31 CFR Part 501 — Reporting, Procedures and Penalties Regulations

PART 501—REPORTING, PROCEDURES AND PENALTIES REGULATIONS Authority: 8 U.S.C. 1189; 18 U.S.C. 2332d, 2339B; 19 U.S.C. 3901-3913; 21 U.S.C. 1901-1908; 22 U.S.C. 287c, 2370(a), 6009, 6032, 7205, 8501-8551; 31 U.S.C. 321(b); 50 U.S.C. 1701-1706, 4301-4341; Pub. L. 101-410, 104 Stat. 890, as amended (28 U.S.C. 2461 note). Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted. Subpart A—Relation of This Part to Other Parts in This Chapter § 501.101 Relation of this part to other parts in this chapter. 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] Subpart B—Definitions § 501.301 Definitions. 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. Subpart C—Reports § 501.601 Records and recordkeeping requirements. 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 10 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 10 years after the date such property is unblocked. [62 FR 45101, Aug. 25, 1997, as amended at 62 FR 52494, Oct. 8, 1997; 89 FR 74834, Sept. 13, 2024] § 501.602 Reports to be furnished on demand. (a) 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 Office of Foreign Assets Control, complete information relative to any act or transaction, regardless of whether such act or 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 or had any interest of any nature whatsoever, direct or indirect. The Office of Foreign Assets Control may require that such reports include the production of any books, contracts, letters, papers, or other hard copy or electronic documents relating to any such act, 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, during, or after such transactions. Except as provided in parts 596 and 597, the Office of Foreign Assets Control 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 any books, contracts, letters, papers, and other hard copy or electronic documents relating to any matter under investigation, regardless of whether any report has been required or filed in connection therewith. (b) For purposes of paragraph (a) of this section, the term “document” includes any written, recorded, or graphic matter or other means of preserving thought or expression (including in electronic format), and all tangible things stored in any medium from which information can be processed, transcribed, or obtained directly or indirectly, including correspondence, memoranda, notes, messages, contemporaneous communications such as text and instant messages, letters, emails, spreadsheets, metadata, contracts, bulletins, diaries, chronological data, minutes, books, reports, examinations, charts, ledgers, books of account, invoices, air waybills, bills of lading, worksheets, receipts, printouts, papers, schedules, affidavits, presentations, transcripts, surveys, graphic representations of any kind, drawings, photographs, graphs, video or sound recordings, and motion pictures or other film. (c) Persons providing documents to OFAC pursuant to this section must produce documents in a usable format agreed upon by OFAC. For guidance, see OFAC's data delivery standards available on OFAC's website ( https://ofac.treasury.gov Note 1 to § 501.602: If OFAC has reason to believe an account or transaction (or class of transactions) may involve the property or interests in property of a blocked person, OFAC may issue an instruction to one or more financial institutions that: (1) provides information or criteria to aid in the identification of blocked property; and (2) requires the financial institution to report transactions that meet the specified criteria and notify OFAC prior to processing such transactions. Upon review, OFAC may determine that a reported transaction involves the property or interests in property of a blocked person and take further action. Note 2 to § 501.602: See subpart F of part 597 for the relationship between this section and part 597. [84 FR 29058, June 21, 2019, as amended at 89 FR 40375, May 10, 2024; 91 FR 46837, July 27, 2026] § 501.603 Reports of blocked, unblocked, or transferred blocked property. (a) Who must report Persons holding, unblocking, or transferring blocked property. (2) Primary responsibility to report. (3) Financial institution. (b) What must be reported Initial blocking reports When reports are due. (ii) Required information to be reported. (A) The name and address of the person holding the property blocked pursuant to this chapter ( i.e., (B) A description of any transaction associated with the blocking, including: The type of transaction; any persons, including financial institutions, participating in the transaction and their respective locations (e.g., if relevant, customers, beneficiaries, originators, letter of credit applicants, and their banks; intermediary banks; correspondent banks; issuing banks; and advising or confirming banks); and any reference numbers, dates, or other information necessary to identify the transaction; (C) The associated sanctions target(s) whose property is blocked (such as a Specially Designated National or other blocked person), the location(s) of the target(s) (if known), and, if not evident, a narrative description of the interest(s) of the target(s) in the property; if there is no target or the target is not known, include a reference to the relevant written communication from OFAC pursuant to which the blocking action was taken; (D) A description of the property that is the subject of the blocking and its location in the United States or otherwise, including any relevant account numbers and account types, check numbers, reference numbers, dates, or other information necessary to identify the property; (E) The date the property was blocked; (F) The actual, or if unknown, estimated value of the property in U.S. Dollars. If the blocked property represents an outstanding loan, a credit card receivable, or other property with a negative balance, the amount blocked should be reported as $0.00 (zero) with the amount owed reflected in a narrative description. Blocked trade finance documents should also be reported as $0.00 (zero) with the value of the shipment reflected in a narrative description. Transactions blocked in foreign currencies must be reported in U.S. Dollars with the foreign currency amount and notional exchange rate in the narrative; (G) Any action taken with respect to the property (e.g., depositing the property into a new or existing blocked, interest-bearing account that is labeled as such and is established in the name of, or contains a means of clearly identifying the interest of, the person subject to blocking pursuant to the requirements of this chapter); (H) The legal authority or authorities under which the property is blocked. This may include a