31 C.F.R. PART 501—REPORTING, PROCEDURES AND PENALTIES REGULATIONS
Title 31 - Money and Finance: Treasury
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.
Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted.
This part sets forth standard reporting and recordkeeping requirements and license application and other procedures governing transactions regulated pursuant to other parts codified in this chapter, as well as to economic sanctions programs for which implementation and administration are delegated to the Office of Foreign Assets Control. Substantive prohibitions and policies particular to each economic sanctions program are not contained in this part but are set forth in the particular part of this chapter dedicated to that program, or, in the case of economic sanctions programs not yet implemented in regulations, in the applicable executive order or other authority. License application procedures and reporting requirements set forth in this part govern transactions undertaken pursuant to general or specific licenses. The criteria for general and specific licenses pertaining to a particular economic sanctions program are set forth in subpart E of the individual parts in this chapter. Statements of licensing policy contained in subpart E of the individual parts in this chapter, however, may contain additional information collection provisions that require production of specified documentation unique to a given general license or statement of licensing policy. [62 FR 52494, Oct. 8, 1997] Definitions of terms used in this part are found in subpart C of the part within this chapter applicable to the relevant application, record, report, procedure or transaction. In the case of economic sanctions programs for which implementation and administration are delegated to the Office of Foreign Assets Control but for which regulations have not yet been issued, the definitions of terms in this part are governed by definitions contained in the implementing statute or Executive order. Except as otherwise provided, every person engaging in any transaction subject to the provisions of this chapter shall keep a full and accurate record of each such transaction engaged in, regardless of whether such transaction is effected pursuant to license or otherwise, and such record shall be available for examination for at least 5 years after the date of such transaction. Except as otherwise provided, every person holding property blocked pursuant to the provisions of this chapter or funds transfers retained pursuant to §596.504(b) of this chapter shall keep a full and accurate record of such property, and such record shall be available for examination for the period of time that such property is blocked and for at least 5 years after the date such property is unblocked. Note: See subpart F of part 597 for the relationship between this section and part 597. [62 FR 45101, Aug. 25, 1997, as amended at 62 FR 52494, Oct. 8, 1997] Every person is required to furnish under oath, in the form of reports or otherwise, from time to time and at any time as may be required by the Director, Office of Foreign Assets Control, complete information relative to any transaction, regardless of whether such transaction is effected pursuant to license or otherwise, subject to the provisions of this chapter or relative to any property in which any foreign country or any national thereof has any interest of any nature whatsoever, direct or indirect. The Director may require that such reports include the production of any books of account, contracts, letters or other papers connected with any such transaction or property, in the custody or control of the persons required to make such reports. Reports with respect to transactions may be required either before or after such transactions are completed. Except as provided in parts 596 and 597, the Director may, through any person or agency, conduct investigations, hold hearings, administer oaths, examine witnesses, receive evidence, take depositions, and require by subpoena the attendance and testimony of witnesses and the production of all books, papers, and documents relating to any matter under investigation, regardless of whether any report has been required or filed in connection therewith. Note: See subpart F of part 597 for the relationship between this section and part 597. [62 FR 45101, Aug. 25, 1997, as amended at 62 FR 52494, Oct. 8, 1997] (a) Who must report—(1) Holders of blocked property. Any person, including a financial institution, holding property blocked pursuant to this chapter must report. The requirement includes financial institutions that receive and block payments or transfers. This requirement is mandatory and applies to all U.S. persons (or persons subject to U.S. jurisdiction in the case of parts 500 and 515 of this chapter) who have in their possession or control any property or interests in property blocked pursuant to this chapter. (2) Primary responsibility to report. A report may be filed on behalf of a holder of blocked property by an attorney, agent, or other person. Primary responsibility for reporting blocked property, however, rests with the actual holder of the property, or the person exercising control over property located outside the United States, with the following exceptions: primary responsibility for reporting any trust assets rest with the trustee; and primary responsibility for reporting real property rests with any U.S. co-owner, legal representative, agent, or property manager in the United States. No person is excused from filing a report by reason of the fact that another person has submitted a report with regard to the same property, except upon actual knowledge of the report filed by such other person. Reports filed are regarded as privileged and confidential. (3) Financial institutions. For purposes of this section, the term “financial institution” shall include a banking institution, domestic bank, United States depository institution, financial institution, or U.S. financial institution, as those terms are defined in the applicable part of this chapter. (b) What must be reported—(1) Initial reports—(i) When reports are due. Reports are required to be filed within 10 business days from the date that property becomes blocked. This reporting requirement includes payments or transfers that are received and blocked by financial institutions. (ii) Contents of reports. Initial reports on blocked property shall describe the owner or account party, the property, its location, any existing or new account number or similar reference necessary to identify the property, actual or estimated value and the date it was blocked, and shall include the name and address of the holder, along with the name and telephone number of a contact person from whom compliance information can be obtained. If the report is filed by a financial institution and involves the receipt of a payment or transfer of funds which are blocked by the financial institution, the report shall also include a photocopy of the payment or transfer instructions received and shall confirm that the payment has been deposited into a new or existing blocked account which is labeled as such and is established in the name of, or contains a means of clearly identifying the interest of, the individual or entity subject to blocking pursuant to the requirements of this chapter. (2) Annual reports—(i) When reports are due. A comprehensive report on all blocked property held as of June 30 of the current year shall be filed annually by September 30. The first annual report is due September 30, 1997. (ii) Contents of reports. Annual reports shall be filed using Form TDF 90–22.50, Annual Report of Blocked Property. Copies of Form TDF 90–22.50 may be obtained directly from the Office of Foreign Assets Control, by calling the fax-on-demand service maintained by the Office of Foreign Assets Control at 202/622–0077, or by downloading the form from the “OFAC Press Releases and Miscellaneous Documents” file library (“FAC_MISC”) located on the Government Printing Office's Federal Bulletin Board Online via GPO Access (Internet site: http://fedbbs.access.gpo.gov/libs/fac_misc.htm). Photocopies of the report form may be used. Requests to submit the information required on Form TDF 90–22.50 in an alternative format developed by the reporter are invited and will be considered by the Office of Foreign Assets Control on a case-by-case basis. A copy of reports filed using form TDF 90–22.50 or in alternative formats must be retained for the reporter's records. (c) Reports on retained funds pursuant to §596.504(b) of this chapter. The reporting requirements set forth in this section are applicable to any financial institution retaining funds pursuant to §596.504(b) of this chapter, except that the account name shall reflect the name of the person whose interest required retention of the funds. (d) Where to report. All reports must be filed with the Office of Foreign Assets Control, Compliance Programs Division, U.S. Treasury Department, 1500 Pennsylvania Avenue NW.—Annex, Washington, DC 20220. Note: See subpart F of part 597 for the relationship between this section and part 597. [62 FR 45101, Aug. 25, 1997, as amended at 62 FR 52495, Oct. 8, 1997] (a) Who must report. Any financial institution that rejects a funds transfer where the funds are not blocked under the provisions of this chapter, but where processing the transfer would nonetheless violate, or facilitate an underlying transaction that is prohibited under, other provisions contained in this chapter, must report. For purposes of this section, the term “financial institution” shall include a banking institution, depository institution or United States depository institution, domestic bank, financial institution or U.S. financial institution, as those terms are defined in the applicable part of this chapter. (b) Rejected transfers. Examples of transactions involving rejected funds transfers include funds transfer instructions: (1) Referencing a blocked vessel but where none of the parties or financial institutions involved in the transaction is a blocked person; (2) Sending funds to a person in Iraq; (3) Transferring unlicensed gifts or charitable donations from the Government of Syria to a U.S. person; (4) Crediting Iranian accounts on the books of a U.S. financial institution; and (5) Making unauthorized transfers from U.S. persons to Iran or the Government of Iran. (c) When reports are due. Reports are required to be filed within 10 business days by any financial institution rejecting instructions to execute payments or transfers involving underlying transactions prohibited by the provisions of this chapter. (d) What must be reported. The report shall include the name and address of the transferee financial institution, the date of the transfer, the amount of the payment transfer, and a photocopy of the payment or transfer instructions received, and shall state the basis for the rejection of the transfer instructions. The report shall also provide the name and telephone number of a contact person at the transferee financial institution from whom compliance information may be obtained. (e) Where to report. Reports must be filed with the Office of Foreign Assets Control, Compliance Programs Division, U.S. Treasury Department, 1500 Pennsylvania Avenue NW.—Annex, Washington, DC 20220. [62 FR 45101, Aug. 25, 1997, as amended 70 FR 34061, June 13, 2005] (a) U.S. persons (or persons subject to the jurisdiction of the United States in the case of parts 500 and 515 of this chapter) participating in litigation, arbitration, or other binding alternative dispute resolution proceedings in the United States on behalf of or against persons whose property or interests in property are blocked or whose funds have been retained pursuant to §596.504(b) of this chapter, or when the outcome of any proceeding may affect blocked property or retained funds, must: (1) Provide notice of such proceedings upon their commencement or upon submission or receipt of documents bringing the proceedings within the terms of the introductory text to this paragraph (a); (2) Submit copies of all pleadings, motions, memoranda, exhibits, stipulations, correspondence, and proposed orders or judgments (including any proposed final judgment or default judgment) submitted to the court or other adjudicatory body, and all orders, decisions, opinions, or memoranda issued by the court, to the Chief Counsel, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW.—Annex, Washington, DC 20220, within 10 days of filing, submission or issuance. This paragraph (a)(2) shall not apply to discovery requests or responses, documents filed under seal, or requests for procedural action not seeking action dispositive of the proceedings (such as requests for extension of time to file); and (3) Report by immediate facsimile transmission to the Chief Counsel, Office of Foreign Assets Control, at facsimile number 202/622–1911, the scheduling of any hearing or status conference in the proceedings whenever it appears that the court or other adjudicatory body may issue an order or judgment in the proceedings (including a final judgment or default judgment) or is considering or may decide any pending request dispositive of the merits of the proceedings or of any claim raised in the proceedings. (b) The reporting requirements of paragraph (a) of this section do not apply to proceedings to which the Office of Foreign Assets Control is a party. (c) Persons initiating proceedings subject to the reporting requirements of this section must notify the court or other adjudicatory body of the restrictions set forth under the applicable part in this chapter governing the transfer of blocked property or funds retained pursuant to §596.504(b) of this chapter, including the prohibition on any unlicensed attachment, judgment, decree, lien, execution, garnishment or other judicial process with respect to any property in which, on or after the applicable effective date, there existed an interest of any person whose property and property interests were subject to blocking pursuant to this chapter or were subject to retention pursuant to §596.504(b) of this chapter. The reporting and recordkeeping requirements set forth in this subpart are applicable to economic sanctions programs for which implementation and administration have been delegated to the Office of Foreign Assets Control. Source: 68 FR 53642, Sept. 11, 2003, unless otherwise noted.
This subpart is applicable only to those parts of chapter V promulgated pursuant to the TWEA, which include parts 500, 505, and 515. (a) Attention is directed to section 16 of the TWEA, 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), which provides that: (1) Persons who willfully violate any provision of TWEA or any license, rule, or regulation issued thereunder, and persons who willfully violate, neglect, or refuse to comply with any order of the President issued in compliance with the provisions of TWEA shall, upon conviction, be fined not more than $1,000,000 or, if an individual, be fined not more than $100,000 or imprisoned for not more than 10 years, or both; and an officer, director, or agent of any corporation who knowingly participates in such violation shall, upon conviction, be fined not more than $100,000 or imprisoned for not more than 10 years, or both. (2) Any property, funds, securities, papers, or other articles or documents, or any vessel, together with its tackle, apparel, furniture, and equipment, concerned in a violation of TWEA may upon conviction be forfeited to the United States Government. (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 (4) Any property, funds, securities, papers, or other articles or documents, or any vessel, together with its tackle, apparel, furniture, and equipment, that is the subject of a violation subject to a civil penalty issued pursuant to TWEA shall, at the discretion of the Secretary of the Treasury, be forfeited to the United States Government. (b) The criminal penalties provided in TWEA are subject to increase pursuant to 18 U.S.C. 3571 which, when read in conjunction with section 16 of TWEA, provides that persons convicted of violating TWEA may be fined up to the greater of either $250,000 for individuals and $1,000,000 for organizations or twice the pecuniary gain or loss from the violation. (c) Attention is directed to 18 U.S.C. 1001, which provides that whoever, in any matter within the jurisdiction of any department or agency of the United States, knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined under title 18, United States Code, or imprisoned not more than 5 years, or both. [68 FR 53642, Sept. 11, 2003, as amended at 68 FR 61361, Oct. 28, 2003] (a) Chief Counsel means the Chief Counsel (Foreign Assets Control), Office of the General Counsel, Department of the Treasury. (b) Day means calendar day. In computing any period of time prescribed in or allowed by this subpart, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday, Sunday, or Federal legal holiday, in which event the period runs until the end of the next day that is not a Saturday, Sunday, or Federal legal holiday. Intermediate Saturdays, Sundays, and Federal legal holidays shall be excluded from the computation when the period of time prescribed or allowed is seven days or less, not including any additional time allowed for service by mail. If on the day a filing is to be made, weather or other conditions have caused the designated filing location to close, the filing deadline shall be extended to the end of the next day that the filing location is not closed and that is not a Saturday, a Sunday, or a Federal legal holiday. If service is made by mail, three days shall be added to the prescribed period for response. (c) Department means the Department of the Treasury. (d) Director means the Director of the Office of Foreign Assets Control, Department of the Treasury. (e) Ex Parte Communication means any material oral or written communication not on the public record concerning the merits of a proceeding with respect to which reasonable prior notice to all parties is not given, on any material matter or proceeding covered by these rules, that takes place between: A party to the proceeding, a party's counsel, or any other interested individual; and the Administrative Law Judge or Secretary's designee handling that proceeding. A request to learn the status of a proceeding does not constitute an ex parte communication; and settlement inquiries and discussions do not constitute ex parte communications. (f) General Counsel means the General Counsel of the U.S. Department of the Treasury. (g) Order of Settlement means a written order issued by the Director terminating a civil penalty action. An Order of Settlement does not constitute an agency decision that any violation took place. (h) Order Instituting Proceedings means a written order issued by the Director to initiate a civil penalty hearing. (i) Prepenalty Notice means a written notification from the Director informing a respondent of the alleged violation(s) and the respondent's right to respond. (j) Penalty Notice means a written notification from the Director informing a respondent that the Director has made a finding of violation and, absent a request for a hearing, will impose a civil monetary penalty. (k) Proceeding means any agency process initiated by an “Order Instituting Proceedings,” or by the filing of a petition for review of an Administrative Law Judge's decision or ruling. (l) Respondent means any individual alleged by the Director to have violated a TWEA-based sanctions regulation. (m) Secretary's designee means a U.S. Treasury Department official delegated responsibility by the Secretary of the Treasury to consider petitions for review of Administrative Law Judge decisions made in civil penalty hearings conducted pursuant to this subpart. (n) Secretary means the Secretary of the Treasury. (a) The administrative process for enforcing TWEA sanctions programs proceeds as follows: (1) The Director of the Office of Foreign Assets Control will notify a suspected violator (hereinafter “respondent”) of an alleged violation by issuing a “Prepenalty Notice.” The Prepenalty Notice shall describe the alleged violation(s) and include a proposed civil penalty amount. (2) The respondent will have 60 days from the date the Prepenalty Notice is served to make a written presentation either defending against the alleged violation or admitting the violation. A respondent who admits a violation may offer information as to why a monetary penalty should not be imposed or why, if imposed, the monetary penalty should be in a lesser amount than proposed. (3) Absent a settlement agreement or a finding that no violation occurred, the Director of the Office of Foreign Assets Control will issue a “Penalty Notice.” The respondent will have 30 days from the date of service to either pay the penalty or request a hearing. (4) If the respondent requests a hearing, the Director of the Office of Foreign Assets Control will have two options: (i) The Director may issue an “Order Instituting Proceedings” and refer the matter to an Administrative Law Judge for a hearing and decision; or (ii) The Director may determine to discontinue the penalty action based on information presented by the respondent. (5) Absent review by a Secretary's designee, the decision of the Administrative Law Judge will become the final decision of the Department without further proceedings. (6) If review is taken by a Secretary's designee, the Secretary's designee reaches the final decision of the Department. (7) A respondent may seek judicial review of the final decision of the Department. (b) Construction