§ 589.203 - Prohibited transactions with respect to financing activities in the energy sector of the Russian Federation economy (Directive 2).

§ 589.203 Holding of funds in interest-bearing accounts; investment and reinvestment.

(a) Except as provided in paragraphs (e) or (f) of this section, or as otherwise directed by OFAC, any

Prohibited transactions with respect to financing activities in the energy sector of the Russian Federation economy (Directive 2).

The following activities by a U.S. person

holding funds, such as currency, bank deposits, or liquidated financial obligations, subject to § 589.201 shall hold or place such funds in a blocked interest-bearing account located in

or within the United States

.

are prohibited:

(

b

a)

(1) For purposes of this section, the term blocked interest-bearing account means a blocked account:

(i) In a federally-insured U.S. bank, thrift institution, or credit union, provided the funds are earning interest at rates that are commercially reasonable; or

(ii) With a broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), provided the funds are invested in a money market fund or in U.S. Treasury bills.

(2) Funds held or placed in a blocked account pursuant to paragraph (a) of this section may not be invested in instruments the maturity of which exceeds 180 days.

(c) For purposes of this section, a rate is commercially reasonable if it is the rate currently offered to other depositors on deposits or instruments of comparable size and maturity.

(d) For purposes of this section, if interest is credited to a separate blocked account or subaccount, the name of the account party on each account must be the same.

(e) Blocked funds held in instruments the maturity of which exceeds 180 days at the time the funds become subject to § 589.201 may continue to be held until maturity in the original instrument, provided any interest, earnings, or other proceeds derived therefrom are paid into a blocked interest-bearing account in accordance with paragraphs (a) or (f) of this section.

(f) Blocked funds held in accounts or instruments outside the United States at the time the funds become subject to § 589.201 may continue to be held in the same type of accounts or instruments, provided the funds earn interest at rates that are commercially reasonable.

(g) This section does not create an affirmative obligation for the holder of blocked tangible property, such as chattels or real estate, or of other blocked property, such as debt or equity securities, to sell or liquidate such property. However, OFAC may issue licenses permitting or directing such sales or liquidation in appropriate cases.

(h) Funds subject to this section may not be held, invested, or reinvested in a manner that provides immediate financial or economic benefit or access to any person whose property and interests in property are blocked pursuant to § 589.201, nor may their holder cooperate in or facilitate the pledging or other attempted use as collateral of blocked funds or other assets.

For new debt issued on or after July 16, 2014 and before November 28, 2017, all transactions in, provision of financing for, and other dealings in new debt of longer than 90 days maturity of persons determined to be subject to this section, their property, or their interests in property; and

(b) For new debt issued on or after November 28, 2017, all transactions in, provision of financing for, and other dealings in new debt of longer than 60 days maturity of persons determined to be subject to this section, their property, or their interests in property.

Note 1 to § 589.203:

The names of persons subject to this section (and earlier versions of Directive 2) are published in the Federal Register and incorporated into OFAC's Sectoral Sanctions Identifications List (SSI List) with the descriptive text “Executive Order 13662 Directive Determination - Subject to Directive 2.” Certain transactions with persons subject to this section may result in the imposition of secondary sanctions, and therefore such persons' entries on the SSI List will also include the descriptive prefix text “Secondary sanctions risk:”, followed by information about the applicable secondary sanctions authority. The SSI List is accessible through the Ukraine-/Russia-Related Sanctions page on OFAC's website: www.treas.gov/ofac. See § 589.411 concerning entities that may not be listed on the SSI List but whose property and interests in property are nevertheless subject to the prohibitions in this section.

Note 2 to § 589.203:

Section 216 of CAATSA (22 U.S.C. 9511) requires Congressional review prior to the termination of sanctions imposed pursuant to E.O. 13662. Section 222 of CAATSA (22 U.S.C. 9522) describes the Congressional notification required prior to the termination of sanctions imposed pursuant to E.O. 13662.