reference to the sanctions program (current programs are on OFAC's website: https://ofac.treasury.gov Note: (I) A copy of any payment or transfer instructions, check, letter of credit, accompanying bill of lading, invoice, or any other relevant documentation received in connection with any related transaction. (2) Annual reports of blocked property When reports are due. (ii) Required information to be reported. (A) The name and address of the person holding the property blocked pursuant to this chapter ( i.e., (B) The number of accounts or items reported in the annual report; (C) Beginning with the annual report due no later than September 30, 2020, and for each subsequent reporting year, the associated sanctions target(s) whose property is blocked, such as a Specially Designated National or other blocked person, the location(s) of the target(s), if known, and, if not evident, a narrative description of the interest(s) of the target(s) in the transaction; if there is no target or the target is not known, include a reference to the relevant written communication from OFAC pursuant to which the blocking action was taken; (D) A description of the property that is the subject of the blocking and its location in the United States or otherwise, including any relevant account numbers and account types, check numbers, reference numbers, dates, or other information necessary to identify the property; (E) The date the property was blocked; (F) The actual, or if unknown, estimated value of the property in U.S. Dollars as of June 30. If a June 30 value date is not available and a value date other than June 30 is reported, so indicate. If the blocked property represents an outstanding loan, a credit card receivable, or other property with a negative balance, the amount blocked should be reported as $0.00 (zero) with the amount owed reflected in a narrative description. Blocked trade finance documents should also be reported as $0.00 (zero) with the value of the shipment reflected in a narrative description. Transactions blocked in foreign currencies must be reported in U.S. Dollars with the foreign currency amount and notional exchange rate in the narrative; (G) The legal authority or authorities under which the property is blocked. This may include a reference to the sanctions program (current programs are listed here: www.treasury.gov/resource-center/sanctions/SDN-List/Pages/program_tags.aspx e.g., e.g., e.g., Note: (3) Reports of blocked property that is unblocked or transferred When reports are due. (A) Authorized debits to blocked accounts for normal service charges; (B) Authorized transfers of funds or credit by a financial institution between blocked accounts in its branches or offices; (C) Unblocking or transfer of blocked property that is explicitly authorized by a specific or general license, unless the specific or general license includes a condition requiring the submission of a separate unblocking report; or (D) Unblocking of blocked property pursuant to OFAC's removal of a person from OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List). (ii) Required information to be reported. i.e., (A) The name and address of the person holding the property immediately prior to the property's release from blocked status ( i.e., (B) The associated sanctions target(s) whose property had been previously blocked and was released from blocked status, such as a Specially Designated National or other blocked person, the location(s) of the target(s), if known, and, if not evident, a narrative description of the interest(s) of the target(s) in the previously blocked property or transaction; if there is no target or the target is not known, include a reference to the relevant written communication from OFAC pursuant to which the blocking action was taken; (C) A description of the property that has been unblocked and its location in the United States or otherwise immediately prior to its release from blocked status, including any relevant account numbers and account types, check numbers, reference numbers, dates, or other information necessary to identify the property; (D) The date the property was unblocked; (E) The actual value of the property that was released from blocked status in U.S. Dollars. If the property represented an outstanding loan, a credit card receivable, or other property with a negative balance, the amount unblocked should be reported as $0.00 (zero) with the amount owed reflected in a narrative description. Trade finance documents should also be reported as $0.00 (zero) with the value of the shipment reflected in a narrative description. Transactions that were previously blocked in foreign currencies and were unblocked in a foreign currency must be reported in U.S. Dollars with the foreign currency amount and notional exchange rate in the narrative; (F) The legal authority or authorities under which the property was unblocked or transferred. This may include, for example, reference to a specific or general license under an applicable part of this chapter or an E.O.; and (G) A copy of the original blocking report filed with OFAC pursuant to § 501.603(b)(1) and the OFAC Reporting System report identification numbers, when available. Note 3 to paragraph ( b The reporting requirement set forth in this paragraph (b)(3) applies in addition to the reporting requirement set forth in § 501.605 of this part, which requires litigants to notify OFAC of proceedings that may affect blocked property or retained funds. (c) Reports on retained funds pursuant to § 596.504(b) of this chapter. (d) How to report. https://ofac.treasury.gov/ofac-reporting-system. (2) All reports of unblocked or transferred blocked property required pursuant to § 501.603(b)(3) must be submitted electronically to OFAC via email at [email protected], https://ofac.treasury.gov/ofac-reporting-system. [email protected]. (e) Rules governing availability of information. [84 FR 29058, June 21, 2019, as amended at 89 FR 15740, Mar. 5, 2024; 89 FR 40375, May 10, 2024; 89 FR 81361, Oct. 8, 2024; 91 FR 46837, July 27, 2026] § 501.604 Reports of rejected transactions. (a) Who must report Persons rejecting transactions. (2) Financial institution. (3) Transaction. (b) Required information to be reported. (1) The name and address of the person that rejected the transaction pursuant to this chapter ( i.e., (2) A description of the rejected transaction, including the type of transaction; any persons, including financial institutions, participating in the transaction and their respective locations ( e.g., (3) If applicable, the associated sanctions target(s) whose involvement in the transaction has resulted in the transaction being rejected, the location(s) of the associated sanctions