03-27074. Reporting, Procedures and Penalties Regulations; Iraqi Sanctions Regulations; Foreign Terrorist Organizations Sanctions Regulations; Foreign Narcotics Kingpin Sanctions Regulations

AGENCY:

Office of Foreign Assets Control, Treasury.

ACTION:

Final rule.

SUMMARY:

The Treasury Department's Office of Foreign Assets Control (“OFAC”) is issuing a final rule to amend the Reporting, Procedures and Penalties Regulations, Iraqi Sanctions Regulations, Foreign Terrorist Organizations Sanctions Regulations, and Foreign Narcotics Kingpin Sanctions Regulations (collectively, the “Regulations”) to implement the requirement of the Federal Civil Penalties Inflation Adjustment Act of 1990 to adjust for inflation the maximum amounts of the civil monetary penalties that may be assessed under the Regulations.

EFFECTIVE DATE:

October 23, 2003.

FOR FURTHER INFORMATION CONTACT:

Chief, Civil Penalties Division, tel. [phone], or Chief Counsel, tel. [phone], Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

This file is available for download without charge in ASCII and Adobe Acrobat readable (*.PDF) formats at GPO Access. GPO Access supports HTTP, FTP, and Telnet at fedbbs.access.gpo.gov. It may also be accessed by modem dialup at 202/512-1387 followed by typing “/GO/FAC.” Paper copies of this document can be obtained by calling the Government Printing Office at 202-512-1530. Additional information concerning the programs of the Office of Foreign Assets Control is available for download from the Office's Internet Home Page at: http://www.treas.gov/​ofac or via FTP at ofacftp.treas.gov. Facsimiles of information are available through the Office's 24-hour fax-on-demand service: call 202/622-0077 using a fax machine, a fax modem, or (within the United States) a touch-tone telephone.

Background

Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990 (“FCPIA Act”) (Pub. L. 101-410, 104 Stat. 890; 28 U.S.C. 2461 note), as amended by the Debt Collection Improvement Act of 1996 (“DCIA”) (Pub. L. 104-134, 110 Stat. 1321-373; 31 U.S.C. 3701 note)), requires each Federal agency with statutory authority to assess civil monetary penalties (“CMPs”) to adjust those CMPs for inflation according to a formula described in section 5 of the FCPIA Act. One purpose of the FCPIA Act is to ensure that CMPs continue to maintain their deterrent effect through periodic cost-of-living based adjustments. The DCIA amended the FCPIA Act to require that each agency, to the extent necessary, issue regulations at least every four years to adjust its CMPs for inflation.

Section 5 of the FCPIA Act requires that each CMP having a specified or maximum monetary amount provided for by Federal law be increased by the percentage by which the Consumer Price Index for all urban consumers (“CPI”), published by the Department of Labor, for the month of June of the calendar year preceding the adjustment exceeds the CPI for the month of June of the calendar year in which the amount of the CMP was last set or adjusted pursuant to law. The statute includes a mechanism for rounding penalty increases and limits the first inflation adjustment of a CMP to 10 percent of such penalty.

With regard to rounding, the FCPIA Act sets out penalty ranges, from amounts less than or equal to $100 to amounts greater than $200,000, and provides different dollar multiples for rounding the increase in each penalty range. Specifically, section 5(a) of the FCPIA Act requires that any increase in a CMP be rounded to the nearest multiple of:

1. $10 in the case of penalties less than or equal to $100;

2. $100 in the case of penalties greater than $100 but less than or equal to $1,000;

3. $1,000 in the case of penalties greater than $1,000 but less than or equal to $10,000;

4. $5,000 in the case of penalties greater than $10,000 but less than or equal to $100,000;

5. $10,000 in the case of penalties greater than $100,000 but less than or equal to $200,000; and

6. $25,000 in the case of penalties greater than $200,000.

OFAC currently is authorized to impose CMPs pursuant to five statutes: The Trading with the Enemy Act (“TWEA”) (50 U.S.C. App. 16); the International Emergency Economics Powers Act (“IEEPA”) (50 U.S.C. 1705); the Iraq Sanctions Act of 1990 (“ISA”) (Pub. L. 101-513, 104 Stat. 2049; 50 U.S.C. 1701 note); the Antiterrorism and Effective Death Penalty Act of 1996 (“AEDPA”) (18 U.S.C. 2339B); and the Foreign Narcotics Kingpin Designation Act (“FNKDA”) (21 U.S.C. 1906). The current maximum CMP for each of the first four statutes was last adjusted or set by statute in 1996. The current maximum CMP under the FNKDA was set when the statute was enacted in 1999 and has not yet been adjusted for inflation.