of rules. The rules contained in this subpart shall be construed and administered to promote the just, speedy, and inexpensive determination of every action. To the extent there is a conflict between the rules contained in this subpart and a procedural requirement contained in any statute, the requirement in the statute shall control. No person shall be represented before the Director in any civil penalty matter, or an Administrative Law Judge or the Secretary's designee in a civil penalty hearing, under this subpart except as provided in this section. (a) Representing oneself. In any proceeding, an individual may appear on his or her own behalf. (b) Representative. Upon written notice to the Director, (1) A respondent may be represented by a personal representative. If a respondent wishes to be represented by counsel, such counsel must be an attorney at law admitted to practice before the Supreme Court of the United States, the highest court of any State, commonwealth, possession, or territory of the United States, or the District of Columbia; (2) a duly authorized member of a partnership may represent the partnership; and (3) a bona fide officer, director, or employee of a corporation, trust or association may represent the corporation, trust or association. (c) Director representation. The Director shall be represented by members of the Office of Chief Counsel or any other counsel specifically assigned by the General Counsel. (d) Conflicts of interest—(1) Conflict of interest in representation. No individual shall appear as representative for a respondent in a proceeding conducted pursuant to this subpart if it reasonably appears that such representation may be materially limited by that representative's responsibilities to a third person, or by that representative's own interests. (2) Corrective measures. An Administrative Law Judge may take corrective measures at any stage of a proceeding to cure a conflict of interest in representation, including the issuance of an order limiting the scope of representation or disqualifying an individual from appearing in a representative capacity for the duration of the proceeding. (a) Service of Prepenalty Notice, Penalty Notice, Acknowledgment of Hearing Request and Order Instituting Proceedings. The Director shall cause any Prepenalty Notice, Penalty Notice, Acknowledgment of Hearing Request, Order Instituting Proceedings, and other related orders and decisions, or any amendments or supplements thereto, to be served upon the respondent. (1) Service on individuals. Service shall be complete: (i) Upon the date of mailing by first class (regular) mail to the respondent at the respondent's last known address, or to a representative authorized to receive service, including qualified representatives noticed to the Director pursuant to §501.704. Absent satisfactory evidence in the administrative record to the contrary, the Director may presume that the date of mailing is the date stamped on the first page of the notice or order. The respondent may rebut the presumption that a notice or order was mailed on the stamped mailing date only by presenting evidence of the postmark date on the envelope in which the notice or order was mailed; (ii) Upon personal service on the respondent; or leaving a copy at the respondent's place of business with a clerk or other person in charge thereof; or leaving a copy at the respondent's dwelling house or usual place of abode with a person at least 18 years of age then residing therein; or with any other representative authorized by appointment or by law to accept or receive service for the respondent, including representatives noticed to the Director pursuant to §501.704; and evidenced by a certificate of service signed and dated by the individual making such service, stating the method of service and the identity of the individual with whom the notice or order was left; or (iii) Upon proof of service on a respondent who is not resident in the United States by any method of service permitted by the law of the jurisdiction in which the respondent resides or is located, provided the requirements of such foreign law satisfy due process requirements under United States law with respect to notice of administrative proceedings, and where applicable laws or intergovernmental agreements or understandings make the methods of service set forth in paragraphs (a)(1)(i) and (ii) of this section inappropriate or ineffective for service upon the nonresident respondent. (2) Service on corporations and other entities. Service is complete upon delivering a copy of the notice or order to a partner, bona fide officer, director, managing or general agent, or any other agent authorized by appointment or by law to receive such notice, by any method specified in paragraph (a)(1) of this section. (b) Service of responses to Prepenalty Notice, Penalty Notice, and requests for a hearing. A respondent shall serve a response to a Prepenalty Notice and any request for a hearing on the Director through the Chief of Civil Penalties, Office of Foreign Assets Control, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW., Washington DC 20220, with the envelope prominently marked “Urgent: Part 501 Action.” Service shall be complete upon the date of mailing, as evidenced by the post-mark date on the envelope, by first class (regular) mail. (c) Service or filing of papers in connection with any hearing by an Administrative Law Judge or review by the Secretary's designee. (1) Service on the Director and/or each respondent. (i) Each paper, including each notice of appearance, written motion, brief, petition for review, statement in opposition to petition for review, or other written communication, shall be served upon the Director and/or each respondent in the proceeding in accordance with paragraph (a) of this section; provided, however, that no service shall be required in the case of documents that are the subject of a motion seeking a protective order to limit or prevent disclosure to another party. (ii) Service upon the Director shall be made through the Chief Counsel (Foreign Assets Control), U.S. Treasury Department, 1500 Pennsylvania Avenue, NW., Washington, DC 20220, with the envelope prominently marked “Urgent: Part 501 Proceeding.” (iii) Service may be made: (A) As provided in paragraph (a) of this section; (B) By mailing the papers through the U.S. Postal Service by Express Mail; or (C) By transmitting the papers by facsimile machine where the following conditions are met: (1) The persons serving each other by facsimile transmission have agreed to do so in a writing, signed by each party, which specifies such terms as they deem necessary with respect to facsimile machine telephone numbers to be used, hours of facsimile machine operation, the provision of non-facsimile original or copy, and any other such matters; and (2) Receipt of each document served by facsimile is confirmed by a manually signed receipt delivered by facsimile machine or other means agreed to by the parties. (iv) Service by U.S. Postal Service Express Mail is complete upon delivery as evidenced by the sender's receipt. Service by facsimile is complete upon confirmation of transmission by delivery of a manually signed receipt. (2) Filing with the Administrative Law Judge. Unless otherwise provided, all briefs, motions, objections, applications or other filings made during a proceeding before an Administrative Law Judge, and all requests for review by the Secretary's designee, shall be filed with the Administrative Law Judge. (3) Filing with the Secretary's designee. And all briefs, motions, objections, applications or other filings made during a proceeding before the Secretary's designee shall be filed with the Secretary's designee. (4) Certificate of service. Papers filed with an Administrative Law Judge or Secretary's designee shall be accompanied by a certificate stating the name of each person served, the date of service, the method of service and the mailing address or facsimile telephone number to which service was made, if not made in person. If the method of service to any person is different from the method of service to any other person, the certificate shall state why a different means of service was used. (5) Form of briefs. All briefs containing more than 10 pages shall, to the extent applicable, include a table of contents, an alphabetized table of cases, a table of statutes, and a table of other authorities cited, with references to the pages of the brief wherein they are cited. (6) Specifications. All original documents shall be filed with the Administrative Law Judge or Secretary's designee, as appropriate. Papers filed in connection with any proceeding shall: (i) Be on one grade of unglazed white paper measuring 8.5×11 inches, except that, to the extent that the reduction of larger documents would render them illegible, such documents may be filed on larger paper; (ii) Be typewritten or printed in either 10- or 12-point typeface or otherwise reproduced by a process that produces permanent and plainly legible copies; (iii) Include at the head of the paper, or on a title page, the title of the proceeding, the name(s) of each respondent, the subject of the particular paper or pleading, and the file number assigned to the proceeding; (iv) Be formatted with all margins at least 1 inch wide; (v) Be double-spaced, with single-spaced footnotes and single-spaced indented quotations; and (vi) Be stapled, clipped or otherwise fastened in the upper left corner. (7) Signature requirement and effect. All papers must be dated and signed by a member of the Office of Chief Counsel, or other counsel assigned by the General Counsel to represent the Director, or a respondent or respondent's representative, as appropriate. If a filing is signed by a respondent's representative it shall state that representative's mailing address and telephone number. A respondent who represents himself or herself shall sign his or her individual name and state his or her address and telephone number on every filing. A witness deposition shall be signed by the witness. (i) Effect of signature. The signature shall constitute a certification that: (A) The person signing the filing has read the filing; (B) To the best of his or her knowledge, information, and belief, formed after reasonable inquiry, the filing is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and (C) The filing is not made for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of adjudication. (ii) If a filing is not signed, the Administrative Law Judge (or the Secretary's designee) shall strike the filing, unless it is signed promptly after the omission is called to the attention of the person making the filing. (d) Service of written orders or decisions issued by the Administrative Law Judge or Secretary's designee. Written orders or decisions issued by the Administrative Law Judge or the Secretary's designee shall be served promptly on each respondent and the Director pursuant to any method of service authorized under paragraph (a) of this section. Service of such orders or decisions shall be made by the Administrative Law Judge or the Secretary's designee, as appropriate. (a) When required. If the Director has reason to believe there has occurred a violation of any provision of parts 500 or 515 of this chapter or a violation of the provisions of any license, ruling, regulation, order, direction or instruction issued by or pursuant to the direction or authorization of the Secretary pursuant to parts 500 or 515 of this chapter or otherwise under the Trading With the Enemy Act, and the Director determines that further civil proceedings are warranted, the Director shall issue a Prepenalty Notice. The Prepenalty Notice may be issued whether or not another agency has taken any action with respect to the matter. (b) Contents of notice—(1) Facts of violation. The Prepenalty Notice shall describe the alleged violation, specify the laws and regulations allegedly violated, and state the amount of the proposed monetary penalty. (2) Right to respond. The Prepenalty Notice shall inform the respondent of respondent's right to make a written presentation within the time prescribed in §501.707 as to why the respondent believes there should be no finding of a violation or why, if the respondent admits the violation, a monetary penalty should not be imposed or why, if imposed, the monetary penalty should be in a lesser amount than proposed. The Prepenalty Notice shall also inform the respondent that: (i) The act of submitting a written response by the respondent is a factor that may result in a lower penalty absent any aggravating factors; and (ii) If the respondent fails to respond to the Prepenalty Notice within the applicable 60-day period set forth in §501.707, the Director may proceed with the issuance of a Penalty Notice. (3) Right to request a hearing. The Prepenalty Notice shall inform the respondent of respondent's right, if a subsequent Penalty Notice is issued, to request an administrative hearing. The Director will not consider any request for an administrative hearing until a Penalty Notice has been issued. (a) Deadline for response. (1) The respondent shall have 60 days after the date of service of the Prepenalty Notice pursuant to §501.705(a) to respond thereto. The response, signed and dated, shall be served as provided in §501.705(b). (2) In response to a written request by the respondent, the Director may, at his or her discretion for the purpose of conducting settlement negotiations or for other valid reasons, grant additional time for a respondent to submit a response to the Prepenalty Notice. (3) The failure to submit a response within the time period set forth in this paragraph (a), including any additional time granted by the Director, shall be deemed to be a waiver of the right to respond to the Prepenalty Notice. (b) Form and contents of response. (1) In general. The response need not be in any particular form, but must be typewritten and contain the heading “Response to Prepenalty Notice” and the Office of Foreign Assets Control identification number shown near the top of the Prepenalty Notice. It should be responsive to the allegations contained therein and set forth the nature of the respondent's admission of the violation, or defenses and claims for mitigation, if any. (i) The response must admit or deny specifically each separate allegation of violation made in the Prepenalty Notice. If the respondent is without knowledge as to an allegation, the response shall so state, and such statement shall constitute a denial. Any allegation not specifically addressed in the response shall be deemed admitted. (ii) The response must set forth any additional or new matter or arguments the respondent seeks, or shall seek, to use in support of all defenses or claims for mitigation. Any defense the respondent wishes to assert must be included in the response. (iii) The response must accurately state (for each respondent, if applicable) the respondent's full name and address for future service, together with a current telephone and, if applicable, facsimile machine number. If respondent is represented, the representative's full name and address, together with telephone and facsimile numbers, may be provided instead of service information for the respondent. The respondent or respondent's representative of record is responsible for providing timely written notice to the Director of any subsequent changes in the information provided. (iv) Financial disclosure statement requirement. Any respondent who asserts financial hardship or an inability to pay a penalty shall include with the response a financial disclosure statement setting forth in detail the basis for asserting the financial hardship or inability to pay a penalty, subject to 18 U.S.C. 1001. (2) Settlement. In addition, or as an alternative, to a written response to a Prepenalty Notice, the respondent or respondent's representative may seek settlement of the alleged violation(s). See §501.710. In the event of settlement prior to the issuance of a Penalty Notice, the claim proposed in the Prepenalty Notice will be withdrawn and the respondent will not be required to make a written response to the Prepenalty Notice. In the event no settlement is reached, a written response to the Prepenalty Notice is required pursuant to paragraph (c) of this section. If after considering any written response to the Prepenalty Notice submitted pursuant to §501.707 and any other relevant facts, the Director determines that there was no violation or that the violation does not warrant the imposition of a civil monetary penalty, the Director promptly shall notify the respondent in writing of that determination and that no civil monetary penalty pursuant to this subpart will be imposed. (a) If, after considering any written response to the Prepenalty Notice, and any other relevant facts, the Director determines that there was a violation by the respondent and that a monetary penalty is warranted, the Director promptly shall issue a Penalty Notice informing the respondent that, absent a timely request for an administrative hearing, the Director will impose the civil monetary penalty described in the Penalty Notice. The Penalty Notice shall inform the respondent: (1) Of the respondent's right to submit a written request for an administrative hearing not later than 30 days after the date of service of the Penalty Notice; (2) That in the absence of a timely request for a hearing, the issuance of the Penalty Notice constitutes final agency action; (3) That, absent a timely request for a hearing, payment (or arrangement with the Financial Management Service of the Department for installment payment) of the assessed penalty must be made not later than 30 days after the date of service of the Penalty Notice; and (4) That absent a timely request for a hearing, the respondent must furnish respondent's taxpayer identification number pursuant to 31 U.S.C. 7701 and that the Director intends to use such information for the purposes of collecting and reporting on any delinquent penalty amount in the event of a failure to pay the penalty imposed. (a) Availability. Either the Director or any respondent may, at any time during the administrative civil penalty process described in this subpart, propose an offer of settlement. The amount accepted in settlement may be less than the civil penalty that might be imposed in the event of a formal determination of violation. Upon mutual agreement by the Director and a respondent on the terms of a settlement, the Director shall issue an Order of Settlement. (b) Procedure—(1) Prior to issuance of Penalty Notice. Any offer of settlement made by a respondent prior to the issuance of a Penalty Notice shall be submitted, in writing, to the Chief of Civil Penalties, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW., Washington, DC 20220. (2) After issuance of Penalty Notice. Any offer of settlement made by a respondent after issuance of a Penalty Notice shall state that it is made pursuant to this section; shall recite or incorporate as a part of the offer the provisions of paragraphs (b)(5)(ii) and (b)(6) of this section; shall be signed by the respondent making the offer, and not only by his or her representative; and shall be submitted to the Chief Counsel. (3) Extensions of time. The submission of any settlement offer does not provide a basis for adjourning or otherwise delaying all or any portion of the administrative civil penalty process. (i) Prior to issuance of Order Instituting Proceedings. Any respondent (or potential respondent in the case of a pending Prepenalty Notice) may request, in writing, that the Director withhold issuance of any such notice, or grant an extension of time to respond to any such Notice, for a period not to exceed 60 days for the exclusive purpose of effecting settlement. The Director may grant any such request, in writing, under terms and conditions within his or her discretion. (ii) After issuance of Order Instituting Proceedings. Upon mutual agreement of the Director and a respondent, the Administrative Law Judge may grant an extension of time, for a period not to exceed 60 days, for the exclusive purpose of effecting settlement. (4) Views of Administrative Law Judge. Where an Administrative Law Judge is assigned to a proceeding, the Director or the respondent may request that the Administrative Law Judge express his or her views regarding the appropriateness of the offer of settlement. A request for the Administrative Law Judge to express his or her views on an offer of settlement or otherwise to participate in a settlement conference constitutes a waiver by the party making the request of any right to claim bias or prejudgment by the Administrative Law Judge based on the views expressed. (5) Waivers. (i) By submitting an offer of settlement, a respondent making the offer waives, subject to acceptance of the offer: (A) All hearings pursuant to section 16 of the Trading with the Enemy Act (50 U.S.C. App. 16); (B) The filing of proposed findings of fact and conclusions of law; (C) Proceedings before, and a decision by, an Administrative Law Judge; (D) All post-hearing procedures; and (E) Judicial review by any court. (ii) By submitting an offer of settlement the respondent further waives: (A) Such provisions of this subpart or other requirements of law as may be construed to prevent any member of the Director's staff, or members of the Office of Chief Counsel or other counsel assigned by the General Counsel, from participating in or advising the Director as to any order, opinion, finding of fact, or conclusion of law to be entered pursuant to the offer; and (B) Any