target(s), if known, and, if not evident, a narrative description of the interest(s) of the target(s) in the transaction; (4) The date the transaction was rejected; (5) The actual, or if unknown, estimated value of the property in U.S. Dollars. Rejected trade documents should be reported as $0.00 (zero) with the value of the shipment reflected in a narrative description. Rejected transactions in foreign currencies must be reported in U.S. Dollars with the foreign currency amount and notional exchange rate in a narrative description; (6) The legal authority or authorities under which the transaction was rejected. This may include a reference to the sanctions program (current programs are listed here: https://ofac.treasury.gov (7) A copy of any related payment or transfer instructions, check, letter of credit, accompanying bill of lading, invoice, or any other relevant documentation received in connection with the transaction. (c) When reports are due. (d) Where to report. https://ofac.treasury.gov/ofac-reporting-system. [email protected]. (e) Rules governing availability of information. [84 FR 29060, June 21, 2019, as amended at 89 FR 15740, Mar. 5, 2024; 89 FR 40376, May 10, 2024; 91 FR 46837, July 27, 2026] § 501.605 Reports on litigation, arbitration, and dispute resolution proceedings. (a) U.S. persons (or persons subject to U.S. jurisdiction in the case of part 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 Office of the Chief Counsel (Foreign Assets Control) at [email protected] (3) Report by email to the Office of the Chief Counsel (Foreign Assets Control), at [email protected] (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. [62 FR 45101, Aug. 25, 1997, as amended at 89 FR 40377, May 10, 2024] § 501.606 Reporting and recordkeeping requirements applicable to economic sanctions programs. 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. Subpart D—Trading With the Enemy Act (TWEA) Penalties Source: 68 FR 53642, Sept. 11, 2003, unless otherwise noted. § 501.700 Applicability. This subpart is applicable only to those parts of chapter V promulgated pursuant to the TWEA, which include parts 500, 505, and 515. § 501.701 Penalties. (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 imprisoned for not more than 20 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 $111,308 per violation on any person who violates any license, order, or regulation issued under TWEA. Note to paragraph ( a The current civil penalty cap may be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as amended, 28 U.S.C. 2461 note). (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; 81 FR 43073, July 1, 2016; 82 FR 10435, Feb. 10, 2017; 83 FR 11877, Mar. 19, 2018; 84 FR 27715, June 14, 2019; 84 FR 29061, June 21, 2019; 85 FR 19885, Apr. 9, 2020; 86 FR 14536, Mar. 17, 2021; 87 FR 7370, Feb. 9, 2022; 88 FR 2231, Jan. 13, 2023; 89 FR 2140, Jan. 12, 2024; 90 FR 3689, Jan. 15, 2025] § 501.702 Definitions. (a) Chief Counsel (b) Day (c) Department (d) Director (e) Ex Parte Communication (f) General Counsel (g) Order of Settlement (h) Order Instituting Proceedings (i) Prepenalty Notice (j) Penalty Notice (k) Proceeding (l) Respondent (m) Secretary's designee (n) Secretary § 501.703 Overview of civil penalty process and construction of rules. (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. § 501.704 Appearance and practice. 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. (b) Representative. (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. (d) Conflicts of interest Conflict of interest in representation. (2) Corrective measures. § 501.705 Service and filing. (a) Service of Prepenalty Notice, Penalty Notice, Acknowledgment of Hearing Request and Order Instituting Proceedings. (1) Service on individuals. (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. (b) Service of responses to Prepenalty Notice, Penalty Notice, and requests for a hearing. (c) Service or filing of papers in connection with any hearing by an Administrative Law Judge or review by the Secretary's designee Service on the Director and/or each respondent. (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 ( 2 (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. (3) Filing with the Secretary's designee. (4) Certificate of service. (5) Form of briefs. (6) Specifications. (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. (i) Effect of signature. (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. § 501.706 Prepenalty Notice; issuance by Director. (a) When required. (b) Contents of notice Facts of violation. (2) Right to respond. (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. § 501.707 Response to Prepenalty Notice. (a) Deadline for response. (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 In general. (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. (2) Settlement. § 501.708 Director's finding of no penalty warranted. 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. § 501.709 Penalty notice. (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. § 501.710 Settlement. (a) Availability. (b) Procedure Prior to issuance of Penalty Notice. (2) After issuance of Penalty Notice. (3) Extensions of time. (i) Prior to issuance of Order Instituting Proceedings. (ii) After issuance of Order Instituting Proceedings. (4) Views of Administrative Law Judge. (5) Waivers. (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. § 501.711 Hearing request. (a) Deadline for request. (b) Form and contents of request. (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. § 501.712 Acknowledgment of 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. § 501.713 Order Instituting Proceedings. 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. (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. (c) Amendment to Order Instituting Proceedings. § 501.714 Answer to Order Instituting Proceedings. (a) When required. (b) Contents; effect of failure to deny. (c) Motion for more definite statement. (d) Amendments. (e) Failure to file answer: § 501.715 Notice of Hearing. (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. (c) Failure to appear at hearings: default. § 501.716 Default. (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). § 501.717 Consolidation of proceedings. 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. § 501.718 Conduct and order of hearings. 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. § 501.719 Ex parte communications. (a) Prohibition. (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. § 501.720 Separation of functions. 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. § 501.721 Hearings to be public. 