With regard to those CMPs last adjusted or set by statute in 1996, the CPI value increased from 156.7 for June 1996 to 179.9 for June 2002, resulting in an inflation factor of 1.148 (i.e., a 14.8 percent increase). The CMP inflation factor for the FNKDA is 1.082 (i.e., an 8.2 percent increase), calculated using the CPI values of 166.2 for June 1999 and 179.9 for June 2002.

The original maximum CMP of $50,000 under TWEA was adjusted for inflation to $55,000 in 1996. Multiplying the current penalty of $55,000 by the factor of 1.148 results in $63,140, an increase of $8,140. When that number is rounded to the nearest multiple of $5,000, as required by the FCPIA Act, the maximum TWEA-based CMP per violation is increased to the inflation-adjusted amount of $65,000.

The original maximum CMP of $10,000 under IEEPA was adjusted for inflation to $11,000 in 1996. Multiplying the current penalty of $11,000 by the factor of 1.148 results in $12,628, an increase of $1,628. When that number is rounded to the nearest multiple of $5,000, as required by the FCPIA Act, the maximum IEEPA-based CMP per violation remains $11,000.

The original maximum CMP of $250,000 under ISA was adjusted for inflation to $275,000 in 1996. Multiplying the current penalty of $275,000 by the factor of 1.148 results in $315,700, an increase of $40,700. When that number is rounded to the nearest multiple of $25,000, as required by the FCPIA Act, the maximum ISA-based CMP per violation is increased to the inflation-adjusted amount of $325,000.

The maximum CMP of $50,000 under AEDPA was set by statute in 1996 and has not previously been adjusted for inflation. Multiplying the current penalty of $50,000 by the factor of 1.148 results in $57,400, an increase of $7,400. When that number is rounded to the nearest multiple of $5,000, as required by the FCPIA Act, the maximum AEDPA-based CMP per violation is increased to the inflation-adjusted amount of $55,000.

The maximum CMP of $1,000,000 under FNKDA was set by statute in 1999 and has not previously been adjusted for inflation. Multiplying the current penalty of $1,000,000 by the factor of 1.082 results in $1,082,000, an increase of $82,000. When that number is rounded to the nearest multiple of $25,000, as required by the FCPIA Act, the maximum FNKDA-based CMP per violation is increased to the inflation-adjusted amount of $1,075,000.

Executive Order 12866, Administrative Procedure Act, Regulatory Flexibility Act, and Paperwork Reduction Act

Because the regulations involve a foreign affairs function, Executive Order 12866 and the provisions of 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. Additionally, advance notice, public comment, and delayed effectiveness are unnecessary because the regulations merely reflect adjustments in penalty rates required by law and do not substantively alter the existing regulatory framework or in any way affect the terms under which civil penalties are assessed by OFAC. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

The Paperwork Reduction Act does not apply because the rule does not impose information collection requirements that would require the approval of the Office of Management and Budget under 44 U.S.C. 3501 et seq.

List of Subjects

31 CFR Part 501

• Administrative practice and procedure
• Banks
• Banking
• Blocking of assets
• Foreign trade
• Licensing
• Penalties
• Reporting and recordkeeping requirements
• Sanctions

31 CFR Part 575

• Administrative practice and procedure
• Banks
• Banking
• Blocking of assets
• Exports
• Foreign trade
• Humanitarian aid
• Imports
• Iran
• Iraq
• Oil imports
• Penalties
• Petroleum
• Petroleum products
• Reporting and recordkeeping requirements
• Sanctions
• Specially designated nationals
• Terrorism
• Travel restrictions

31 CFR Part 597

• Administrative practice and procedure
• Banks
• Banking
• Blocking of assets
• Foreign terrorist organizations
• Penalties
• Reporting and recordkeeping requirements
• Sanctions
• Terrorism
• Transfer of Assets

31 CFR Part 598

• Administrative practice and procedure
• Banks
• Banking
• Blocking of assets
• Narcotics trafficking
• Penalties
• Reporting and recordkeeping requirements
• Sanctions
• Significant foreign narcotics traffickers
• Specially designated narcotics trafficker
• Transfer of Assets

For the reasons set forth in the preamble, 31 CFR chapter V is amended as follows:

PART 501—REPORTING, PROCEDURES AND PENALTIES REGULATIONS

1. The authority citation for part 501 continues to read as follows:

Authority: 18 U.S.C. 2332d; 21 U.S.C. 1901-1908; 22 U.S.C. 287c; 22 U.S.C. 2370(a); 31 U.S.C. 321(b); 50 U.S.C. 1701-1706; 50 U.S.C. App. 1-44; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., p. 1174; E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p. 614.