right to claim bias or prejudgment by the Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding. (6) If the Director rejects the offer of settlement, the respondent shall be so notified in writing and the offer of settlement shall be deemed withdrawn. The rejected offer shall not constitute a part of the record in any proceeding against the respondent making the offer, provided, however, that rejection of an offer of settlement does not affect the continued validity of waivers pursuant to paragraph (b)(5) of this section with respect to any discussions concerning the rejected offer of settlement. (7) No settlement offer or proposal, or any subsequent negotiation or resolution, is admissible as evidence in any administrative proceeding initiated by the Director. (a) Deadline for request. A request for an agency hearing shall be served on the Director not later than 30 days after the date of service of the Penalty Notice. See §501.705(b). A respondent may not reserve the right to request a hearing after expiration of the 30 calendar day period. A request for a hearing that is not made as required by this paragraph shall constitute a waiver of the respondent's right to a hearing. (b) Form and contents of request. The request need not be in any particular form, but must be typewritten and contain the heading “Request for Agency Hearing”. The request must include the Office of Foreign Assets Control identification number shown near the top of the Penalty Notice. It should be responsive to the determination contained in the Penalty Notice and set forth the nature of the respondent's defenses or claims for mitigation, if any. (1) The request must admit or deny specifically each separate determination of violation made in the Penalty Notice. If the respondent is without knowledge as to a determination, the request shall so state, and such statement shall constitute a denial. Any determination not specifically addressed in the response shall be deemed admitted. (2) The request must set forth any additional or new matter or arguments the respondent seeks, or shall seek, to use in support of all defenses or claims for mitigation. Any defense the respondent wishes to assert must be included in the request. (3) The request must accurately state, for each respondent (if applicable), the respondent's full name and address for future service, together with current telephone and, if applicable, a facsimile machine number. If respondent is represented, the representative's full name and address, together with telephone and facsimile numbers, may be provided in lieu of service information for the respondent. The respondent or respondent's representative is responsible for providing timely written notice to the Director of any subsequent changes in the information provided. (c) Signature requirement. The respondent or, if represented, the respondent's representative, must sign the hearing request. No later than 60 days after service of any hearing request, the Director shall acknowledge receipt and inform a respondent, in writing, whether an Order Instituting Proceedings shall be issued. If a respondent makes a timely request for a hearing, the Director shall determine, at his or her option, whether to dismiss the violation(s) set forth in the Penalty Notice or to issue an Order Instituting Proceedings to initiate the hearing process. The Order shall be served on the respondent(s) as provided in §501.705(c)(1). The Director may, in his or her discretion, withdraw an Order Instituting Proceedings at any time prior to the issuance of a decision by the Administrative Law Judge. (a) Content of Order. The Order Instituting Proceedings shall: (1) Be prepared by the Office of the Chief Counsel or other counsel assigned by the General Counsel and based on information provided by the Director; (2) State the legal authority under which the hearing is to be held; (3) Contain a short and plain statement of the alleged violation(s) to be considered and determined (including the matters of fact and law asserted) in such detail as will permit a specific response thereto; (4) State the amount of the penalty sought in the proceeding; and (5) Be signed by the Director. (b) Combining penalty actions. The Director may combine claims contained in two or more Penalty Notices involving the same respondent, and for which hearings have been requested, into a single Order Instituting Proceedings. (c) Amendment to Order Instituting Proceedings. Upon motion by the Director, the Administrative Law Judge may, at any time prior to issuance of a decision, permit the Director to amend an Order Instituting Proceedings to include new matters of fact or law that are within the scope of the original Order Instituting Proceedings. (a) When required. Not later than 45 days after service of the Order Instituting Proceedings, the respondent shall file, with the Administrative Law Judge and the Office of Chief Counsel, an answer to each of the allegations contained therein. If the Order Instituting Proceedings is amended, the Administrative Law Judge may require that an amended answer be filed and, if such an answer is required, shall specify a date for the filing thereof. (b) Contents; effect of failure to deny. Unless otherwise directed by the Administrative Law Judge, an answer shall specifically admit, deny, or state that the respondent does not have, and is unable to obtain, sufficient information to admit or deny each allegation in the Order Instituting Proceedings. When a respondent intends to deny only a part of an allegation, the respondent shall specify so much of it as is true and shall deny only the remainder. A statement of lack of information shall have the effect of a denial. A defense of res judicata, statute of limitations or any other matter constituting an affirmative defense shall be asserted in the answer. Any allegation not specifically addressed in the answer shall be deemed admitted. (c) Motion for more definite statement. A respondent may file with an answer a motion for a more definite statement of specified matters of fact or law to be considered or determined. Such motion shall state the respects in which, and the reasons why, each such matter of fact or law should be required to be made more definite. If the motion is granted, the order granting such motion shall set the periods for filing such a statement and any answer thereto. (d) Amendments. A respondent may amend its answer at any time by written consent of the Director or with permission of the Administrative Law Judge. Permission shall be freely granted when justice so requires. (e) Failure to file answer: default. If a respondent fails to file an answer required by this subpart within the time prescribed, such respondent may be deemed in default pursuant to §501.716(a). A party may make a motion to set aside a default pursuant to §501.726(e). (a) If the Director issues an Order Instituting Proceedings, the respondent shall receive not less than 45 days notice of the time and place of the hearing. (b) Time and place of hearing. All hearings shall be held in the Washington, DC metropolitan area unless, based on extraordinary reasons, otherwise mutually agreed by the respondent and the Director. The time for any hearing shall be fixed with due regard for the public interest and the convenience and necessity of the parties or their representatives. Requests to change the time of a hearing may be submitted to the Administrative Law Judge, who may modify the hearing date(s) and/or time(s) and place. All requests for a change in the date and time and/or place of a hearing must be received by the Administrative Law Judge and served upon the parties no later than 15 days before the scheduled hearing date. (c) Failure to appear at hearings: default. Any respondent named in an order instituting proceedings as a person against whom findings may be made or penalties imposed who fails to appear (in person or through a representative) at a hearing of which he or she has been duly notified may be deemed to be in default pursuant to §501.716(a). Without further proceedings or notice to the respondent, the Administrative Law Judge may enter a finding that the right to a hearing was waived, and the Penalty Notice shall constitute final agency action as provided in §501.709(a)(2). A respondent may make a motion to set aside a default pursuant to §501.726(e). (a) A party to a proceeding may be deemed to be in default and the Administrative Law Judge (or the Secretary's designee during review proceedings) may determine the proceeding against that party upon consideration of the record if that party fails: (1) To appear, in person or through a representative, at any hearing or conference of which the party has been notified; (2) To answer, to respond to a dispositive motion within the time provided, or otherwise to prosecute or defend the proceeding; or (3) To cure a deficient filing within the time specified by the Administrative Law Judge (or the Secretary's designee) pursuant to §501.729(b). (b) In deciding whether to determine the proceedings against a party deemed to be in default, the Administrative Law Judge shall consider the record of the proceedings (including the Order Instituting Proceedings) and shall construe contested matters of fact and law against the party deemed to be in default. (c) For information and procedures pertaining to a motion to set aside a default, see §501.726(e). By order of the Administrative Law Judge, proceedings involving common questions of law and fact may be consolidated for hearing of any or all the matters at issue in such proceedings. The Administrative Law Judge may make such orders concerning the conduct of such proceedings as he or she deems appropriate to avoid unnecessary cost or delay. Consolidation shall not prejudice any rights under this subpart and shall not affect the right of any party to raise issues that could have been raised if consolidation had not occurred. All hearings shall be conducted in a fair, impartial, expeditious and orderly manner. Each party has the right to present its case or defense by oral and documentary evidence and to conduct such cross examination as may be required for full disclosure of the relevant facts. The Director shall present his or her case-in-chief first. The Director shall be the first party to present an opening statement and a closing statement and may make a rebuttal statement after the respondent's closing statement. (a) Prohibition. (1) From the time the Director issues an Order Instituting Proceedings until the date of final decision, no party, interested person, or representative thereof shall knowingly make or cause to be made an ex parte communication. (2) Except to the extent required for the disposition of ex parte communication matters as authorized by law, the Secretary's designee and the Administrative Law Judge presiding over any proceeding may not: (i) consult a person or party on an issue, unless on notice and opportunity for all parties to participate; or (ii) be responsible to or subject to the supervision, direction of, or evaluation by, an employee engaged in the performance of investigative or prosecutorial functions for the Department. (b) Procedure upon occurrence of ex parte communication. If an ex parte communication is received by the Administrative Law Judge or the Secretary's designee, the Administrative Law Judge or the Secretary's designee, as appropriate, shall cause all of such written communication (or, if the communication is oral, a memorandum stating the substance of the communication) to be placed on the record of the proceeding and served on all parties. A party may, not later than 10 days after the date of service, file a response thereto and may recommend that the person making the prohibited communication be sanctioned pursuant to paragraph (c) of this section. (c) Sanctions. Any party to the proceeding, a party's representative, or any other interested individual, who makes a prohibited ex parte communication, or who encourages or solicits another to make any such communication, may be subject to any appropriate sanction or sanctions imposed by the Administrative Law Judge or the Secretary's designee, as appropriate, for good cause shown, including, but not limited to, exclusion from the hearing and an adverse ruling on the issue that is the subject of the prohibited communication. Any officer or employee engaged in the performance of investigative or prosecutorial functions for the Department in a proceeding as defined in §501.702 may not, in that proceeding or one that is factually related, participate or advise in the decision pursuant to Section 557 of the Administrative Procedure Act, 5 U.S.C. 557, except as a witness or counsel in the proceeding. All hearings, except hearings on applications for confidential treatment filed pursuant to §501.725(b), shall be public unless otherwise ordered by the Administrative Law Judge or the Secretary's designee, as appropriate, on his or her own motion or the motion of a party. (a) Purposes of conferences. The purposes of prehearing conferences include, but are not limited to: (1) Expediting the disposition of the proceeding; (2) Establishing early and continuing control of the proceeding by the Administrative Law Judge; and (3) Improving the quality of the hearing through more thorough preparation. (b) Procedure. On his or her own motion or at the request of a party, the Administrative Law Judge may direct a representative or any party to attend one or more prehearing conferences. Such conferences may be held with or without the Administrative Law Judge present as the Administrative Law Judge deems appropriate. Where such a conference is held outside the presence of the Administrative Law Judge, the Administrative Law Judge shall be advised promptly by the parties of any agreements reached. Such conferences also may be held with one or more persons participating by telephone or other remote means. (c) Subjects to be discussed. At a prehearing conference consideration may be given and action taken with respect to the following: (1) Simplification and clarification of the issues; (2) Exchange of witness and exhibit lists and copies of exhibits; (3) Admissions of fact and stipulations concerning the contents, authenticity, or admissibility into evidence of documents; (4) Matters of which official notice may be taken; (5) The schedule for exchanging prehearing motions or briefs, if any; (6) The method of service for papers; (7) Summary disposition of any or all issues; (8) Settlement of any or all issues; (9) Determination of hearing dates (when the Administrative Law Judge is present); (10) Amendments to the Order Instituting Proceedings or answers thereto; (11) Production of documents as set forth in §501.723, and prehearing production of documents in response to subpoenas duces tecum as set forth in §501.728; and (12) Such other matters as may aid in the orderly and expeditious disposition of the proceeding. (d) Timing of conferences. Unless the Administrative Law Judge orders otherwise, an initial prehearing conference shall be held not later than 14 days after service of an answer. A final conference, if any, should be held as close to the start of the hearing as reasonable under the circumstances. (e) Prehearing orders. At or following the conclusion of any conference held pursuant to this rule, the Administrative Law Judge shall enter written rulings or orders that recite the agreement(s) reached and any procedural determinations made by the Administrative Law Judge. (f) Failure to appear: default. A respondent who fails to appear, in person or through a representative, at a prehearing conference of which he or she has been duly notified may be deemed in default pursuant to §501.716(a). A respondent may make a motion to set aside a default pursuant to §501.726(e). (a) Initial disclosures. (1) Except to the extent otherwise stipulated or directed by order of the Administrative Law Judge, a party shall, without awaiting a discovery request, provide to the opposing party: (i) The name and, if known, the address and telephone number of each individual likely to have discoverable information that the disclosing party may use to support its claims or defenses, unless solely for impeachment of a witness appearing in person or by deposition, identifying the subjects of the information; and (ii) A copy, or a description by category and location, of all documents, data compilations, and tangible things that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachment of a witness appearing in person or by deposition; (2) The disclosures described in paragraph (a)(1)(i) of this section shall be made not later than 30 days after the issuance of an Order Instituting Proceedings, unless a different time is set by stipulation or by order of the Administrative Law Judge. (b) Prehearing disclosures. (1) In addition to the disclosures required by paragraph (a) of this section, a party must provide to the opposing party, and promptly file with the Administrative Law Judge, the following information regarding the evidence that it may present at hearing for any purpose other than solely for impeachment of a witness appearing in person or by deposition: (i) An outline or narrative summary of its case or defense (the Order Instituting Proceedings will usually satisfy this requirement for the Director and the answer thereto will usually satisfy this requirement for the respondent); (ii) The legal theories upon which it will rely; (iii) Copies and a list of documents or exhibits that it intends to introduce at the hearing; and (iv) A list identifying each witness who will testify on its behalf, including the witness's name, occupation, address, phone number, and a brief summary of the expected testimony. (2) Unless otherwise directed by the Administrative Law Judge, the disclosures required by paragraph (b)(1) of this section shall be made not later than 30 days before the date of the hearing. (c) Disclosure of expert testimony. A party who intends to call an expert witness shall submit, in addition to the information required by paragraph (b)(1)(iv) of this section, a statement of the expert's qualifications, a list of other proceedings in which the expert has given expert testimony, and a list of publications authored or co-authored by the expert. (d) Form of disclosures. Unless the Administrative Law Judge orders otherwise, all disclosures under paragraphs (a) through (c) of this section shall be made in writing, signed, and served as provided in §501.705. (e) Methods to discover additional matter. Parties may obtain discovery by one or more of the following methods: Depositions of witnesses upon oral examination or written questions; written interrogatories to another party; production of documents or other evidence for inspection; and requests for admission. All depositions of Federal employees must take place in Washington, DC, at the Department of the Treasury or at the location where the Federal employee to be deposed performs his or her duties, whichever the Federal employee's supervisor or the Office of Chief Counsel shall deem appropriate. All depositions shall be held at a date and time agreed by the Office of Chief Counsel and the respondent or respondent's representative, and for an agreed length of time. (f) Discovery scope and limits. Unless otherwise limited by order of the Administrative Law Judge in accordance with paragraph (f)(2) of this section, the scope of discovery is as follows: (1) In general. The availability of information and documents through discovery is subject to the assertion of privileges available to the parties and witnesses. Privileges available to the Director and the Department include exemptions afforded pursuant to the Freedom of Information Act (5 U.S.C. 552(b)(1) through (9)) and the Privacy Act (5 U.S.C. 552a). Parties may obtain discovery regarding any matter, not privileged, that is relevant to the merits of the pending action, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of any persons having knowledge of any discoverable matter. For good cause, the Administrative Law Judge may order discovery of any matter relevant to the subject matter involved in the proceeding. Relevant information need not be admissible at the hearing if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. (2) Limitations. The Administrative Law Judge may issue any order that justice requires to ensure that discovery requests are not unreasonable, oppressive, excessive in scope or unduly burdensome, including an order to show cause why a particular discovery request is justified upon motion of the objecting party. The frequency or extent of use of the discovery methods otherwise permitted under this section may be limited by the Administrative Law Judge if he or she determines that: (i) The discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) The party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) The burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the hearing, the importance of the issues at stake, and the importance of the proposed discovery in resolving the issues. (3) Interrogatories. Respondent's interrogatories shall be served upon the Office of the Chief Counsel not later than 30 days after issuance of the Order Instituting Proceedings. The Director's interrogatories shall be served by the later of 30 days after the receipt of service of respondent's interrogatories or 40 days after issuance of the Order Instituting Proceedings if no interrogatories are filed by respondent. Parties shall respond to interrogatories not later than 30 days after the date interrogatories are received. Interrogatories shall be limited to 