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. § 501.722 Prehearing conferences. (a) Purposes of conferences. (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. (c) Subjects to be discussed. (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. (e) Prehearing orders. (f) Failure to appear: default. § 501.723 Prehearing disclosures; methods to discover additional matter. (a) Initial disclosures. (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. (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. (d) Form of disclosures. (e) Methods to discover additional matter. (f) Discovery scope and limits. (1) In general. (2) Limitations. (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. (4) Privileged matter. (g) Updating discovery. (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. (i) Effect of failure to comply. § 501.724 Documents that may be withheld. (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. § 501.725 Confidential treatment of information in certain filings. (a) Filing document under seal. (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. (1) Procedure for supplying additional information. (2) Confidentiality of materials pending final decision. (3) Public availability of orders. § 501.726 Motions. (a) Generally. (b) Opposing and reply briefs. (c) Dilatory motions. (d) Length limitation. (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. § 501.727 Motion for summary disposition. (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. (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. § 501.728 Subpoenas. (a) Availability; procedure. (b) Standards for issuance. (c) Service. (d) Application to quash or modify Procedure. (2) Standards governing application to quash or modify. (e) Witness fees and mileage. § 501.729 Sanctions. (a) Contemptuous conduct Subject to exclusion or suspension. (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. (b) Deficient filings; leave to cure deficiencies. (c) Failure to make required filing or to cure deficient filing. (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. (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. § 501.730 Depositions upon oral examination. (a) Procedure. (b) Required finding when ordering a deposition. (c) Contents of order. (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. (e) Objections to questions or evidence. (f) Filing of depositions. § 501.731 Depositions upon written questions. (a) Availability. (b) Procedure. (c) Additional requirements. § 501.732 Evidence. 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 Objections. (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. (b) Official notice. (c) Stipulations. (d) Presentation under oath or affirmation. (e) Presentation, rebuttal and cross-examination. § 501.733 Evidence: confidential information, protective orders. (a) Procedure. (b) Basis for issuance. (c) Requests for additional information supporting confidentiality. (d) Confidentiality of documents pending decision. § 501.734 Introducing prior sworn statements of witnesses into the record. (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. § 501.735 Proposed findings, conclusions and supporting briefs. (a) Opportunity to file. (b) Procedure. (c) Time for filing. (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. § 501.736 Authority of Administrative Law Judge. 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. § 501.737 Adjustments of time, postponements and adjournments. (a) Availability. (b) Limitations on postponements, adjournments and adjustments. (1) Additional considerations. (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. § 501.738 Disqualification and withdrawal of Administrative Law Judge. (a) Notice of disqualification. (b) Motion for Withdrawal. § 501.739 Record in proceedings before Administrative Law Judge; retention of documents; copies. (a) Recordation. (1) Availability of a transcript. (2) Transcript correction. (b) Contents of the record. (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. § 501.740 Decision of Administrative Law Judge. The Administrative Law Judge shall prepare a decision that constitutes his or her final disposition of the proceedings. (a) Content. (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 Service. (2) Filing of report with the Secretary's designee. (3) Correction of errors. (c) Administrative Law Judge's decision final unless review directed. (d) Penalty awarded. § 501.741 Review of decision or ruling. (a) Availability. (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 ( 2 ( 3 (2) Interlocutory review of ruling. (b) Filing. (c) Contents. (d) When filing effective. (e) Statements in opposition to petition. (f) Number of copies. (g) Prerequisite to judicial review. § 501.742 Secretary's designee's consideration of decisions by Administrative Law Judges. (a) Scope of review. (b) Summary affirmance. § 501.743 Briefs filed with the Secretary's designee. (a) Briefing schedule order. (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. (c) Length limitation. § 501.744 Record before 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. (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. (1) The date upon which the Secretary's designee's order becomes final; or (2) The conclusion of any judicial review of that order. § 501.745 Orders and decisions: signature, date and public availability. (a) Signature required. (b) Date of entry of orders. (c) Public availability of orders. (2) Exception. § 501.746 Referral to United States Department of Justice; administrative collection measures. 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. § 501.747 Procedures on remand of decisions. 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. Subpart E—Procedures Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted. Redesignated at 68 FR 53642, Sept. 11, 2003. § 501.801 Licensing. (a) General licenses. https://ofac.treasury.gov Federal Register (b) Specific licenses General course of procedure. (2) Applications for specific licenses. https://licensing.ofac.treas.gov/ https://licensing.ofac.treas.gov/ (i) Additional conditions. (ii) Information to be supplied. https://licensing.ofac.treas.gov https://ofac.treasury.gov/ofac-license-application-page (3) Issuance of specific license. (4) Reports under specific licenses. (5) Effect of denial. https://ofac.treasury.gov/ofac-license-application-page (6) Rules governing availability of information. [84 FR 29061, June 21, 2019, as amended at 89 FR 40377, May 10, 2024] § 501.802 Decisions. 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. § 501.803 Amendment, modification, or revocation. 