 
recipient.
    (5) If, during the initial fourteen-day period, the Country 
Narcotics Coordinator determines that information exists that may 
warrant withholding assistance or taking other measures under these 
regulations, then the Country Narcotics Coordinator shall have another 
fourteen calendar days to make a final determination whether to provide 
or withhold the assistance or take such other measures.
    (b) Criteria to be applied. (1) A decision to withhold assistance 
or take other measures shall be based on knowledge or a reasonable 
belief that the proposed recipient individual or entity, or one or more 
key individuals within a proposed recipient entity, during the past ten 
years, has:
     (i) Been convicted of a narcotics offense as defined in these 
regulations; or
    (ii) Been engaged in drug trafficking, regardless of whether there 
has been a conviction.
    (2) Factors that may support a decision to withhold assistance or 
take other measures based on the belief that the proposed recipient has 
been engaged in drug trafficking during the past ten years when there 
has been no conviction of such an offense may include, but are not 
limited to, the following:
    (i) Admission of participation in such activities;
    (ii) A long record of arrests for drug-trafficking with an 
unexplained failure to prosecute by the local government;
    (iii) Several reliable and corroborative reports.
    (3) If the Country Narcotics Coordinator determines that a key 
individual (as described in Sec. 140.6(a)(3)) within a proposed 
recipient entity has been convicted of a narcotics offense or has been 
engaged in drug trafficking under the terms of these regulations, the 
Country Narcotics Coordinator must then decide whether withholding 
assistance or taking other measures in connection with the entity 
itself is warranted. This decision shall be made in consultation with 
the head of the agency proposing the assistance, or the agency head's 
designee. In making this determination, the Country Narcotics 
Coordinator shall take into account:
    (i) The extent to which such individual would have control over 
assistance received;
    (ii) The extent to which such individual could benefit personally 
from the assistance;
    (iii) The degree to which financial or other resources of the 
entity itself have been used to support drug trafficking; and
    (iv) Whether such individual has acted alone or in collaboration 
with others associated with the entity.
    (4) A decision to withhold assistance or to take other measures 
based on information or allegations that a key individual who is a 
senior government official of the host nation has been convicted of a 
narcotics offense or has been engaged in drug trafficking shall be made 
by the Assistant Secretary for International Narcotics Matters in 
consultation with the affected bureaus and other interested agencies. 
For purposes of these regulations, ``senior government official'' 
includes host nation officials at or above the vice minister level, 
heads of host nation law enforcement agencies, and general or flag 
officers of the host nation armed forces. In making the decision 
whether to withhold assistance or take other measures because of 
information or allegations that a senior government official of the 
host nation has engaged in drug trafficking, the criteria set forth in 
Secs. 140.6(b)(2) and (3) shall apply.
    (c) Violations identified subsequent to obligation. The foregoing 
procedures require a review before funds are obligated. If, however, 
subsequent to an obligation of funds an assistance recipient is found 
to have been convicted of a narcotics offense or to have been engaged 
in drug trafficking (e.g., the head of a recipient entity changes 
during the course of an activity and the new head is found to have been 
engaged in drug trafficking), appropriate action should be taken, 
including, if necessary, termination of the assistance. Agreements 
shall be written to permit termination of assistance in such 
circumstances.


Sec. 140.7  Multilateral institutions and international organizations.

    Assistance provided to or through multilateral institutions or 
international organizations is subject to these regulations as follows:
    (a) Where the government agency providing assistance has reasonable 
grounds to suspect that a recipient multilateral institution or 
international organization may be or may have been involved in drug 
trafficking, the agency shall apply the provisions of Sec. 140.6.
    (b) Where the government agency providing assistance designates the 
recipient of assistance from the multilateral institution or 
international organization and the designated recipient is a covered 
individual or entity, the agency shall apply the provisions of these 
regulations that would apply if the assistance were provided directly 
to the designated recipient.
    (c) Where the government agency providing assistance does not 
designate the recipient of assistance from the 
[[Page 7741]] multilateral institution or international organization, 
these regulations do not apply to such recipients of assistance, except 
that the agency's agreement with the multilateral institution or 
international organization shall stipulate that such entity is to make 
reasonable efforts to ensure that the assistance is not diverted in 
support of drug trafficking.