20 questions only. Each subpart, section, or other designation of a part of a question shall be counted as one complete question in computing the permitted 20 question total. Where more than 20 questions are served upon a party, the receiving party may determine which of the 20 questions the receiving party shall answer. The limitation on the number of questions in an interrogatory may be waived by the Administrative Law Judge. (4) Privileged matter. Privileged documents are not discoverable. Privileges include, but are not limited to, the attorney-client privilege, attorney work-product privilege, any government's or government agency's deliberative-process or classified information privilege, including materials classified pursuant to Executive Order 12958 (3 CFR, 1995 Comp., p. 333) and any future Executive orders that may be issued relating to the treatment of national security information, and all materials and information exempted from release to the public pursuant to the Privacy Act (5 U.S.C. 552a) or the Freedom of Information Act (5 U.S.C. 552(b)(1) through (9)). (g) Updating discovery. A party who has made an initial disclosure under paragraph (a) of this section or responded to a request for discovery with a disclosure or response is under a duty to supplement or correct the disclosure or response to include information thereafter acquired whenever: (1) The party learns that in some material respect the information disclosed is incomplete or incorrect, if the additional or corrective information has not otherwise been made known to the other party during the discovery process or in writing; or (2) Ordered by the Administrative Law Judge. The Administrative Law Judge may impose sanctions for failure to supplement or correct discovery. (h) Time limits. All discovery, including all responses to discovery requests, shall be completed not later than 20 days prior to the date scheduled for the commencement of the hearing, unless the Administrative Law Judge finds on the record that good cause exists to grant additional time to complete discovery. (i) Effect of failure to comply. No witness may testify and no document or exhibit may be introduced at the hearing if such witness, document, or exhibit is not listed in the prehearing submissions pursuant to paragraphs (b) and (c) of this section, except for good cause shown. (a) Notwithstanding §501.723(f), the Director or respondent may withhold a document if: (1) The document is privileged; (2) The document would disclose the identity of a confidential source; or (3) The Administrative Law Judge grants leave to withhold a document or category of documents as not relevant to the subject matter of the proceeding or otherwise, for good cause shown. (b) Nothing in paragraph (a) of this section authorizes the Director to withhold documents that contain material exculpatory evidence. (c) Withheld document list. The Director and respondent shall provide the Administrative Law Judge, for review, a list of documents withheld pursuant to paragraphs (a)(1)–(3) of this section. The Administrative Law Judge shall determine whether any such document should be made available for inspection and copying. (a) Filing document under seal. (1) The Director may file any document or any part of a document under seal and/or seek a protective order concerning any document if disclosure of the document would be inconsistent with the protection of the public interest or if justice requires protection of any person, including a source or a party, from annoyance, threat, oppression, or undue burden or expense, or the disclosure of the information would be, or might reasonably lead to a disclosure, contrary to Executive Order 12958, as amended by Executive Order 13292, or other Executive orders concerning disclosure of information, Department regulations, or the Privacy Act, or information exempt from release under the Freedom of Information Act. The Administrative Law Judge shall allow placement of any such document under seal and/or grant a protective order upon a showing that the disclosure would be inconsistent with any such statute or Executive order, or that the harm resulting from disclosure would outweigh the benefits of disclosure. (2) A respondent may file any document or any part of a document under seal and/or seek a protective order to limit such document from disclosure to other parties or to the public. The Administrative Law Judge shall allow placement of any document under seal and/or grant a protective order upon a showing that the harm resulting from disclosure would outweigh the benefits of disclosure. (3) The Administrative Law Judge shall safeguard the security and integrity of any documents under seal or protective order and shall take all appropriate steps to preserve the confidentiality of such documents or any parts thereof, including closing a hearing or portions of a hearing to the public. Release of any information under seal or to the extent inconsistent with a protective order, in any form or manner, is subject to the sanctions and the exercise of the authorities as are provided with respect to ex parte communications under §501.719. (4) If the Administrative Law Judge denies placement of any document under seal or under protective order, any party, and any person whose document or material is at issue, may obtain interlocutory review by the Secretary's designee. In such cases the Administrative Law Judge shall not release or expose any of the records or documents in question to the public or to any person for a period of 20 days from the date of the Administrative Law Judge's ruling, in order to permit a party the opportunity either to withdraw the records and documents or obtain interlocutory review by the Secretary's designee and an order that the records be placed under seal or a protective order. (5) Upon settlement, final decision, or motion to the Administrative Law Judge for good cause shown, all materials (including all copies) under seal or protective order shall be returned to the submitting parties, except when it may be necessary to retain a record until any judicial process is completed. (6)(i) Written notice of each request for release of documents or materials under seal or subject to a protective order shall be given to the parties at least 20 days prior to any permitted release or prior to any access not specifically authorized under a protective order. A copy of each request for information, including the name, address, and telephone number of the requester, shall be provided to the parties. (ii) Each request for access to protected material shall include the names, addresses, and telephone numbers of all persons on whose behalf the requester seeks access to protected information. The Administrative Law Judge may impose sanctions as provided under §501.729 for failure to provide this information. (b) Application. An application for a protective order or to place under seal shall be filed with the Administrative Law Judge. The application shall be accompanied by a sealed copy of the materials as to which confidential treatment is sought. (1) Procedure for supplying additional information. The person making the application may be required to furnish in writing additional information with respect to the grounds for objection to public disclosure. Failure to supply the information so requested within 14 days from the date of receipt of a notice of the information required shall be deemed a waiver of the objection to public disclosure of that portion of the information to which the additional information relates, unless the Administrative Law Judge shall otherwise order for good cause shown at or before the expiration of such 14-day period. (2) Confidentiality of materials pending final decision. Pending the determination of the application for confidential treatment, transcripts, non-final orders including an initial decision, if any, and other materials in connection with the application shall be placed under seal; shall be for the confidential use only of the Administrative Law Judge, the Secretary's designee, the applicant, the Director, and any other respondent and representative; and shall be made available to the public only in accordance with orders of the Administrative Law Judge or the Secretary's designee. (3) Public availability of orders. Any final order of the Administrative Law Judge or the Secretary's designee denying or sustaining an application for confidential treatment shall be made public. Any prior findings or opinions relating to an application for confidential treatment under this section shall be made public at such time as the material as to which confidentiality was requested is made public. (a) Generally. Unless made during a hearing or conference, a motion shall be in writing, shall state with particularity the grounds therefor, shall set forth the relief or order sought, and shall be accompanied by a written brief of the points and authorities relied upon. Motions by a respondent must be filed with the Administrative Law Judge and served upon the Director through the Office of Chief Counsel and with any other party respondent or respondent's representative, unless otherwise directed by the Administrative Law Judge. Motions by the Director must be filed with the Administrative Law Judge and served upon each party respondent or respondent's representative. All written motions must be served in accordance with, and otherwise meet the requirements of, §501.705. The Administrative Law Judge may order that an oral motion be submitted in writing. No oral argument shall be heard on any motion unless the Administrative Law Judge otherwise directs. (b) Opposing and reply briefs. Except as provided in §501.741(e), briefs in opposition to a motion shall be filed not later than 15 days after service of the motion. Reply briefs shall be filed not later than 3 days after service of the opposition. The failure of a party to oppose a written motion or an oral motion made on the record shall be deemed a waiver of objection by that party to the entry of an order substantially in the form of any proposed order accompanying the motion. (c) Dilatory motions. Frivolous, dilatory, or repetitive motions are prohibited. The filing of such motions may form the basis for sanctions. (d) Length limitation. Except as otherwise ordered by the Administrative Law Judge, a brief in support of, or in opposition to, a motion shall not exceed 15 pages, exclusive of pages containing any table of contents, table of authorities, or addendum. (e) A motion to set aside a default shall be made within a reasonable time as determined by the Administrative Law Judge, state the reasons for the failure to appear or defend, and, if applicable, specify the nature of the proposed defense in the proceeding. In order to prevent injustice and on such conditions as may be appropriate, the Administrative Law Judge, at any time prior to the filing of his or her decision, or the Secretary's designee, at any time during the review process, may for good cause shown set aside a default. (a) At any time after a respondent's answer has been filed, the respondent or the Director may make a motion for summary disposition of any or all allegations contained in the Order Instituting Proceedings. If the Director has not completed presentation of his or her case-in-chief, a motion for summary disposition shall be made only with permission of the Administrative Law Judge. The facts of the pleadings of the party against whom the motion is made shall be taken as true, except as modified by stipulations or admissions made by that party, by uncontested affidavits, or by facts officially noticed pursuant to §501.732(b). (b) Decision on motion. The Administrative Law Judge may promptly decide the motion for summary disposition or may defer decision on the motion. The Administrative Law Judge shall issue an order granting a motion for summary disposition if the record shows there is no genuine issue with regard to any material fact and the party making the motion is entitled to a summary disposition as a matter of law. (c) A motion for summary disposition must be accompanied by a statement of the material facts as to which the moving party contends there is no genuine issue. Such motion must be supported by documentary evidence, which may take the form of admissions in pleadings, stipulations, depositions, transcripts, affidavits, and any other evidentiary materials that the moving party contends support its position. The motion must also be accompanied by a brief containing the points and authorities in support of the moving party's arguments. Any party opposing a motion for summary disposition must file a statement setting forth those material facts as to which such party contends a genuine dispute exists. The opposition must be supported by evidence of the same type as that submitted with the motion for summary disposition and a brief containing the points and authorities in support of the contention that summary disposition would be inappropriate. (a) Availability; procedure. In connection with any hearing before an Administrative Law Judge, either the respondent or the Director may request the issuance of subpoenas requiring the attendance and testimony of witnesses at the designated time and place of hearing, and subpoenas requiring the production of documentary or other tangible evidence returnable at a designated time and place. Unless made on the record at a hearing, requests for issuance of a subpoena shall be made in writing and served on each party pursuant to §501.705. (b) Standards for issuance. If it appears to the Administrative Law Judge that a subpoena sought may be unreasonable, oppressive, excessive in scope, or unduly burdensome, he or she may, in his or her discretion, as a condition precedent to the issuance of the subpoena, require the person seeking the subpoena to show the general relevance and reasonable scope of the testimony or other evidence sought. If after consideration of all the circumstances, the Administrative Law Judge determines that the subpoena or any of its terms is unreasonable, oppressive, excessive in scope, or unduly burdensome, he or she may refuse to issue the subpoena, or issue a modified subpoena as fairness requires. In making the foregoing determination, the Administrative Law Judge may inquire of the other participants whether they will stipulate to the facts sought to be proved. (c) Service. Service of a subpoena shall be made pursuant to the provisions of §501.705. (d) Application to quash or modify—(1) Procedure. Any person to whom a subpoena is directed or who is an owner, creator or the subject of the documents or materials that are to be produced pursuant to a subpoena may, prior to the time specified therein for compliance, but not later than 15 days after the date of service of such subpoena, request that the subpoena be quashed or modified. Such request shall be made by application filed with the Administrative Law Judge and served on all parties pursuant to §501.705. The party on whose behalf the subpoena was issued may, not later than 5 days after service of the application, file an opposition to the application. (2) Standards governing application to quash or modify. If the Administrative Law Judge determines that compliance with the subpoena would be unreasonable, oppressive or unduly burdensome, the Administrative Law Judge may quash or modify the subpoena, or may order return of the subpoena only upon specified conditions. These conditions may include, but are not limited to, a requirement that the party on whose behalf the subpoena was issued shall make reasonable compensation to the person to whom the subpoena was addressed for the cost of copying or transporting evidence to the place for return of the subpoena. (e) Witness fees and mileage. Witnesses summoned to appear at a proceeding shall be paid the same fees and mileage that are paid to witnesses in the courts of the United States, and witnesses whose depositions are taken and the persons taking the same shall severally be entitled to the same fees as are paid for like services in the courts of the United States. Witness fees and mileage shall be paid by the party at whose instance the witnesses appear. (a) Contemptuous conduct—(1) Subject to exclusion or suspension. Contemptuous conduct by any person before an Administrative Law Judge or the Secretary's designee during any proceeding, including any conference, shall be grounds for the Administrative Law Judge or the Secretary's designee to: (i) Exclude that person from such hearing or conference, or any portion thereof; and/or (ii) If a representative, summarily suspend that person from representing others in the proceeding in which such conduct occurred for the duration, or any portion, of the proceeding. (2) Adjournment. Upon motion by a party represented by a representative subject to an order of exclusion or suspension, an adjournment shall be granted to allow the retention of a new representative. In determining the length of an adjournment, the Administrative Law Judge or the Secretary's designee shall consider, in addition to the factors set forth in §501.737, the availability of another representative for the party or, if the representative was a counsel, of other members of a suspended counsel's firm. (b) Deficient filings; leave to cure deficiencies. The Administrative Law Judge, or the Secretary's designee in the case of a request for review, may in his or her discretion, reject, in whole or in part, any filing that fails to comply with any requirements of this subpart or of any order issued in the proceeding in which the filing was made. Any such filings shall not be part of the record. The Administrative Law Judge or the Secretary's designee may direct a party to cure any deficiencies and to resubmit the filing within a fixed time period. (c) Failure to make required filing or to cure deficient filing. The Administrative Law Judge (or the Secretary's designee during review proceedings) may enter a default pursuant to §501.716, dismiss the case, decide the particular matter at issue against that person, or prohibit the introduction of evidence or exclude testimony concerning that matter if a person fails: (1) To make a filing required under this subpart; or (2) To cure a deficient filing within the time specified by the Administrative Law Judge or the Secretary's designee pursuant to paragraph (b) of this section. (d) Failure to make required filing or to cure deficient filing in the case of a request for review. The Secretary's designee, in any case of a request for review, may decide the issue against that person, or prohibit the introduction of evidence or exclude testimony concerning that matter if a person fails: (1) To make a filing required under this subpart; or (2) To cure a deficient filing within the time specified by the Secretary's designee pursuant to paragraph (b) of this section. (a) Procedure. Any party desiring to take the testimony of a witness by deposition shall make a written motion setting forth the reasons why such deposition should be taken including the specific reasons why the party believes the witness may be unable to attend or testify at the hearing; the name and address of the prospective witness; the matters concerning which the prospective witness is expected to be questioned; and the proposed time and place for the taking of the deposition. (b) Required finding when ordering a deposition. In the discretion of the Administrative Law Judge, an order for deposition may be issued upon a finding that the prospective witness will likely give testimony material to the proceeding, that it is likely the prospective witness will be unable to attend or testify at the hearing because of age, sickness, infirmity, imprisonment or other disability, and that the taking of a deposition will serve the interests of justice. (c) Contents of order. An order for deposition shall designate by name a deposition officer. The designated officer may be the Administrative Law Judge or any other person authorized to administer oaths by the laws of the United States or of the place where the deposition is to be held. An order for deposition also shall state: (1) The name of the witness whose deposition is to be taken; (2) The scope of the testimony to be taken; (3) The time and place of the deposition; (4) The manner of recording, preserving and filing the deposition; and (5) The number of copies, if any, of the deposition and exhibits to be filed upon completion of the deposition. (d) Procedure at depositions. A witness whose testimony is taken by deposition shall swear or affirm before any questions are put to him or her. Examination and cross-examination of witnesses may proceed as permitted at a hearing. A witness being deposed may have counsel or a representative present during the deposition. (e) Objections to questions or evidence. Objections to questions or evidence shall be in short form, stating the grounds of objection relied upon. Objections to questions or evidence shall be noted by the deposition officer upon the deposition, but a deposition officer (other than an Administrative Law Judge) shall not have the power to decide on the competency, materiality or relevance of evidence. Failure to object to questions or evidence before the deposition officer shall not be deemed a waiver unless the ground of the objection is one that might have been obviated or removed if presented at that time. (f) Filing of depositions. The questions asked and all answers or objections shall be recorded or transcribed verbatim, and a transcript shall be prepared by the deposition officer, or under his or her direction. The transcript