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] § 501.804 Rulemaking. (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 Office of Foreign Assets Control for the issuance, amendment, or repeal of any rule, including a general license, at [email protected] [62 FR 45101, Aug. 25, 1997. Redesignated at 68 FR 53642, Sept. 11, 2003, as amended at 89 FR 40377, May 10, 2024] § 501.805 Rules governing availability of information. (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, as well as the provisions of this part. Note to paragraph § 501.805( a Records or information obtained or created in the implementation of part 598 of this chapter are not subject to disclosure under section 552(a)(3) of the Freedom of Information Act. See § 598.802 of this chapter. (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, as well as the provisions of this part. (c) Any form issued for use in connection with this chapter may be obtained on OFAC's website ( https://ofac.treasury.gov (d) Certain Civil Penalties Information. (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 https://ofac.treasury.gov (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; 89 FR 40377, May 10, 2024] § 501.806 Procedures for unblocking property believed to have been blocked and reported in error due to mistaken identity or typographical or similar errors. When a party believes it has blocked property pursuant to the applicable regulations of this chapter due to mistaken identity or typographical or similar errors, such party may seek to have such property unblocked pursuant to the following administrative procedures: (a) Any person who has blocked and reported to the Office of Foreign Assets Control (OFAC) property pursuant to § 501.603 may submit a request for authorization to release blocked property that was blocked in error due to mistaken identity or typographical or similar error. (b) Requests to release such property must be sent via email to [email protected] (c) A request to release property must include the name, address, telephone number, and email address of the person seeking the release of the property. (d) A request to release property should include the following information, where known, concerning the blocked property: (1) The name of the person that holds the blocked property or filed the initial report of blocked property; (2) The actual value, or if unknown, estimated value, in U.S. dollars of the blocked property, as included in the initial report of blocked property; (3) The date of the blocking included in the initial report of blocked property; (4) A copy of a valid government-issued identification document, social security number or employer identification number for a person whose property is believed to have been blocked in error, when applicable; (5) The OFAC Reporting System (ORS) identification numbers associated with the initial report of blocked property filed with OFAC, when available; (6) A description of the property or underlying transaction; and (7) A narrative description of the reasons why the applicant believes the property was blocked in error. (e) Upon receipt of the materials required by paragraph (d) of this section, OFAC may request additional material, if available, from the applicant concerning the blocked property pursuant to § 501.602. (f) Following review of all applicable submissions, OFAC will determine whether the property should be released. In the event that OFAC determines that the property should be released, it will direct the person to release the property to the appropriate party. [89 FR 40378, May 10, 2024] § 501.807 Procedures governing delisting from the Specially Designated Nationals and Blocked Persons List or any other list of sanctioned persons or property maintained by the Office of Foreign Assets Control. A person may submit a petition for administrative reconsideration pursuant to the procedures outlined below in order to seek removal of a person or property (e.g., a vessel) from the List of Specially Designated Nationals and Blocked Persons (SDN List) or any other list or identification of sanctioned persons or property maintained by the Office of Foreign Assets Control (OFAC): (a) A person blocked under the provisions of any part of this chapter, including a specially designated national, specially designated terrorist, specially designated narcotics trafficker, or a person otherwise subject to sanctions pursuant to the provisions of any part of this chapter (each, a “sanctioned person”), or a person owning a majority interest in property (e.g., a vessel) that is blocked or otherwise subject to sanctions may submit arguments or evidence that the person believes establishes that insufficient basis exists for the sanction or that the circumstances resulting in the sanction no longer apply. The sanctioned 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 the sanction. A person owning a majority interest in property (e.g., a vessel) that is blocked or otherwise subject to sanctions 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 via email to [email protected]. (b) For purposes of reconsideration petitions relating to persons or property sanctioned by OFAC: (1) The information submitted by the person seeking removal of a person or property from the SDN List or any other list or identification of sanctioned persons or property maintained by OFAC will be reviewed by OFAC, which may request clarifying, corroborating, or other additional information. (2) A person seeking removal of a person or property from the SDN List or any other list or identification of sanctioned persons or property maintained by OFAC may request a meeting with OFAC; 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. (3) After OFAC has conducted a review of the request for reconsideration, it will provide a written decision to the person seeking the removal of a person or property from the SDN List or any other list or identification of sanctioned persons or property maintained by OFAC. [89 FR 40378, May 10, 2024] § 501.808 License application and other procedures applicable to economic sanctions programs. 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. Subpart F—Paperwork Reduction Act Source: 62 FR 45101, Aug. 25, 1997, unless otherwise noted. Redesignated at 68 FR 53642, Sept. 11, 2003. § 501.901 Paperwork Reduction Act notice. 