    Example:
    The State Department provides $600,000 to the United Nations for 
the United Nations Drug Control Program, specifically designating 
that Government D receive $150,000 and Corporation E receive $60,000 
for programs in a covered country. Individuals who will receive 
training are not specifically designated by the State Department. 
The United Nations is a covered entity based on Sec. 140.4(a)(1)(i); 
Government D is a covered entity based on Secs. 140.4(b) and 
140.7(b); Corporation E is not a covered entity under Secs. 140.4(b) 
and 140.7(b) because it has been designated to receive less than 
$100,000 in assistance. Participant trainees are not covered 
individuals because they fall under the exception contained in 
Sec. 140.7(c) (see also Sec. 140.4(a)(1)(ii)).


Sec. 140.8  Recipients of scholarships, fellowships, and participant 
training.

    (a) Procedures. Individuals who are located in a covered country 
and who are proposed recipients of scholarships, fellowships, or 
participant training are subject to the review procedures, criteria, 
and procedures concerning violations identified subsequent to 
obligation set forth in Sec. 140.6. Such review of recipient 
individuals is in addition to the provisions applicable to the entity 
providing the assistance.
    (b) Certifications. Individuals who are located in a covered 
country and who are proposed recipients of scholarships, fellowships, 
or participant training shall also be required to certify prior to 
approval that, within the last ten years, they have not been convicted 
of a narcotics offense, have not been engaged in drug trafficking, and 
have not knowingly assisted, abetted, conspired, or colluded with 
others in drug trafficking. False certification may subject the 
assistance recipient to U.S. criminal prosecution under 18 U.S.C. Sec. 
1001 and to withdrawal of assistance under these regulations.


Sec. 140.9  Non-governmental entities.

    (a) Procedures. Section 140.9 applies to private voluntary 
agencies, educational institutions, for-profit firms, or any other non-
governmental entity. A non-governmental entity that is not organized 
under the laws of the United States shall be subject to the review 
procedures and criteria set forth in Secs. 140.6(a) and (b). A non-
governmental entity that is organized under the laws of the United 
States shall not be subject to such review procedures and criteria. 
However, an affected agency shall follow such procedures if the agency 
has reasonable grounds to suspect that a proposed U.S. non-governmental 
entity or a key individual of such entity may be or may have been 
involved in drug trafficking or may have been convicted, within the 
last ten years, of a narcotics offense. Procedures set forth in 
Sec. 140.6(c) concerning violations identified subsequent to obligation 
shall apply to both U.S. and foreign non-governmental entities.

    Examples:
    (1) A $100,000 grant to a covered U.S. university for 
participant training would not be subject to the review procedures 
and criteria in Secs. 140.6(a) and (b). However, a proposed 
participant would be subject to the review procedures and criteria 
in Secs. 140.6 (a) and (b) as part of the agency's approval process.
    (2) A $100,000 grant to a covered foreign private voluntary 
agency for participant training would be subject to the review 
procedures and criteria in Secs. 140.6(a) and (b). In addition, each 
proposed participant would be subject to the review procedures and 
criteria in Secs. 140.6(a) and (b) as part of the agency's approval 
process.

    (b) Refunds. A clause shall be included in grants, contracts, and 
other agreements with both U.S. and foreign non-governmental entities 
requiring that assistance provided to or through such an entity that is 
found to have been engaged in drug trafficking, as defined in these 
regulations, shall be subject to refund.
    (c) Certifications. Prior to approval of covered assistance, key 
individuals (as described in Sec. 140.6(a)(3)) in both U.S. and foreign 
non-governmental entities shall be required to certify that, within the 
last ten years, they have not been convicted of a narcotics offense, 
have not been engaged in drug trafficking and have not knowingly 
assisted, abetted, conspired, or colluded with others in drug 
trafficking. False certification may subject the signatory to U.S. 
criminal prosecution under 18 U.S.C. Sec. 1001.