shall be subscribed by the witness and certified by the deposition officer. The original deposition transcript and exhibits shall be filed with the Administrative Law Judge. A copy of the deposition transcript and exhibits shall be served on the opposing party or parties. The cost of the transcript (including copies) shall be paid by the party requesting the deposition. (a) Availability. Depositions may be taken and submitted on written questions upon motion of any party. The motion shall include the information specified in §501.730(a). A decision on the motion shall be governed by §501.730(b). (b) Procedure. Written questions shall be filed with the motion. Not later than 10 days after service of the motion and written questions, any party may file objections to such written questions and any party may file cross-questions. When a deposition is taken pursuant to this section no persons other than the witness, representative or counsel to the witness, the deposition officer, and, if the deposition officer does not act as reporter, a reporter, shall be present at the examination of the witness. No party shall be present or represented unless otherwise permitted by order. The deposition officer shall propound the questions and cross-questions to the witness in the order submitted. (c) Additional requirements. The order for deposition, filing of the deposition, form of the deposition and use of the deposition in the record shall be governed by paragraphs (b) through (g) of §501.730, except that no cross-examination shall be made. The applicable evidentiary standard for proceedings under this subpart is proof by a preponderance of reliable, probative, and substantial evidence. The Administrative Law Judge shall admit any relevant and material oral, documentary, or demonstrative evidence. The Federal Rules of Evidence do not apply, by their own force, to proceedings under this subpart, but shall be employed as general guidelines. The fact that evidence submitted by a party is hearsay goes only to the weight of the evidence and does not affect its admissibility. (a) Objections and offers of proof—(1) Objections. Objections to the admission or exclusion of evidence must be made on the record and shall be in short form, stating the grounds relied upon. Exceptions to any ruling thereon by the Administrative Law Judge need not be noted at the time of the ruling. Such exceptions will be deemed waived on review by the Secretary's designee, however, unless raised: (i) Pursuant to interlocutory review in accordance with §501.741; (ii) In a proposed finding or conclusion filed pursuant to §501.738; or (iii) In a petition for the Secretary's designee's review of an Administrative Law Judge's decision filed in accordance with §501.741. (2) Offers of proof. Whenever evidence is excluded from the record, the party offering such evidence may make an offer of proof, which shall be included in the record. Excluded material shall be retained pursuant to §501.739(b). (b) Official notice. An Administrative Law Judge or Secretary's designee may take official notice of any material fact that might be judicially noticed by a district court of the United States, any matter in the public official records of the Secretary, or any matter that is particularly within the knowledge of the Department as an expert body. If official notice is requested or taken of a material fact not appearing in the evidence in the record, a party, upon timely request to the Administrative Law Judge, shall be afforded an opportunity to establish the contrary. (c) Stipulations. The parties may, by stipulation, at any stage of the proceeding agree upon any pertinent fact in the proceeding. A stipulation may be received in evidence and, when accepted by the Administrative Law Judge, shall be binding on the parties to the stipulation. (d) Presentation under oath or affirmation. A witness at a hearing for the purpose of taking evidence shall testify under oath or affirmation. (e) Presentation, rebuttal and cross-examination. A party is entitled to present its case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as, in the discretion of the Administrative Law Judge, may be required for a full and true disclosure of the facts. (a) Procedure. In any proceeding as defined in §501.702, a respondent; the Director; any person who is the owner, subject or creator of a document subject to subpoena or which may be introduced as evidence; or any witness who testifies at a hearing may file a motion requesting a protective order to limit from disclosure to other parties or to the public documents or testimony containing confidential information. The motion should include a general summary or extract of the documents without revealing confidential details. If a person seeks a protective order against disclosure to other parties as well as the public, copies of the documents shall not be served on other parties. Unless the documents are unavailable, the person shall file for inspection by the Administrative Law Judge a sealed copy of the documents as to which the order is sought. (b) Basis for issuance. Documents and testimony introduced in a public hearing are presumed to be public. A motion for a protective order shall be granted only upon a finding that the harm resulting from disclosure would outweigh the benefits of disclosure. (c) Requests for additional information supporting confidentiality. A person seeking a protective order under paragraph (a) of this section may be required to furnish in writing additional information with respect to the grounds for confidentiality. Failure to supply the information so requested not later than 5 days from the date of receipt by the person of a notice of the information required shall be deemed a waiver of the objection to public disclosure of that portion of the documents to which the additional information relates, unless the Administrative Law Judge shall otherwise order for good cause shown at or before the expiration of such 5-day period. (d) Confidentiality of documents pending decision. Pending a determination of a motion under this section, the documents as to which confidential treatment is sought and any other documents that would reveal the confidential information in those documents shall be maintained under seal and shall be disclosed only in accordance with orders of the Administrative Law Judge. Any order issued in connection with a motion under this section shall be made public unless the order would disclose information as to which a protective order has been granted, in which case that portion of the order that would reveal the protected information shall not be made public. (a) At a hearing, any person wishing to introduce a prior, sworn statement of a witness who is not a party to the proceeding, that is otherwise admissible in the proceeding, may make a motion setting forth the reasons therefor. If only part of a statement is offered in evidence, the Administrative Law Judge may require that all relevant portions of the statement be introduced. If all of a statement is offered in evidence, the Administrative Law Judge may require that portions not relevant to the proceeding be excluded. A motion to introduce a prior sworn statement may be granted if: (1) The witness is dead; (2) The witness is out of the United States, unless it appears that the absence of the witness was procured by the party offering the prior sworn statement; (3) The witness is unable to attend or testify because of age, sickness, infirmity, imprisonment or other disability; (4) The party offering the prior sworn statement has been unable to procure the attendance of the witness by subpoena; or, (5) In the discretion of the Administrative Law Judge, it would be desirable, in the interests of justice, to allow the prior sworn statement to be used. In making this determination, due regard shall be given to the presumption that witnesses will testify orally in an open hearing. If the parties have stipulated to accept a prior sworn statement in lieu of live testimony, consideration shall also be given to the convenience of the parties in avoiding unnecessary expense. (a) Opportunity to file. Before a decision is issued by the Administrative Law Judge, each party shall have an opportunity, reasonable in light of all the circumstances, to file in writing proposed findings and conclusions. (b) Procedure. Proposed findings of fact must be supported by citations to specific portions of the record. If successive filings are directed, the proposed findings and conclusions of the party assigned to file first shall be set forth in serially numbered paragraphs, and any counter statement of proposed findings and conclusions shall, in addition to any other matter presented, indicate those paragraphs of the proposals already filed as to which there is no dispute. A reply brief may be filed by the party assigned to file first, or, where simultaneous filings are directed, reply briefs may be filed by each party, within the period prescribed therefor by the Administrative Law Judge. No further briefs may be filed except with permission of the Administrative Law Judge. (c) Time for filing. In any proceeding in which a decision is to be issued: (1) At the close of each hearing, the Administrative Law Judge shall, by order, after consultation with the parties, prescribe the period within which proposed findings and conclusions and supporting briefs are to be filed. The party directed to file first shall make its initial filing not later than 30 days after the end of the hearing unless the Administrative Law Judge, for good cause shown, permits a different period and sets forth in the order the reasons why the different period is necessary. (2) The total period within which all such proposed findings and conclusions and supporting briefs and any counter statements of proposed findings and conclusions and reply briefs are to be filed shall be no longer than 90 days after the close of the hearing unless the Administrative Law Judge, for good cause shown, permits a different period and sets forth in an order the reasons why the different period is necessary. The Administrative Law Judge shall have authority to do all things necessary and appropriate to discharge his or her duties. No provision of these rules shall be construed to limit the powers of the Administrative Law Judge provided by the Administrative Procedure Act, 5 U.S.C. 556, 557. The powers of the Administrative Law Judge include, but are not limited to: (a) Administering oaths and affirmations; (b) Issuing subpoenas authorized by law and revoking, quashing, or modifying any such subpoena; (c) Receiving relevant evidence and ruling upon the admission of evidence and offers of proof; (d) Regulating the course of a proceeding and the conduct of the parties and their representatives; (e) Holding prehearing and other conferences as set forth in §501.726 and requiring the attendance at any such conference of at least one representative of each party who has authority to negotiate concerning the resolution of issues in controversy; (f) Subject to any limitations set forth elsewhere in this subpart, considering and ruling on all procedural and other motions; (g) Upon notice to all parties, reopening any hearing prior to the issuance of a decision; (h) Requiring production of records or any information relevant to any act or transaction subject to a hearing under this subpart, and imposing sanctions available under Federal Rule of Civil Procedure 37(b)(2) (Fed. R. Civ. P. 37(b)(2), 28 U.S.C.) for a party's failure to comply with discovery requests; (i) Establishing time, place, and manner limitations on the attendance of the public and the media for any hearing; and (j) Setting fees and expenses for witnesses, including expert witnesses. (a) Availability. Except as otherwise provided by law, the Administrative Law Judge or the Secretary's designee, as appropriate, at any time prior to the filing of his or her decision, may, for good cause and in the interest of justice, modify any time limit prescribed by this subpart and may, consistent with paragraph (b) of this section, postpone or adjourn any hearing. (b) Limitations on postponements, adjournments and adjustments. A hearing shall begin at the time and place ordered, provided that, within the limits provided, the Administrative Law Judge or the Secretary's designee, as appropriate, may for good cause shown postpone the commencement of the hearing or adjourn a convened hearing for a reasonable period of time. (1) Additional considerations. In considering a motion for postponement of the start of a hearing, adjournment once a hearing has begun, or extensions of time for filing papers, the Administrative Law Judge or the Secretary's designee, as appropriate, shall consider, in addition to any other factors: (i) The length of the proceeding to date; (ii) The number of postponements, adjournments or extensions already granted; (iii) The stage of the proceedings at the time of the request; and (iv) Any other matter as justice may require. (2) Time limit. Postponements, adjournments or extensions of time for filing papers shall not exceed 21 days unless the Administrative Law Judge or the Secretary's designee, as appropriate, states on the record or sets forth in a written order the reasons why a longer period of time is necessary. (a) Notice of disqualification. If at any time an Administrative Law Judge or Secretary's designee believes himself or herself to be disqualified from considering a matter, the Administrative Law Judge or Secretary's designee, as appropriate, shall issue a notice stating that he or she is withdrawing from the matter and setting forth the reasons therefor. (b) Motion for Withdrawal. Any party who has a reasonable, good faith basis to believe an Administrative Law Judge or Secretary's designee has a personal bias, or is otherwise disqualified from hearing a case, may make a motion to the Administrative Law Judge or Secretary's designee, as appropriate, that the Administrative Law Judge or Secretary's designee withdraw. The motion shall be accompanied by a statement subject to 18 U.S.C. 1001 setting forth in detail the facts alleged to constitute grounds for disqualification. If the Administrative Law Judge or Secretary's designee finds himself or herself qualified, he or she shall so rule and shall continue to preside over the proceeding. (a) Recordation. Unless otherwise ordered by the Administrative Law Judge, all hearings shall be recorded and a written transcript thereof shall be prepared. (1) Availability of a transcript. Transcripts of hearings shall be available for purchase. (2) Transcript correction. Prior to the filing of post-hearing briefs or proposed findings and conclusions, or within such earlier time as directed by the Administrative Law Judge, a party or witness may make a motion to correct the transcript. Proposed corrections of the transcript may be submitted to the Administrative Law Judge by stipulation pursuant to §501.732(c), or by motion. Upon notice to all parties to the proceeding, the Administrative Law Judge may, by order, specify corrections to the transcript. (b) Contents of the record. The record of each hearing shall consist of: (1) The Order Instituting Proceedings, Answer to Order Instituting Proceedings, Notice of Hearing and any amendments thereto; (2) Each application, motion, submission or other paper, and any amendments, motions, objections, and exceptions to or regarding them; (3) Each stipulation, transcript of testimony, interrogatory, deposition, and document or other item admitted into evidence; (4) With respect to a request to disqualify an Administrative Law Judge or to allow the Administrative Law Judge's withdrawal under §501.738, each affidavit or transcript of testimony taken and the decision made in connection with the request; (5) All proposed findings and conclusions; (6) Each written order issued by the Administrative Law Judge; and (7) Any other document or item accepted into the record by the Administrative Law Judge. (c) Retention of documents not admitted. Any document offered as evidence but excluded, and any document marked for identification but not offered as an exhibit, shall not be part of the record. The Administrative Law Judge shall retain any such document until the later of the date the proceeding becomes final, or the date any judicial review of the final proceeding is no longer available. (d) Substitution of copies. A true copy of a document may be substituted for any document in the record or any document retained pursuant to paragraph (c) of this section. The Administrative Law Judge shall prepare a decision that constitutes his or her final disposition of the proceedings. (a) Content. (1) The Administrative Law Judge shall determine whether or not the respondent has violated any provision of parts 500 and 515 of this chapter or the provisions of any license, ruling, regulation, order, direction or instruction issued by or under the authority of the Secretary pursuant to part 500 or 515 of this chapter or otherwise under the Trading with the Enemy Act. (2) The Administrative Law Judge's decision shall include findings and conclusions, and the reasons or basis therefor, as to all the material issues of fact, law or discretion presented on the record. (3) (i) Upon a finding of violation, the Administrative Law Judge shall award an appropriate monetary civil penalty in an amount consistent with the Penalty Guidelines published by the Director. (ii) Notwithstanding paragraph (a)(3)(i) of this section, the Administrative Law Judge: (A) Shall provide an opportunity for a respondent to assert his or her inability to pay a penalty, or financial hardship, by filing with the Administrative Law Judge a financial disclosure statement subject to 18 U.S.C. 1001 that sets forth in detail the basis for the financial hardship or the inability to pay; and (B) Shall consider any such filing in determining the appropriate monetary civil penalty. (b) Administrative Law Judge's decision—(1) Service. The Administrative Law Judge shall serve his or her decision on the respondent and on the Director through the Office of Chief Counsel, and shall file a copy of the decision with the Secretary's designee. (2) Filing of report with the Secretary's designee. If the respondent or Director files a petition for review pursuant to §501.741, or upon a request from the Secretary's designee, the Administrative Law Judge shall file his or her report with the Secretary's designee not later than 20 days after service of his or her decision on the parties. The report shall consist of the record, including the Administrative Law Judge's decision, and any petition from the respondent or the Director seeking review. (3) Correction of errors. Until the Administrative Law Judge's report has been directed for review by the Secretary's designee or, in the absence of a direction for review, until the decision has become a final order, the Administrative Law Judge may correct clerical errors and errors arising through oversight or inadvertence in decisions, orders, or other parts of the record. (c) Administrative Law Judge's decision final unless review directed. Unless the Secretary's designee determines to review a decision in accordance with §501.741(a)(1), the decision of the Administrative Law Judge shall become the final decision of the Department. (d) Penalty awarded. The Director is charged with implementing all final decisions of the Department and, upon a finding of violation and/or award of a civil monetary penalty, shall carry out the necessary steps to close the action. (a) Availability. (1)(i) Review of the decision of the Administrative Law Judge by the Secretary's designee is not a right. The Secretary's designee may, in his or her discretion, review the decision of the Administrative Law Judge on the petition of either the respondent or the Director, or upon his or her own motion. The Secretary's designee shall determine whether to review a decision: (A) If a petition for review has been filed by the respondent or the Director, not later than 30 days after that date the Administrative Law Judge filed his or her report with the Secretary's designee pursuant to paragraph (b)(2) of this section; or (B) If no petition for review has been filed by the respondent or the Director, not later than 40 days after the date the Administrative Law Judge filed his or her decision with the Secretary's designee pursuant to paragraph (b)(1) of this section. (ii) In determining whether to review a decision upon petition of the respondent or the Director, the Secretary's designee shall consider whether the petition for review makes a reasonable showing that: (A) a prejudicial error was committed in the conduct of the proceeding; or (B) the decision embodies: (1) a finding or conclusion of material fact that is clearly erroneous; (2) a conclusion of law that is erroneous; or (3) an exercise of discretion or decision of law or policy that is important and that the Secretary's designee should review. (2) Interlocutory review of ruling. The Secretary's designee shall review any ruling of an Administrative Law Judge involving privileged or confidential material that is the subject of a petition for review. See §501.725. (b) Filing. Either the respondent or the Director, when adversely affected or aggrieved by the decision or ruling of the Administrative Law Judge, may seek review by the Secretary's designee by filing a petition for review. Any petition for review shall be filed with the Administrative Law Judge within 10 days after service of the Administrative Law Judge's decision or the issuance of a ruling involving privileged or confidential