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. Appendix A to Part 501—Economic Sanctions Enforcement Guidelines. Note: This appendix provides a general framework for the enforcement of all economic sanctions programs administered by the Office of Foreign Assets Control (OFAC). I. Definitions A. Apparent violation B. Applicable schedule amount 1. $1,000 with respect to a transaction valued at less than $1,000; 2. $10,000 with respect to a transaction valued at $1,000 or more but less than $10,000; 3. $25,000 with respect to a transaction valued at $10,000 or more but less than $25,000; 4. $50,000 with respect to a transaction valued at $25,000 or more but less than $50,000; 5. $100,000 with respect to a transaction valued at $50,000 or more but less than $100,000; 6. $200,000 with respect to a transaction valued at $100,000 or more but less than $200,000; 7. The statutory maximum civil penalty per violation of IEEPA listed in section V.B.2.a.v. of this appendix with respect to a transaction valued at $200,000 or more. C. OFAC D. Penalty E. Proposed penalty F. Regulator G. Subject Person H. Transaction value I. Voluntary self-disclosure II. Types of Responses to Apparent Violations Depending on the facts and circumstances of a particular case, an OFAC investigation may lead to one or more of the following actions: A. No Action. B. Request Additional Information. C. Cautionary Letter: D. Finding of Violation: E. Civil Monetary Penalty. F. Criminal Referral. G. Other Administrative Actions. 1. License Denial, Suspension, Modification, or Revocation. 2. Cease and Desist Order. III. General Factors Affecting Administrative Action As a general matter, OFAC will consider some or all of the following General Factors in determining the appropriate administrative action in response to an apparent violation of U.S. sanctions by a Subject Person, and, where a civil monetary penalty is imposed, in determining the appropriate amount of any such penalty: A. Willful or Reckless Violation of Law: 1. Willfulness. 2. Recklessness. 3. Concealment. 4. Pattern of Conduct. 5. Prior Notice. 6. Management Involvement. B. Awareness of Conduct at Issue: 1. Actual Knowledge. 2. Reason to Know. 3. Management Involvement. C. Harm to Sanctions Program Objectives: 1. Economic or Other Benefit to the Sanctioned Individual, Entity, or Country: 2. Implications for U.S. Policy: 3. License Eligibility: 4. Humanitarian activity: D. Individual Characteristics: 1. Commercial Sophistication: 2. Size of Operations and Financial Condition: 3. Volume of Transactions: 4. Sanctions History: E. Compliance Program: F. Remedial Response: 1. The steps taken by the Subject Person upon learning of the apparent violation. Did the Subject Person immediately stop the conduct at issue? 2. In the case of an entity, the processes followed to resolve issues related to the apparent violation. Did the Subject Person discover necessary information to ascertain the causes and extent of the apparent violation, fully and expeditiously? Was senior management fully informed? If so, when? 3. In the case of an entity, whether the Subject Person adopted new and more effective internal controls and procedures to prevent a recurrence of the apparent violation. If the Subject Person did not have an OFAC compliance program in place at the time of the apparent violation, did it implement one upon discovery of the apparent violations? If it did have an OFAC compliance program, did it take appropriate steps to enhance the program to prevent the recurrence of similar violations? Did the entity provide the individual(s) responsible for the apparent violation with additional training, and/or take other appropriate action, to ensure that similar violations do not occur in the future? 4. Where applicable, whether the Subject Person undertook a thorough review to identify other possible violations. G. Cooperation with OFAC: 1. Did the Subject Person voluntarily self-disclose the apparent violation to OFAC? 2. Did the Subject Person provide OFAC with all relevant information regarding an apparent violation (whether or not voluntarily self-disclosed)? 3. Did the Subject Person research and disclose to OFAC relevant information regarding any other apparent violations caused by the same course of conduct? 4. Was information provided voluntarily or in response to an administrative subpoena? 5. Did the Subject Person cooperate with, and promptly respond to, all requests for information? 6. Did the Subject Person enter into a statute of limitations tolling agreement, if requested by OFAC (particularly in situations where the apparent violations were not immediately notified to or discovered by OFAC, in particularly complex cases, and in cases in which the Subject Person has requested and received additional time to respond to a request for information from OFAC)? If so, the Subject Person's entering into a tolling agreement will be deemed a mitigating factor. Note: A Subject Person's refusal to enter into a tolling agreement will not be considered by OFAC as an aggravating factor in assessing a Subject Person's cooperation or otherwise under the Guidelines. Where appropriate, OFAC will publicly note substantial cooperation provided by a Subject Person. H. Timing of apparent violation in relation to imposition of sanctions: I. Other enforcement action: J. Future Compliance/Deterrence Effect: K. Other relevant factors on a case-by-case basis: IV. Civil Penalties for Failure To Comply With a Requirement To Furnish Information or Keep Records As a general matter, the following civil penalty amounts shall apply to a Subject Person's failure to comply with a requirement to furnish information or maintain records: A. The failure to comply with a requirement to furnish information pursuant to 31 CFR 501.602 may result in a penalty in an amount up to $29,150, irrespective of whether any other violation is alleged. Where OFAC has reason to believe that the apparent violation(s) that is the subject of the requirement to furnish information involves a transaction(s) valued at greater than $500,000, a failure to comply with a requirement to furnish information may result in a penalty in an amount up to $72,876, irrespective of whether any other violation is alleged. A failure to comply with a requirement to furnish information may be considered a continuing violation, and the penalties described above may be imposed each month that a party has continued to fail to comply with the requirement to furnish information. OFAC may also seek to have a requirement to furnish information judicially enforced. Imposition of a civil monetary penalty for failure to comply with a requirement to furnish information does not preclude OFAC from seeking such judicial enforcement of the requirement to furnish information. B. The late filing of a required report, whether set forth in regulations or in a specific license, may result in a civil monetary penalty in an amount up to $3,550, if filed within the first 30 days after the report is due, and a penalty in an amount up to $7,104 if filed more than 30 days after the report is due. If the report relates to blocked assets, the penalty may include an additional $1,422 for every 30 days that the report is overdue, up to 10 