05-6046. Iranian Transactions Regulations

AGENCY:

Office of Foreign Assets Control, Treasury.

ACTION:

Final rule.

SUMMARY:

The Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury is revising the Iranian Transactions Regulations to clarify the applicability of certain general licenses to brokers and dealers in securities.

DATES:

Effective Date: March 28, 2005.

FOR FURTHER INFORMATION CONTACT:

Chief of Policy Planning and Program Management, tel. [phone], Chief of Licensing, tel.: [phone], Chief of Compliance, tel. [phone], or Chief Counsel, tel.: [phone], Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220 (not toll free numbers).

SUPPLEMENTARY INFORMATION:

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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. In that order, the President declared a national emergency pursuant to IEEPA to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by 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 this 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 Treasury Department's Office of Foreign Assets Control (“OFAC”) is amending the ITR to include definitions relating to registered brokers and dealers in securities and to clarify the application to such brokers and dealers of general licenses relating to funds transfers to and from Iran and to the operation of Iranian accounts. To this end, OFAC is adding a new provision at 31 CFR 560.321 to establish a regulatory definition of the term United States registered broker or dealer in securities and amending § 560.320 of the ITR to clarify that the term Iranian accounts includes accounts of persons located in Iran or of the Government of Iran maintained on the books of a United States registered broker or dealer in securities. Section 560.516 of the ITR is being amended to clarify that United States registered brokers or dealers in securities are authorized to process certain transfers of funds to or from Iran. Section 560.517 of the ITR is being amended to clarify that United States registered brokers or dealers in securities are within the scope of the general license authorizing the exportation of certain Iranian account-related services to Iran. A corresponding technical change to § 560.532 of the ITR is also included.

Public Participation

Because the amendment of the ITR involves a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) (the “APA”) 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 31 CFR parts 31 CFR parts 560 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
• Securities
• Iran

For the reasons set forth in the Preamble, 31 CFR part 560 is amended as follows:

PART 560—IRANIAN TRANSACTIONS REGULATIONS

1. The authority citation for 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 C—General Definitions

2. Revise § 560.320 to read as follows:

§ 560.320

Iranian accounts.

The term Iranian accounts means accounts of persons located in Iran or of the Government of Iran maintained on the books of either a United States depository institution or a United States registered broker or dealer in securities.

3. Add a new § 560.321 to subpart C to read as follows:

§ 560.321

United States registered broker or dealer in securities.

The term United States registered broker or dealer in securities means any U.S. citizen, permanent resident alien, or entity organized under the laws of the United States or of any jurisdiction within the United States, including its foreign branches, or any agency, office or branch of a foreign entity located in the United States, that:

(a) Is a “broker” or “dealer” in securities within the meanings set forth in the Securities Exchange Act of 1934;

(b) Holds or clears customer accounts; and

(c) Is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

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

4. Amend § 560.516 by redesignating paragraphs (b) through (d) as paragraphs (c) through (e), respectively, and adding a new paragraph (b) to read as follows:

§ 560.516

Payment and United States dollar clearing transactions involving Iran.

* * * * *

(b) United States registered brokers or dealers in securities are authorized 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 paragraphs (a)(2) through (4) of this section and does not involve the debiting or crediting of an Iranian account.

* * * * *

5. Amend § 560.517 by revising the section heading and paragraph (b) and adding paragraph (c) to read as follows:

§ 560.517

Exportation of services: Iranian accounts at United States depository institutions or United States registered brokers or dealers in securities.

* * * * *

(b) United States registered brokers or dealers in securities are prohibited from performing services with respect to Iranian accounts, as defined in § 560.320, at the instruction of the Government of Iran or persons located in Iran, except that United States registered brokers or dealers in securities are authorized to provide and be compensated for services and incidental transactions with respect to:

(1) The limited maintenance of an Iranian account, including only the payment into such account of interest, cash dividends, and stock dividends; the debiting of service charges; and the execution of stock splits and dividend reinvestment plans; and

(2) At the request of the account party, the closing of Iranian accounts through the one-time liquidation of all assets in the account at fair market value and the lump sum transfer only to the account party of all proceeds derived therefrom and all remaining funds in the account.

(c) Specific licenses may be issued with respect to the operation of Iranian accounts that constitute accounts of:

(1) Foreign government missions and their personnel in Iran; or

(2) Missions of the Government of Iran in the United States.

6. Revise the last sentence of paragraph (d) of § 560.532 to read as follows:

§ 560.532

Payment for and financing of export and reexport of commercial commodities, medicine, and medical devices.

* * * * *

(d) * * * See § 560.516(c).

* * * * *

Dated: February 9, 2005.

Robert W. Werner,

Director, Office of Foreign Assets Control.

Approved: February 18, 2005.

Juan C. Zarate,

Assistant Secretary (Terrorist Financing).