material. (c) Contents. The petition shall state why the Secretary's designee should review the Administrative Law Judge's decision or ruling, including: Whether the Administrative Law Judge's decision or ruling raises an important question of law, policy or discretion; whether review by the Secretary's designee will resolve a question about which the Department's Administrative Law Judges have rendered differing opinions; whether the Administrative Law Judge's decision or ruling is contrary to law or Department precedent; whether a finding of material fact is not supported by a preponderance of the evidence; or whether a prejudicial error of procedure or an abuse of discretion was committed. A petition should concisely state the portions of the decision or ruling for which review is sought. A petition shall not incorporate by reference a brief or legal memorandum. (d) When filing effective. A petition for review is filed when received by the Administrative Law Judge. (e) Statements in opposition to petition. Not later than 8 days after the filing of a petition for review, either the respondent or the Director may file a statement in opposition to a petition. A statement in opposition to a petition for review shall be filed in the manner specified in this section for filing of petitions for review. Statements in opposition shall concisely state why the Administrative Law Judge's decision or ruling should not be reviewed with respect to each portion of the petition to which it is addressed. (f) Number of copies. An original and three copies of a petition or a statement in opposition to a petition shall be filed with the Administrative Law Judge. (g) Prerequisite to judicial review. Pursuant to section 704 of the Administrative Procedure Act, 5 U.S.C. 704, a petition for review by the Secretary's designee of an Administrative Law Judge decision or ruling is a prerequisite to the seeking of judicial review of a final order entered pursuant to such decision or ruling. (a) Scope of review. The Secretary's designee may affirm, reverse, modify, set aside or remand for further proceedings, in whole or in part, a decision or ruling by an Administrative Law Judge and may make any findings or conclusions that in his or her judgment are proper and on the basis of the record and such additional evidence as the Secretary's designee may receive in his or her discretion. (b) Summary affirmance. The Secretary's designee may summarily affirm an Administrative Law Judge's decision or ruling based upon the petition for review and any response thereto, without further briefing, if he or she finds that no issue raised in the petition for review warrants further consideration. (a) Briefing schedule order. If review of a determination is mandated by judicial order or whenever the Secretary's designee reviews a decision or ruling, the Secretary's designee shall, unless such review results in summary affirmance pursuant to §501.742(b), issue a briefing schedule order directing the parties to file opening briefs and specifying particular issues, if any, as to which briefing should be limited or directed. Unless otherwise provided, opening briefs shall be filed not later than 40 days after the date of the briefing schedule order. Opposition briefs shall be filed not later than 30 days after the date opening briefs are due. Reply briefs shall be filed not later than 14 days after the date opposition briefs are due. No briefs in addition to those specified in the briefing schedule order may be filed without permission of the Secretary's designee. The briefing schedule order shall be issued not later than 21 days after the later of: (1) The last day permitted for filing a brief in opposition to a petition for review pursuant to §501.741(e); or (2) Receipt by the Secretary's designee of the mandate of a court with respect to a judicial remand. (b) Contents of briefs. Briefs shall be confined to the particular matters at issue. Each exception to the findings or conclusions being reviewed shall be stated succinctly. Exceptions shall be supported by citation to the relevant portions of the record, including references to the specific pages relied upon, and by concise argument including citation of such statutes, decisions and other authorities as may be relevant. If the exception relates to the admission or exclusion of evidence, the substance of the evidence admitted or excluded shall be set forth in the brief, in an appendix thereto, or by citation to the record. If the exception relates to interlocutory review, there is no requirement to reference pages of the transcript. Reply briefs shall be confined to matters in opposition briefs of other parties. (c) Length limitation. Opening and opposition briefs shall not exceed 30 pages and reply briefs shall not exceed 20 pages, exclusive of pages containing the table of contents, table of authorities, and any addendum, except with permission of the Secretary's designee. The Secretary's designee shall determine each matter on the basis of the record and such additional evidence as the Secretary's designee may receive in his or her discretion. In any case of interlocutory review, the Administrative Law Judge shall direct that a transcript of the relevant proceedings be prepared and forwarded to the Secretary's designee. (a) Contents of the record. In proceedings for final decision before the Secretary's designee the record shall consist of: (1) All items that are part of the record in accordance with §501.739; (2) Any petitions for review, cross-petitions or oppositions; (3) All briefs, motions, submissions and other papers filed on appeal or review; and (4) Any other material of which the Secretary's designee may take administrative notice. (b) Review of documents not admitted. Any document offered in evidence but excluded by the Administrative Law Judge and any document marked for identification but not offered as an exhibit shall not be considered a part of the record before the Secretary's designee on review but shall be transmitted to the Secretary's designee if he or she so requests. In the event that the Secretary's designee does not request the document, the Administrative Law Judge shall retain the document not admitted into the record until the later of: (1) The date upon which the Secretary's designee's order becomes final; or (2) The conclusion of any judicial review of that order. (a) Signature required. All orders and decisions of the Administrative Law Judge or Secretary's designee shall be signed. (b) Date of entry of orders. The date of entry of an order by the Administrative Law Judge or Secretary's designee shall be the date the order is signed. Such date shall be reflected in the caption of the order, or if there is no caption, in the order itself. (c) Public availability of orders. (1) In general, any final order of the Department shall be made public. Any supporting findings or opinions relating to a final order shall be made public at such time as the final order is made public. (2) Exception. Any final order of the Administrative Law Judge or Secretary's designee pertaining to an application for confidential treatment shall only be available to the public in accordance with §501.725(b)(3). In the event that the respondent does not pay any penalty imposed pursuant to this part within 30 calendar days of the mailing of the written notice of the imposition of the penalty, the matter may be referred for administrative collection measures or to the United States Department of Justice for appropriate action to recover the penalty in a civil suit in a Federal district court. Either an Administrative Law Judge or a Secretary's designee, as appropriate, shall reconsider any Department decision on judicial remand to the Department. The rules of practice contained in this subpart shall apply to all proceedings held on judicial remand. Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted. Redesignated at 68 FR 53642, Sept. 11, 2003.
(a) General licenses. General licenses have been issued authorizing under appropriate terms and conditions certain types of transactions which are subject to the prohibitions contained in this chapter. All such licenses are set forth in subpart E of each part contained in this chapter. General licenses may also be issued authorizing under appropriate terms and conditions certain types of transactions which are subject to prohibitions contained in economic sanctions programs the implementation and administration of which have been delegated to the Director of the Office of Foreign Assets Control but which are not yet codified in this chapter. It is the policy of the Office of Foreign Assets Control not to grant applications for specific licenses authorizing transactions to which the provisions of an outstanding general license are applicable. Persons availing themselves of certain general licenses may be required to file reports and statements in accordance with the instructions specified in those licenses. Failure to file such reports or statements will nullify the authority of the general license. (b) Specific licenses—(1) General course of procedure. Transactions subject to the prohibitions contained in this chapter, or to prohibitions the implementation and administration of which have been delegated to the Director of the Office of Foreign Assets Control, which are not authorized by general license may be effected only under specific licenses. (2) Applications for specific licenses. Original signed applications for specific licenses to engage in any transactions prohibited by or pursuant to this chapter or sanctions programs that have been delegated to the Director of the Office of Foreign Assets Control for implementation and administration must be filed by mail or courier. Applications will not be accepted by fax or electronically, unless otherwise authorized. Applications may be submitted in letter form with the exception of license applications for the unblocking of funds transfers. Applications for the unblocking of funds transfers must be submitted using TD-F 90–22.54, “Application for the Release of Blocked Funds,” accompanied by two complete copies of the entire submission. The form, which requires information regarding the date of the blocking, the financial institutions involved in the transfer, and the beneficiary and amount of the transfer, may be obtained from the OFAC Internet Home Page: http://www.treas.gov/ofac, the OFAC fax-on-demand service: 202/622–0077, or the Compliance Programs Division, Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220. Any person having an interest in a transaction or proposed transaction may file an application for a license authorizing such transaction. (3) Information to be supplied. The applicant must supply all information specified by relevant instructions and/or forms, and must fully disclose the names of all parties who are concerned with or interested in the proposed transaction. If the application is filed by an agent, the agent must disclose the name of his principal(s). Such documents as may be relevant shall be attached to each application as a part of such application, except that documents previously filed with the Office of Foreign Assets Control may, where appropriate, be incorporated by reference in such application. Applicants are required to supply their taxpayer identifying number pursuant to 31 U.S.C. 7701, which number may be used for purposes of collecting and reporting on any delinquent amounts arising out of the applicant's relationship with the United States Government. Applicants may be required to furnish such further information as is deemed necessary to a proper determination by the Office of Foreign Assets Control. Any applicant or other party in interest desiring to present additional information may do so at any time before or after decision. Arrangements for oral presentation should be made with the Office of Foreign Assets Control. (4) Effect of denial. The denial of a license does not preclude the reopening of an application or the filing of a further application. The applicant or any other party in interest may at any time request explanation of the reasons for a denial by correspondence or personal interview. (5) Reports under specific licenses. As a condition for the issuance of any license, the licensee may be required to file reports with respect to the transaction covered by the license, in such form and at such times and places as may be prescribed in the license or otherwise. (6) Issuance of license. Licenses will be issued by the Office of Foreign Assets Control acting on behalf of the Secretary of the Treasury or licenses may be issued by the Secretary of the Treasury acting directly or through any specifically designated person, agency, or instrumentality. (7) Address. License applications, reports, and inquiries should be addressed to the appropriate division or individual within the Office of Foreign Assets Control, or to its Director, at the following address: Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW.—Annex, Washington, DC 20220. (c) Registration of nongovernmental organizations—(1) Purpose of registration. For those parts of this chapter specifically authorizing the registration of nongovernmental organizations (“NGOs”), registration numbers may be issued on a case-by-case basis to NGOs involved in humanitarian or religious activities in countries or geographic areas subject to economic sanctions pursuant to this chapter V. A registration number authorizes certain transactions by or on behalf of the registered NGO otherwise prohibited by the specific part with respect to which the registration number is issued, including the exportation of goods, services, and funds to the country or geographic area subject to such part for the purpose of relieving human suffering. The transactions authorized for registered NGOs either will be specified by the statement of licensing policy in the part under which the registration number is issued or by the Office of Foreign Assets Control letter issuing the registration number. (2) Application information to be supplied. Applications for registration numbers should be submitted to the Compliance Programs Division, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW., Annex, Washington, DC 20220, or by facsimile to (202) 622–2426, and must include: (i) The organization's name in English, in the language of origin, and any acronym or other names used to identify the organization; (ii) Address and phone number of the organization's headquarters location; (iii) Full name in English, in the language of origin, and any acronym or other names used, as well as nationality, citizenship, current country of residence, place and date of birth for key staff at the organization's headquarters, such as the chairman and board members, president, director, etc.; (iv) Identification of field offices or partner offices elsewhere, including addresses, phone numbers, and organizational names used, as well as the identification of the senior officer(s) at these locations, including the person's name, position, nationality, citizenship, and date of birth (names of individuals and organizations shall be provided in English, in the language of origin, and shall include any acronym or other names used to identify the individuals or organizations); (v) Identification of subcontracting organizations, if any, to the extent known or contemplated at the time of the application; (vi) Existing sources of income, such as official grants, private endowments, commercial activities; (vii) Financial institutions that hold deposits on behalf of or extend lines of credit to the organization (names of individuals and organizations shall be provided in English, in the language of origin, and shall include any acronym or other names used to identify the individuals or organizations); (viii) Independent accounting firms, if employed in the production of the organization's financial statements (names of individuals and organizations shall be provided in English, in the language of origin, and shall include any acronym or other names used to identify the individuals or organizations); (ix) A detailed description of the organization's humanitarian or religious activities and projects in countries or geographic areas subject to economic sanctions pursuant to this chapter V; (x) Most recent official registry documents, annual reports, and annual filings with the pertinent government, as applicable; and (xi) Names and addresses of organizations to which the applicant currently provides or proposes to provide funding, services or material support, to the extent known at the time of the vetting, as applicable. (3) Use of registration number. Registered NGOs conducting transactions authorized by their registrations to support their humanitarian or religious activities pursuant to any part of this chapter should reference the registration number on all payments and funds transfers and on all related documentation, including all purchasing, shipping, and financing documents. (4) Limitations. Registered NGOs are not authorized to make remittances from blocked accounts. Registration numbers are not transferable and may be revoked or modified at any time at the discretion of the Director, Office of Foreign Assets Control. Registration numbers do not excuse compliance with any law or regulation administered by the Office of Foreign Assets Control or any other agency (including reporting requirements) applicable to the transaction(s) herein authorized, nor does it release the Registrant or third parties from civil or criminal liability for violation of any law or regulation. (5) Prior numbers. Registration numbers already issued remain in effect. [62 FR 45101, Aug. 25, 1997, as amended at 65 FR 10708, Feb. 29, 2000; 66 FR 2728, Jan. 11, 2001] The Office of Foreign Assets Control will advise each applicant of the decision respecting filed applications. The decision of the Office of Foreign Assets Control acting on behalf of the Secretary of the Treasury with respect to an application shall constitute final agency action. Except as otherwise provided by law, the provisions of each part of this chapter and any rulings, licenses (whether general or specific), authorizations, instructions, orders, or forms issued thereunder may be amended, modified or revoked at any time. [63 FR 35809, July 1, 1998] (a) All rules and other public documents are issued by the Director of the Office of Foreign Assets Control. In general, rulemaking by the Office of Foreign Assets Control involves foreign affairs functions of the United States, and for that reason is exempt from the requirements under the Administrative Procedure Act (5 U.S.C. 553) for notice of proposed rulemaking, opportunity for public comment, and delay in effective date. (b) Any interested person may petition the Director of the Office of Foreign Assets Control in writing for the issuance, amendment, or repeal of any rule. (a) The records of the Office of Foreign Assets Control which are required by the Freedom of Information Act (5 U.S.C. 552) to be made available to the public shall be made available in accordance with the definitions, procedures, payment of fees, and other provisions of the regulations on the Disclosure of Records of the Departmental Offices and of other bureaus and offices of the Department of the Treasury issued under 5 U.S.C. 552 and published at 31 CFR part 1. Note to paragraph (b) The records of the Office of Foreign Assets Control which are required by the Privacy Act (5 U.S.C. 552a) to be made available to an individual shall be made available in accordance with the definitions, procedures, requirements for payment of fees, and other provisions of the Regulations on the Disclosure of Records of the Departmental Offices and of other bureaus and offices of the Department of the Treasury issued under 5 U.S.C. 552a and published at 31 CFR part 1. (c) Any form issued for use in connection with this chapter may be obtained in person or by writing to the Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW.—Annex, Washington, DC 20220, or by calling 202/622–2480. (d) Certain Civil Penalties Information. (1) After the conclusion of a civil penalties proceeding that results in either the imposition of a civil monetary penalty or an informal settlement, OFAC shall make available to the public certain information on a routine basis, not less frequently than monthly, as follows: (i) In each such proceeding against an entity, OFAC shall make available to the public (A) The name and address of the entity involved, (B) The sanctions program involved, (C) A brief description of the violation or alleged violation, (D) A clear indication whether the proceeding resulted in an informal settlement or in the imposition of a penalty, (E) An indication whether the entity voluntarily disclosed the violation or alleged violation to OFAC, and (F) The amount of the penalty imposed or the amount of the agreed settlement. (ii) In such proceedings against individuals, OFAC shall release on an aggregate basis (A) The number of penalties imposed and informal settlements reached, (B) The sanctions programs involved, (C) A brief description of the violations or alleged violations, (D) A clear indication whether the proceedings resulted in informal settlements, in the imposition of penalties, or in administrative hearing requests pursuant to the Trading With the Enemy Act (TWEA), 50 U.S.C. 5(b), and (E) The amounts of the penalties imposed and the amounts of the agreed settlements. (2) The medium through which information will be released is OFAC's website at http://www.treas.gov/ofac. (3) The information made available pursuant to paragraph (d)(1) of this section shall not include the following: (i) The name of any violator or alleged violator who is an individual. (ii) Records or information obtained or created in the implementation of part 598 of this chapter. (4) On a case-by-case basis, OFAC may release additional information concerning a particular civil penalties proceeding. [62 FR 45101, Aug. 25, 1997, as amended at 65 FR 41335, July 5, 2000; 68 FR 6822, Feb. 11, 2003] When a transaction results in the blocking of funds at a financial institution pursuant to the applicable regulations of this chapter and a party to the transaction believes the funds have been blocked due to mistaken identity, that party may seek to have such funds unblocked pursuant to the following administrative procedures: (a) Any person who is a party to the transaction may request the release of funds which the party believes to have been blocked due to mistaken identity. (b) Requests to release funds which a party believes to have been blocked due to mistaken identity must be made in writing and addressed to the Office of Foreign Assets Control, Compliance Programs Division, 1500 Pennsylvania Avenue, NW.