years. V. Civil Penalties OFAC will review the facts and circumstances surrounding an apparent violation and apply the General Factors for Taking Administrative Action in Section III above in determining whether to initiate a civil penalty proceeding and in determining the amount of any civil monetary penalty. OFAC will give careful consideration to the appropriateness of issuing a cautionary letter or Finding of Violation in lieu of the imposition of a civil monetary penalty. A. Civil Penalty Process 1. Pre-Penalty Notice. a. In general, the Pre-Penalty Notice will set forth the following with respect to the specific violations alleged and the proposed penalties: i. Description of the alleged violations, including the number of violations and their value, for which a penalty is being proposed; ii. Identification of the regulatory or other provisions alleged to have been violated; iii. Identification of the base category (defined below) according to which the proposed penalty amount was calculated and the General Factors that were most relevant to the determination of the proposed penalty amount; iv. The maximum amount of the penalty to which the Subject Person could be subject under applicable law; and v. The proposed penalty amount, determined in accordance with the provisions set forth in these Guidelines. b. The Pre-Penalty Notice will also include information regarding how to respond to the Pre-Penalty Notice including: i. A statement that the Subject Person may submit a written response to the Pre-Penalty Notice by a date certain addressing the alleged violation(s), the General Factors Affecting Administrative Action set forth in Section III of these Guidelines, and any other information or evidence that the Subject Person deems relevant to OFAC's consideration. ii. A statement that a failure to respond to the Pre-Penalty Notice may result in the imposition of a civil monetary penalty. 2. Response to Pre-Penalty Notice. 3. Penalty Notice. 4. Referral to Financial Management Division. 5. Final Agency Action. B. Amount of Civil Penalty 1. Egregious case. 2. Pre-Penalty Notice. 6 6 a. Base Category Calculation i. In a non-egregious case, if the apparent violation is disclosed through a voluntary self-disclosure by the Subject Person, the base amount of the proposed civil penalty in the Pre-Penalty Notice shall be one-half of the transaction value, capped at a maximum base amount of $188,850 per violation, except where the statutory maximum penalty applicable to the apparent violation is less than $377,700, in which case the base amount of the proposed civil penalty in the Pre-Penalty Notice shall be capped at one-half the statutory maximum penalty applicable to the apparent violation. ii. In a non-egregious case, if the apparent violation comes to OFAC's attention by means other than a voluntary self-disclosure, the base amount of the proposed civil penalty in the Pre-Penalty Notice shall be the “applicable schedule amount,” as defined above. For apparent violations where the statutory maximum penalty applicable to the apparent violation is $377,700 or greater, the maximum base amount shall be capped at $377,700. For apparent violations where the statutory maximum penalty applicable to the apparent violation is less than $377,700, the maximum base amount shall be capped at the statutory maximum penalty amount applicable to the apparent violation. iii. In an egregious case, if the apparent violation is disclosed through a voluntary self-disclosure by a Subject Person, the base amount of the proposed civil penalty in the Pre-Penalty Notice shall be one-half of the applicable statutory maximum penalty applicable to the violation. iv. In an egregious case, if the apparent violation comes to OFAC's attention by means other than a voluntary self-disclosure, the base amount of the proposed civil penalty in the Pre-Penalty Notice shall be the applicable statutory maximum penalty amount applicable to the violation. v. The applicable statutory maximum civil penalty per violation for each statute enforced by OFAC is as follows: International Emergency Economic Powers Act (IEEPA)—greater of $377,700 or twice the amount of the underlying transaction; Trading with the Enemy Act (TWEA)— $111,308; Foreign Narcotics Kingpin Designation Act (FNKDA)— $1,876,699; Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA)—greater of $99,703 or twice the amount of which a financial institution was required to retain possession or control; and Clean Diamond Trade Act (CDTA)—$17,062. The civil penalty amounts authorized under these statutes are subject to adjustment pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as amended, 28 U.S.C. 2461 note). vi. The following matrix represents the base amount of the proposed civil penalty for each category of violation: b. Adjustment for Applicable Relevant General Factors The base amount of the proposed civil penalty may be adjusted to reflect applicable General Factors for Administrative Action set forth in Section III of these Guidelines. Each factor may be considered mitigating or aggravating, resulting in a lower or higher proposed penalty amount. As a general matter, in those cases where the following General Factors are present, OFAC will adjust the base proposed penalty amount in the following manner: i. In cases involving substantial cooperation with OFAC but no voluntary self-disclosure as defined herein, including cases in which an apparent violation is reported to OFAC by a third party but the Subject Person provides substantial additional information regarding the apparent violation and/or other related violations, the base penalty amount generally will be reduced between 25 and 40 percent. Substantial cooperation in cases involving voluntary self-disclosure may also be considered as a further mitigating factor. ii. In cases involving a Subject Person's first violation, the base penalty amount generally will be reduced up to 25 percent. An apparent violation generally will be considered a “first violation” if the Subject Person has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transaction giving rise to the apparent violation. A group of substantially similar apparent violations addressed in a single Pre-Penalty Notice shall be considered as a single violation for purposes of this subsection. In those cases where a prior penalty notice or Finding of Violation within the preceding five years involved conduct of a substantially different nature from the apparent violation at issue, OFAC may consider the apparent violation at issue a “first violation.” In determining the extent of any mitigation for a first violation, OFAC may consider any prior OFAC enforcement action taken with respect to the Subject Person, including any cautionary, warning or evaluative letters issued, or any civil monetary settlements entered into with OFAC. In all cases, the proposed penalty amount will not exceed the applicable statutory maximum. In cases involving a large number of apparent violations, where the transaction value of all apparent violations is either unknown or would require a disproportionate allocation of resources to determine, OFAC may estimate or extrapolate the transaction value of the total universe of apparent violations in determining the amount of any proposed civil monetary penalty. 