Sec. 140.10  Intermediate credit institutions.

    (a) Treatment as Non-Governmental Entity or as a Foreign Government 
Entity. Intermediate credit institutions (``ICIs'') shall be subject to 
either the procedures applicable to foreign government entities or 
those applicable to non-governmental entities, depending on the nature 
of the specific entity. The Assistant Secretary for International 
Narcotics Matters or the Assistant Secretary's designee, in 
consultation with the head of the agency proposing the assistance or 
the agency head's designee, shall determine (consistent with the 
definition of ``foreign state'' set forth in the Foreign Sovereign 
Immunities Act, 28 U.S.C. Sec. 1603(a) and made applicable by 
Sec. 140.5) whether the ICI will be treated as a non-governmental 
entity or a foreign government entity.
    (b) Refunds. In addition to measures required as a consequence of 
an ICI's treatment as a non-governmental entity or a foreign government 
entity, a clause shall be included in agreements with all ICIs 
requiring that any loan greater than $1,000 provided to an individual 
or entity found to have been convicted of a narcotics offense or 
engaged in drug trafficking, as defined in these regulations, shall be 
subject to refund or recall.


Sec. 140.11  Minimum enforcement procedures.

    Sections 140.6 through 140.10 represent the minimum procedures that 
each agency is required to apply in order to implement FAA Section 487. 
Under individual circumstances, however, additional measures may be 
appropriate. In those cases, agencies are encouraged to take additional 
steps, as necessary, to ensure that the statutory restrictions are 
enforced.


Sec. 140.12  Interagency appeal procedures.

    If the agency proposing the assistance disagrees with a 
determination by the Country Narcotics Coordinator to withhold 
assistance or take other measures, the head of the agency, or the 
agency head's designee, may request that the determination be reviewed 
by the Assistant Secretary of State for International Narcotics Matters 
in coordination with other affected bureaus and agencies. The 
assistance shall continue to be withheld pending resolution of the 
appeal.


Sec. 140.13  Notification to foreign entities and individuals.

    (a) Unless otherwise determined under Sec. 140.13(b), if a 
determination has been made that assistance to a foreign entity or 
individual is to be withheld, suspended, or terminated under these 
regulations, the agency administering such assistance shall so inform 
the affected entity or individual. Except as the agency administering 
such assistance and the Country Narcotics Coordinator may otherwise 
determine, the entity or individual shall be notified solely of the 
statutory basis for withholding assistance.
    (b) Before such notification, the Country Narcotics Coordinator 
shall be responsible for determining that notification would not 
interfere with an on-going criminal investigation. If an 
[[Page 7742]] investigation is underway, the Country Narcotics 
Coordinator, in consultation with the investigating agency, shall 
determine whether notification is appropriate or whether other action 
should be taken.


Sec. 140.14  Notification to and opportunity to contest for U.S. 
entities and individuals.

    (a) If the Country Narcotics Coordinator makes a preliminary 
decision that evidence exists to justify withholding assistance to a 
U.S. entity, U.S. citizen, or permanent U.S. resident, the matter shall 
be referred immediately to the Assistant Secretary of State for 
International Narcotics Matters for appropriate action, to be taken in 
coordination with the agency proposing the assistance.
    (b) If a determination has been made that assistance is to be 
withheld, suspended, or terminated under these regulations, the 
Assistant Secretary of State for International Narcotics Matters, or 
the Assistant Secretary's designee, shall notify the affected U.S. 
entity, U.S. citizen, or permanent U.S. resident and provide such 
entity or individual with an opportunity to contest the action in 
accordance with the provisions of applicable agency regulations 
regarding governmentwide debarment and suspension (nonprocurement) and 
governmentwide requirements for drug-free workplace (grants) (for 
example, regulations set forth in 22 CFR part 137 (State Department) or 
22 CFR part 208 (Agency for International Development)).

    Dated: February 1, 1995.
Robert S. Gelbard,
Assistant Secretary for International Narcotics Matters.
[FR Doc. 95-3279 Filed 2-8-95; 8:45 am]
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