—Annex, Washington, DC 20220, or sent by facsimile transmission to the Compliance Programs Division at 202/622–1657. (c) The written request to release funds must include the name, address, telephone number, and (where available) fax number of the party seeking the release of the funds. For individuals, the inclusion of a social security number is voluntary but will facilitate resolution of the request. For corporations or other entities, the application should include its principal place of business, the state of incorporation or organization, and the name and telephone number of the appropriate person to contact regarding the application. (d) A request to release funds should include the following information, where known, concerning the transaction: (1) The name of the financial institution in which the funds are blocked; (2) The amount blocked; (3) The date of the blocking; (4) The identity of the original remitter of the funds and any intermediary financial institutions; (5) The intended beneficiary of the blocked transfer; (6) A description of the underlying transaction including copies of related documents (e.g., invoices, bills of lading, promissory notes, etc.); (7) The nature of the applicant's interest in the funds; and (8) A statement of the reasons why the applicant believes the funds were blocked due to mistaken identity. (e) Upon receipt of the materials required by paragraph (d) of this section, OFAC may request additional material from the applicant concerning the transaction pursuant to §501.602. (f) Following review of all applicable submissions, the Director of the Office of Foreign Assets Control will determine whether to release the funds. In the event the Director determines that the funds should be released, the Office of Foreign Assets Control will direct the financial institution to return the funds to the appropriate party. (g) For purposes of this section, the term “financial institution” shall include a banking institution, depository institution or United States depository institution, domestic bank, financial institution or U.S. financial institution, as those terms are defined in the applicable part of this chapter. [62 FR 45101, Aug. 25, 1997, as amended at 62 FR 52495, Oct. 8, 1997] A person may seek administrative reconsideration of his, her or its designation or that of a vessel as blocked, or assert that the circumstances resulting in the designation no longer apply, and thus seek to have the designation rescinded pursuant to the following administrative procedures: (a) A person blocked under the provisions of any part of this chapter, including a specially designated national, specially designated terrorist, or specially designated narcotics trafficker (collectively,“a blocked person”), or a person owning a majority interest in a blocked vessel may submit arguments or evidence that the person believes establishes that insufficient basis exists for the designation. The blocked person also may propose remedial steps on the person's part, such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation. A person owning a majority interest in a blocked vessel may propose the sale of the vessel, with the proceeds to be placed into a blocked interest-bearing account after deducting the costs incurred while the vessel was blocked and the costs of the sale. This submission must be made in writing and addressed to the Director, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW.—Annex, Washington, DC 20220. (b) The information submitted by the blocked person seeking unblocking or by a person seeking the unblocking of a vessel will be reviewed by the Office of Foreign Assets Control, which may request clarifying, corroborating, or other additional information. (c) A blocked person seeking unblocking or a person seeking the unblocking of a vessel may request a meeting with the Office of Foreign Assets Control; however, such meetings are not required, and the office may, at its discretion, decline to conduct such meetings prior to completing a review pursuant to this section. (d) After the Office of Foreign Assets Control has conducted a review of the request for reconsideration, it will provide a written decision to the blocked person or person seeking the unblocking of a vessel. [64 FR 5614, Feb. 4, 1999] Upon submission to the Office of Management and Budget of an amendment to the overall burden hours for the information collections imposed under this part, the license application and other procedures set forth in this subpart are applicable to economic sanctions programs for which implementation and administration have been delegated to the Office of Foreign Assets Control. Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted. Redesignated at 68 FR 53642, Sept. 11, 2003.
The information collection requirements in subparts C and D have been approved by the Office of Management and Budget (“OMB”) under the Paperwork Reduction Act (44 U.S.C. 3507(j)) and assigned 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 it displays a valid control number assigned by OMB. Note: This appendix provides a general procedural framework for the enforcement of all economic sanctions programs administered by the Office of Foreign Assets Control (“OFAC”) only as they relate to banking institutions, as defined herein. I. Definitions A. Banking regulator means the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision. B. Banking institution, for purposes of this appendix to Part 501, means a depository institution supervised or regulated by a banking regulator. C. OFAC means the Department of the Treasury's Office of Foreign Assets Control. D. Voluntary disclosure means notification to OFAC of an apparent sanctions violation by the banking institution that has committed it. However, such notification to OFAC is not deemed a voluntary disclosure if OFAC has previously received information concerning the conduct from another source, including, but not limited to, a regulatory or law enforcement agency or another person's blocking or funds transfer rejection report. Notification by a banking institution is also not a voluntary disclosure if another person's blocking or funds transfer rejection report is required to be filed, whether or not this required filing is made. Responding to an administrative subpoena or other inquiry from OFAC is not a voluntary disclosure. The submission of a license request is not a voluntary disclosure unless it is accompanied by a separate disclosure. II. Enforcement of Economic Sanctions in General A. OFAC Civil Investigation and Enforcement Action. OFAC is responsible for civil investigation and enforcement with respect to economic sanctions violations committed by banking institutions. In these efforts, OFAC may coordinate with banking regulators. OFAC investigations may lead to one or more of the following: an administrative subpoena, an order to cease and desist, a blocking order, an evaluative letter summarizing concerns, or a civil penalty proceeding. In addition to or instead of such actions, if the banking institution involved is currently acting pursuant to an OFAC license, that license may be suspended or revoked. B. OFAC's Evaluation of Violative Conduct. The level of enforcement action undertaken by OFAC involving a banking institution depends on the nature of the apparent violation, the enforcement objectives, and the foreign policy goals of the particular sanctions program involved. In evaluating whether to initiate a civil penalty action, OFAC determines whether there is reason to believe that a violation of the relevant regulations, statutes, or Executive orders has occurred. In making determinations about the disposition of apparent violations by banking institutions, including evaluative letters and civil penalties, OFAC will consider information provided by the banking institution and its banking regulator concerning the institution's compliance program and the adequacy of that program based on its OFAC risk profile. Further information about the evaluation of compliance programs commensurate with the risk profile of a banking institution and a description of a sound OFAC compliance program are provided in Annexes A and B. C. Criminal Investigations and Prosecutions. If the evidence suggests that a banking institution has committed a willful violation of a substantive prohibition or requirement, OFAC may refer those cases to other federal law enforcement agencies for criminal investigation. Cases that an investigative agency has referred to the Department of Justice for criminal prosecution also may be subject to OFAC civil penalty action. III. Periodic Institutional Review A. Except for those significant violations for which prompt action, such as a civil penalty proceeding or referral to other federal law enforcement agencies, is appropriate, OFAC will review institutions with violations or suspected violations on a periodic basis. OFAC will review each such institution's apparent violations over a period of time deemed appropriate in light of the number and severity of apparent violations and the institution's OFAC compliance history. B. Upon completing this review, OFAC will preliminarily determine the type of enforcement action it will pursue for each apparent violation or related apparent violations. OFAC will then seek comment from the banking institution and ask it to provide additional information with regard to the apparent violation or violations. OFAC also will ask the institution to explain what actions led to the apparent violation or violations and what actions, if any, it has taken to overcome the deficiencies in its systems that led to the apparent improper handling of the transactions or accounts. Depending on the number and complexity of the apparent violations, OFAC may grant up to 30 days for a banking institution to respond and may grant further extensions at its sole discretion where it determines this is appropriate. Upon receipt of the institution's response, OFAC will decide whether to pursue the intended administrative action or whether some other action would serve the same purpose. C. OFAC will subsequently send the banking institution a letter detailing its findings and further actions, if any, concerning the apparent violations. OFAC will provide the banking institution's primary banking regulator with a copy of this letter. IV. Factors Affecting Administrative Action In making its decision as to administrative action, if any, OFAC will consider a number of factors, including, but not limited to, the following: A. The institution's history of sanctions violations. B. The size of the institution and the number of OFAC-related transactions handled correctly compared to the number and nature of transactions handled incorrectly. C. The quality and effectiveness of the banking institution's overall OFAC compliance program, as determined by the institution's primary banking regulator and by its history of compliance with OFAC regulations. D. Whether the apparent violation or violations in question are the result of systemic failures at the banking institution or are atypical in nature. E. The voluntary disclosure to OFAC of the apparent violation or violations by the banking institution. F. Providing OFAC a report of, or useful enforcement information concerning, the apparent violation or violations. Providing a report, but not a voluntary disclosure, of the apparent violation or violations will generally be accorded less weight as a mitigating factor than would provision of a voluntary disclosure. G. The deliberate effort to hide or conceal from OFAC or to mislead OFAC concerning an apparent violation or violations or its OFAC compliance program. H. An analysis of current or potential sanctions harm as a result of a violation or series of related violations. This analysis will focus both on the specifics of the apparent violation or violations and the institution's compliance effort. I. Technical, computer, or human error. J. Applicability of a statute of limitations and any waivers thereof. K. Actions taken by the banking institution to correct the problems that led to the apparent violation or violations. L. The level of OFAC action that will best lead to enhanced compliance by the banking institution. M. The level of OFAC action that will best serve to encourage enhanced compliance by others. N. Evidence that a transaction or transactions could have been licensed by OFAC under an existing licensing policy. O. Whether other U.S. government agencies have taken enforcement action. P. Qualification of the banking institution as a small business or organization for the purposes of the Small Business Regulatory Enforcement Fairness Act, as determined by reference to the applicable regulations of the Small Business Administration. V. License Suspension and Revocation In addition to or in lieu of other administrative actions, OFAC authorization to engage in a transaction or transactions pursuant to a general or specific license may be suspended or revoked with respect to a banking institution for reasons including, but not limited to, the following: A. The banking institution has made or caused to be made in any license application, or in any report required pursuant to a license, any statement that was, at the time and in light of the circumstances under which it was made, false or misleading with respect to any material fact, or it has omitted to state in any application or report any material fact that was required; B. The banking institution has failed to file timely reports or comply with the recordkeeping requirements of a general or specific license; C. The banking institution has violated any provision of the statutes enforced by OFAC or the rules or regulations issued under any such provision or relevant Executive orders and such violation or violations are significant and merited civil penalty or other enforcement action; D. The banking institution is reasonably believed to have counseled, commanded, induced, procured, or knowingly aided or abetted the violation of any provision of any legal authority referred to in paragraph C; E. Based on the information available to it, OFAC considers the banking institution's compliance program inadequate; or F. The banking institution has committed any other act or omission that demonstrates unfitness to conduct the transactions authorized by the general or specific license. VI. Civil Penalties The procedures for addressing the actions of banking institutions that OFAC decides merit civil penalty treatment are provided in the regulations governing the particular sanctions program involved, or, in the case of sanctions regulations issued pursuant to the Trading with the Enemy Act, in this Part. The factors listed in Section IV will be considerations in the civil penalty process. Annex B—Sound Banking Institution OFAC Compliance Programs A. Identification of High Risk Business Areas. A fundamental element of a sound OFAC compliance program rests on a banking institution's assessment of its specific product lines and identification of the high-risk areas for OFAC transactions. As OFAC sanctions reach into virtually all types of commercial and banking transactions, no single area will likely pass review without consideration of some type of OFAC compliance measure. Relevant areas to consider in a risk assessment include, but are not limited to, the following: retail operations, loans and other extensions of credit (open and closed-ended; on and off-balance sheet, including letters of credit), funds transfers, trust, private and correspondent banking, international, foreign offices, over-the-counter derivatives, internet banking, safe deposit, payable through accounts, money service businesses, and merchant credit card processing. B. Internal Controls. An effective OFAC compliance program should include internal controls for identifying suspect accounts and transactions and reporting to OFAC. Internal controls should include the following elements: 1. Flagging and Review of Suspect Transactions and Accounts. A banking institution's policies and procedures should address how it will flag and review transactions and accounts for possible OFAC violations, whether conducted manually, through interdiction software, or a combination of both methods. For screening purposes, a banking institution should clearly define procedures for comparing names provided on the OFAC list with the names in its files or on the transaction and for flagging transactions or accounts involving sanctioned countries. In high-risk and high-volume areas in particular, a banking institution's interdiction filter should be able to flag close name derivations for review. New accounts should be compared with the OFAC lists prior to allowing transactions. Established accounts, once scanned, should be compared regularly against OFAC updates. 2. Updating the Compliance Program. A banking institution's compliance program should also include procedures for maintaining current lists of blocked countries, entities, and individuals and for disseminating such information throughout the institution's domestic operations and its offshore offices, branches and, for purposes of the sanctions programs under the Trading with the Enemy Act, foreign subsidiaries. 3. Reporting. A compliance program should also include procedures for handling transactions that are validly blocked or rejected under the various sanctions programs. These procedures should cover the reporting of blocked and rejected items to OFAC as provided in §501.603 of this Part and the annual report of blocked property required by §501.604 of this Part. 4. Management of blocked accounts. An audit trail should be maintained in order to reconcile all blocked funds. A banking institution is responsible for tracking the amount of blocked funds, the ownership of those funds, interest paid on those funds, and the release of blocked funds pursuant to license. 5. Maintaining License Information. Sound compliance procedures dictate that a banking institution maintain copies of customers' OFAC specific licenses on file. This will allow a banking institution to verify whether a customer is initiating a legal transaction. If it is unclear whether a particular transaction is authorized by a license, a banking institution should confirm this with OFAC. Maintaining copies of licenses will also be useful if another banking institution in the payment chain requests verification of a license's validity. In the case of a transaction performed under general license (or, in some cases, a specific license), it is sound compliance for a banking institution to obtain a statement from the licensee that the transaction is in accordance with the terms of the license, assuming the banking institution does not know or have reason to know that the statement is false. C. Testing. Except for a banking institution with a very low OFAC risk profile, a banking institution should have a periodic test of its OFAC program performed by its internal audit department or by outside auditors, consultants, or other qualified independent parties. The frequency of the independent test should be consistent with the institution's OFAC risk profile; however, an in-depth audit of each department in the banking institution might reasonably be conducted at least once a year. The person(s) responsible for testing should conduct an objective, comprehensive evaluation of OFAC policies and procedures. The audit scope should be comprehensive and sufficient to assess OFAC compliance risks across the spectrum of all the institution's activities. If violations are discovered, they should be promptly reported to both OFAC and the banking institution's banking regulator. D. Responsible Individuals. It is sound compliance procedure for an institution to designate a qualified individual or individuals to be responsible for the day-to-day compliance of its OFAC program, including at least one individual responsible for the oversight of blocked funds. This individual or these individuals should be fully knowledgeable about OFAC statutes, regulations, and relevant Executive orders. E. Training. A banking institution should provide adequate training for all appropriate employees. The scope and frequency of the training should be consistent with the OFAC risk profile and the particular employee's responsibilities. [71 FR 1974, Jan. 12, 2006]
Title 31: Money and Finance: Treasury
PART 501—REPORTING, PROCEDURES AND PENALTIES REGULATIONS
Section Contents
§ 501.101 Relation of this part to other parts in this chapter.