3. Penalty Notice. a. Evidence presented by the Subject Person in response to the Pre-Penalty Notice, or otherwise received by OFAC with respect to the underlying violation(s); and/or b. Any modification resulting from further review and reconsideration by OFAC of the proposed civil monetary penalty in light of the General Factors for Administrative Action set forth in Section III above. In no event will the amount of the civil monetary penalty in the Penalty Notice exceed the proposed penalty set forth in the Pre-Penalty Notice by more than 10 percent, or include additional alleged violations, unless a revised Pre-Penalty Notice has first been sent to the Subject Person as set forth above. In the event that OFAC determines upon further review that no penalty is appropriate, it will so inform the Subject Person in a no-action letter, a cautionary letter, or a Finding of Violation. C. Settlements A settlement does not constitute a final agency determination that a violation has occurred. 1. Settlement Process. 2. Settlement Prior to Issuance of Pre-Penalty Notice. 3. Settlement Following Issuance of Pre-Penalty Notice. 4. Settlements of Multiple Apparent Violations. Annex The following matrix can be used by financial institutions to evaluate their compliance programs: OFAC Risk Matrix Low Moderate High Stable, well-known customer base in a localized environment Customer base changing due to branching, merger, or acquisition in the domestic market A large, fluctuating client base in an international environment. Few high-risk customers; these may include nonresident aliens, foreign customers (including accounts with U.S. powers of attorney), and foreign commercial customers A moderate number of high-risk customers A large number of high-risk customers. No overseas branches and no correspondent accounts with foreign banks Overseas branches or correspondent accounts with foreign banks Overseas branches or multiple correspondent accounts with foreign banks. No electronic services ( e.g., The institution offers limited electronic ( e.g., The institution offers a wide array of electronic ( e.g., i.e., Limited number of funds transfers for customers and non-customers, limited third-party transactions, and no international funds transfers A moderate number of funds transfers, mostly for customers. Possibly, a few international funds transfers from personal or business accounts A high number of customer and non-customer funds transfers, including international funds transfers. No other types of international transactions, such as trade finance, cross-border ACH, and management of sovereign debt Limited other types of international transactions A high number of other types of international transactions. No history of OFAC actions. No evidence of apparent violation or circumstances that might lead to a violation A small number of recent actions ( i.e., Multiple recent actions by OFAC, where the institution has not addressed the issues, thus leading to an increased risk of the institution undertaking similar violations in the future. Management has fully assessed the institution's level of risk based on its customer base and product lines. This understanding of risk and strong commitment to OFAC compliance is satisfactorily communicated throughout the organization Management exhibits a reasonable understanding of the key aspects of OFAC compliance and its commitment is generally clear and satisfactorily communicated throughout the organization, but it may lack a program appropriately tailored to risk Management does not understand, or has chosen to ignore, key aspects of OFAC compliance risk. The importance of compliance is not emphasized or communicated throughout the organization. The board of directors, or board committee, has approved an OFAC compliance program that includes policies, procedures, controls, and information systems that are adequate, and consistent with the institution's OFAC risk profile The board has approved an OFAC compliance program that includes most of the appropriate policies, procedures, controls, and information systems necessary to ensure compliance, but some weaknesses are noted The board has not approved an OFAC compliance program, or policies, procedures, controls, and information systems are significantly deficient. Staffing levels appear adequate to properly execute the OFAC compliance program Staffing levels appear generally adequate, but some deficiencies are noted Management has failed to provide appropriate staffing levels to handle workload. Authority and accountability for OFAC compliance are clearly defined and enforced, including the designation of a qualified OFAC officer Authority and accountability are defined, but some refinements are needed. A qualified OFAC officer has been designated Authority and accountability for compliance have not been clearly established. No OFAC compliance officer, or an unqualified one, has been appointed. The role of the OFAC officer is unclear. Training is appropriate and effective based on the institution's risk profile, covers applicable personnel, and provides necessary up-to-date information and resources to ensure compliance Training is conducted and management provides adequate resources given the risk profile of the organization; however, some areas are not covered within the training program Training is sporadic and does not cover important regulatory and risk areas or is nonexistent. The institution employs strong quality control methods The institution employs limited quality control methods The institution does not employ quality control methods. [74 FR 57601, Nov. 9, 2009, as amended at 81 FR 43073, July 1, 2016; 82 FR 10435, Feb. 10, 2017; 83 FR 11877, Mar. 19, 2018; 84 FR 27715, June 14, 2019; 85 FR 19885, Apr. 9, 2020; 85 FR 48475, Aug. 11, 2020; 85 FR 54914, Sept. 3, 2020; 86 FR 14536, Mar. 17, 2021; 86 FR 18896, Apr. 12, 2021; 87 FR 3206, Jan. 21, 2022; 87 FR 7370, Feb. 9, 2022; 88 FR 2231, Jan. 13, 2023; 88 FR 23340, Apr. 17, 2023; 89 FR 2140, Jan. 12, 2024; 90 FR 3689, Jan. 15, 2025; 89 FR 74834, Sept. 13, 2024]

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