Subpart D—Trading With the Enemy Act (TWEA) Penalties

2. Section 501.701 is amended by revising paragraph (a)(3) to read as follows:

§ 501.701

Penalties

(a) * * *

(3) The Secretary of the Treasury may impose a civil penalty of not more than $65,000 per violation on any person who violates any license, order, or regulation issued under TWEA.

Note to paragraph (a)(3).

The current $65,000 civil penalty cap may be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990.

* * * * *

PART 575—IRAQI SANCTIONS REGULATIONS

1. The authority citation for part 575 continues to read as follows:

Authority: 3 U.S.C. 301; 18 U.S.C. 2332d; 22 U.S.C. 287c; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-513, 104 Stat. 2047-2055 (50 U.S.C. 1701 note); E.O. 12722, 55 FR 31803, 3 CFR, 1990 Comp., p. 294; E.O. 12724, 55 FR 33089, 3 CFR, 1990 Comp., p. 297; E.O. 12817, 57 FR 48433, 3 CFR, 1992 Comp., p. 317; E.O. 13290, 68 FR 14307, March 20, 2003.

Subpart G—Penalties

2. Section 575.701 is amended by revising paragraph (a) introductory text and paragraph (a)(1) to read as follows:

§ 575.701

Penalties.

(a) Section 586E of the Iraq Sanctions Act of 1990 (Public Law 101-513, 104 Stat. 2049; 50 U.S.C. 1701 note), as adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Public Law 101-410, as amended, 28 U.S.C. 2461 note), provides that, notwithstanding section 206 of the International Emergency Economic Powers Act (50 U.S.C. 1705) and section 5(b) of the United Nations Participation Act of 1945 (22 U.S.C. 287c(b)):

(1) A civil penalty of not to exceed $325,000 per violation may be imposed on any person who, after the enactment of this Act, violates or evades or attempts to violate or evade Executive Order Number 12722, 12723, 12724, or 12725, or any license, order, or regulation issued under any such Executive Order;

Note to paragraph (a)(1).

The current $325,000 civil penalty cap may be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990.

* * * * *

PART 597—FOREIGN TERRORIST ORGANIZATIONS SANCTIONS REGULATIONS

1. The authority citation for part 597 is revised to read as follows:

Authority: 31 U.S.C. 321(b); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 104-132, 110 Stat. 1214, 1248-53 (8 U.S.C. 1189, 18 U.S.C. 2339B).

Subpart G—Penalties

2. Section 597.701 is amended by revising paragraph (b) to read as follows:

§ 597.701

Penalties.

* * * * *

(b) Attention is directed to 18 U.S.C. 2339B(b), as added by Public Law 104-132, 110 Stat. 1250-1253, section 303, which, as adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as amended, 28 U.S.C. 2461 note), provides that, except as authorized by the Secretary of the Treasury, any financial institution that knowingly fails to retain possession of or maintain control over funds in which a foreign terrorist organization or its agent has an interest, or to report the existence of such funds in accordance with these regulations, shall be subject to a civil penalty in an amount that is the greater of $55,000 per violation, or twice the amount of which the financial institution was required to retain possession or control.

Note to paragraph (b).

The current $55,000 civil penalty cap may be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990.

* * * * *

PART 598—FOREIGN NARCOTICS KINGPIN SANCTIONS REGULATIONS

1. The authority citation for part 598 continues to read as follows:

Authority: 3 U.S.C. 301; 21 U.S.C. 1901-1908; 31 U.S.C. 321(b); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note).

Subpart G—Penalties.

2. Section 598.701 is amended by revising paragraph (a) introductory text and paragraph (a)(3) to read as follows:

§ 598.701

Penalties.

(a) Attention is directed to section 807 of the Foreign Narcotics Kingpin Designation Act, which is applicable to violations of the provisions of any license, rule, or regulation issued by or pursuant to the direction or authorization of the Secretary of Treasury pursuant to this part or otherwise under that Act. Section 807 of the Foreign Narcotics Kingpin Designation Act, as adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Public Law 101-410, as amended, 28 U.S.C. 2461 note), provides that:

* * * * *

(3) A civil penalty not to exceed $1,075,000 per violation may be imposed by the Secretary of the Treasury on any person who violates any license, order, rule, or regulation issued in compliance with the provisions of the Foreign Narcotics Kingpin Designation Act.

Note to paragraph (a)(3).

The current $1,075,000 civil penalty cap may be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990.

* * * * *

Dated: October 1, 2003.

R. Richard Newcomb,

Director, Office of Foreign Assets Control.

Approved: October 15, 2003.

Juan C. Zarate,

Deputy Assistant Secretary (Terrorist Financing and Financial Crimes), Department of the Treasury.