§ 501.301 Definitions.
§ 501.601 Records and recordkeeping requirements.
§ 501.602 Reports to be furnished on demand.
§ 501.603 Reports on blocked property.
§ 501.604 Reports by U.S. financial institutions on rejected funds transfers.
§ 501.605 Reports on litigation, arbitration, and dispute resolution proceedings.
§ 501.606 Reporting and recordkeeping requirements applicable to economic sanctions programs.
§ 501.700 Applicability.
§ 501.701 Penalties.
§ 501.702 Definitions.
§ 501.703 Overview of civil penalty process and construction of rules.
§ 501.704 Appearance and practice.
§ 501.705 Service and filing.
§ 501.706 Prepenalty Notice; issuance by Director.
§ 501.707 Response to Prepenalty Notice.
§ 501.708 Director's finding of no penalty warranted.
§ 501.709 Penalty notice.
§ 501.710 Settlement.
§ 501.711 Hearing request.
§ 501.712 Acknowledgment of hearing request.
§ 501.713 Order Instituting Proceedings.
§ 501.714 Answer to Order Instituting Proceedings.
§ 501.715 Notice of Hearing.
§ 501.716 Default.
§ 501.717 Consolidation of proceedings.
§ 501.718 Conduct and order of hearings.
§ 501.719 Ex parte communications.
§ 501.720 Separation of functions.
§ 501.721 Hearings to be public.
§ 501.722 Prehearing conferences.
§ 501.723 Prehearing disclosures; methods to discover additional matter.
§ 501.724 Documents that may be withheld.
§ 501.725 Confidential treatment of information in certain filings.
§ 501.726 Motions.
§ 501.727 Motion for summary disposition.
§ 501.728 Subpoenas.
§ 501.729 Sanctions.
§ 501.730 Depositions upon oral examination.
§ 501.731 Depositions upon written questions.
§ 501.732 Evidence.
§ 501.733 Evidence: confidential information, protective orders.
§ 501.734 Introducing prior sworn statements of witnesses into the record.
§ 501.735 Proposed findings, conclusions and supporting briefs.
§ 501.736 Authority of Administrative Law Judge.
§ 501.737 Adjustments of time, postponements and adjournments.
§ 501.738 Disqualification and withdrawal of Administrative Law Judge.
§ 501.739 Record in proceedings before Administrative Law Judge; retention of documents; copies.
§ 501.740 Decision of Administrative Law Judge.
§ 501.741 Review of decision or ruling.
§ 501.742 Secretary's designee's consideration of decisions by Administrative Law Judges.
§ 501.743 Briefs filed with the Secretary's designee.
§ 501.744 Record before the Secretary's designee.
§ 501.745 Orders and decisions: signature, date and public availability.
§ 501.746 Referral to United States Department of Justice; administrative collection measures.
§ 501.747 Procedures on remand of decisions.
§ 501.801 Licensing.
§ 501.802 Decisions.
§ 501.803 Amendment, modification, or revocation.
§ 501.804 Rulemaking.
§ 501.805 Rules governing availability of information.
§ 501.806 Procedures for unblocking funds believed to have been blocked due to mistaken identity.
§ 501.807 Procedures governing removal of names from appendices A, B, and C to this chapter.
§ 501.808 License application and other procedures applicable to economic sanctions programs.
§ 501.901 Paperwork Reduction Act notice.
Appendix A to Part 501—Economic Sanctions Enforcement Procedures for Banking Institutions
Subpart A—Relation of This Part to Other Parts in This Chapter
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§ 501.101 Relation of this part to other parts in this chapter.
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Subpart B—Definitions
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§ 501.301 Definitions.
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Subpart C—Reports
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§ 501.601 Records and recordkeeping requirements.
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§ 501.602 Reports to be furnished on demand.
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§ 501.603 Reports on blocked property.
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§ 501.604 Reports by U.S. financial institutions on rejected funds transfers.
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§ 501.605 Reports on litigation, arbitration, and dispute resolution proceedings.
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§ 501.606 Reporting and recordkeeping requirements applicable to economic sanctions programs.
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Subpart D—Trading With the Enemy Act (TWEA) Penalties
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§ 501.700 Applicability.
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§ 501.701 Penalties.
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§ 501.702 Definitions.
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§ 501.703 Overview of civil penalty process and construction of rules.
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§ 501.704 Appearance and practice.
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§ 501.705 Service and filing.
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§ 501.706 Prepenalty Notice; issuance by Director.
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§ 501.707 Response to Prepenalty Notice.
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§ 501.708 Director's finding of no penalty warranted.
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§ 501.709 Penalty notice.
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§ 501.710 Settlement.
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§ 501.711 Hearing request.
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§ 501.712 Acknowledgment of hearing request.
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§ 501.713 Order Instituting Proceedings.
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§ 501.714 Answer to Order Instituting Proceedings.
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§ 501.715 Notice of Hearing.
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§ 501.716 Default.
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§ 501.717 Consolidation of proceedings.
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§ 501.718 Conduct and order of hearings.
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§ 501.719 Ex parte communications.
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§ 501.720 Separation of functions.
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§ 501.721 Hearings to be public.
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§ 501.722 Prehearing conferences.
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§ 501.723 Prehearing disclosures; methods to discover additional matter.
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§ 501.724 Documents that may be withheld.
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§ 501.725 Confidential treatment of information in certain filings.
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§ 501.726 Motions.
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§ 501.727 Motion for summary disposition.
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§ 501.728 Subpoenas.
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§ 501.729 Sanctions.
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§ 501.730 Depositions upon oral examination.
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§ 501.731 Depositions upon written questions.
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§ 501.732 Evidence.
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§ 501.733 Evidence: confidential information, protective orders.
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§ 501.734 Introducing prior sworn statements of witnesses into the record.
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§ 501.735 Proposed findings, conclusions and supporting briefs.
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§ 501.736 Authority of Administrative Law Judge.
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§ 501.737 Adjustments of time, postponements and adjournments.
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§ 501.738 Disqualification and withdrawal of Administrative Law Judge.
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§ 501.739 Record in proceedings before Administrative Law Judge; retention of documents; copies.
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§ 501.740 Decision of Administrative Law Judge.
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§ 501.741 Review of decision or ruling.
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§ 501.742 Secretary's designee's consideration of decisions by Administrative Law Judges.
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§ 501.743 Briefs filed with the Secretary's designee.
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§ 501.744 Record before the Secretary's designee.
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§ 501.745 Orders and decisions: signature, date and public availability.
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§ 501.746 Referral to United States Department of Justice; administrative collection measures.
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§ 501.747 Procedures on remand of decisions.
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Subpart E—Procedures
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§ 501.801 Licensing.
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§ 501.802 Decisions.
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§ 501.803 Amendment, modification, or revocation.
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§ 501.804 Rulemaking.
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§ 501.805 Rules governing availability of information.
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§ 501.806 Procedures for unblocking funds believed to have been blocked due to mistaken identity.
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§ 501.807 Procedures governing removal of names from appendices A, B, and C to this chapter.
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§ 501.808 License application and other procedures applicable to economic sanctions programs.
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Subpart F—Paperwork Reduction Act
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§ 501.901 Paperwork Reduction Act notice.
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Appendix A to Part 501—Economic Sanctions Enforcement Procedures for Banking Institutions
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Annex A._OFAC Risk Matrices [The following matrices can be used by banking institutions to evaluate their compliance programs. Matrix A is from the FFIEC Bank Secrecy Act Anti-Money Laundering Examination Manual published in 2005, Appendix M (``Quantity of Risk Matrix_OFAC Procedures'')]------------------------------------------------------------------------ Low Moderate High------------------------------------------------------------------------ Matrix A------------------------------------------------------------------------Stable, well-known customer Customer base A large, fluctuating base in a localized changing due to client base in an environment. branching, merger international or acquisition in environment. the domestic market.Few high-risk customers; A moderate number of A large number of these may include high-risk customers. high-risk nonresident aliens, foreign customers. customers (including accounts with U.S. powers of attorney) and foreign commercial customers.No overseas branches and no Overseas branches or Overseas branches or correspondent accounts with correspondent multiple foreign banks. accounts with correspondent foreign banks. accounts with foreign banks.No electronic banking (e- The bank offers The bank offers a banking) services offered, limited e-banking wide array of e- or products available are products and banking products purely informational or non- services. and services (i.e., transactional. account transfers, e-bill payment, or accounts opened via the Internet).Limited number of funds A moderate number of A high number of transfers for customers and funds transfers, customer and non- non-customers, limited mostly for customer funds third-party transactions, customers. transfers, and no international funds Possibly, a few including transfers. international funds international funds transfers from transfers. personal or business accounts.No other types of Limited other types A high number of international transactions, of international other types of such as trade finance, transactions. international cross-border ACH, and transactions. management of sovereign debt.No history of OFAC actions. A small number of Multiple recent No evidence of apparent recent actions actions by OFAC, violation or circumstances (i.e., actions where the bank has that might lead to a within the last not addressed the violation. five years) by issues, thus OFAC, including leading to an notice letters, or increased risk of civil money the bank penalties, with undertaking similar evidence that the violations in the bank addressed the future. issues and is not at risk of similar violations in the future.------------------------------------------------------------------------ Matrix B. This matrix consists of additional factors that may be considered by banking institutions in assessing compliance programs in addition to Appendix M of the FFIEC Bank Secrecy Act Anti-Money Laundering Examination Manual.------------------------------------------------------------------------Management has fully Management exhibits Management does not assessed the bank's level a reasonable understand, or has of risk based on its understanding of chosen to ignore, customer base and product the key aspects of key aspects of OFAC lines. This understanding OFAC compliance and compliance risk. of risk and strong its commitment is The importance of commitment to OFAC generally clear and compliance is not compliance is satisfactorily emphasized or satisfactorily communicated communicated communicated throughout the organization. throughout the throughout the organization, but organization. it may lack a program appropriately tailored to risk.The board of directors, or The board has The board has not board committee, has approved an OFAC approved an OFAC approved an OFAC compliance compliance program compliance program, program that includes that includes most or policies, policies, procedures, of the appropriate procedures, controls, and information policies, controls, and systems that are adequate, procedures, information systems and consistent with the controls, and are significantly bank's OFAC risk profile. information systems deficient. necessary to ensure compliance, but some weaknesses are noted.Staffing levels appear Staffing levels Management has adequate to properly appear generally failed to provide execute the OFAC to adequate, but some appropriate properly execute the OFAC deficiencies are staffing levels to compliance program. noted. handle workload.Authority and accountability Authority and Authority and for OFAC compliance are accountability are accountability for clearly defined and defined, but some compliance have not enforced, including the refinements are been clearly designations of a qualified needed. A qualified established. No OFAC officer. OFAC officer has OFAC compliance been designated. officer, or an unqualified one, has been appointed. The role of the OFAC officer is unclear.Training is appropriate and Training is Training is sporadic effective based on the conducted and and does not cover bank's risk profile, covers management provides important applicable personnel, and adequate resources regulatory and risk provides necessary up-to- given the risk areas. date information and profile of the resources to ensure organization; compliance. however, some ares are not covered within the training program.The institution employs The institution The institution does strong quality control employs limited not employ quality methods. quality control control quality methods. control methods.------------------------------------------------------------------------
