§ 536.513 Official business of certain international organizations and entities.
(a) Except as provided in paragraph (b) of this section, all transactions prohibited by this part that are for the conduct of the official business of the following entities by employees, grantees, or contractors thereof are authorized:
(1) The United Nations, including its Programmes, Funds, and Other Entities and Bodies, as well as its Specialized Agencies and Related Organizations;
(2) The International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA);
(3) The African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank Group (IDB Group), including any fund entity administered or established by any of the foregoing;
(4) The International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies; and
(5) The Global Fund to Fight AIDS, Tuberculosis, and Malaria, and Gavi, the Vaccine Alliance.
(b) This section does not authorize funds transfers initiated or processed with knowledge or reason to know that the intended beneficiary of such transfers is a person blocked pursuant to this part, other than for the purpose of effecting the payment of taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services.
1) On 12-21-22, this GL was added to the regulations, along with over 20 other “Official business of certain international organizations and entities” GLs that were implemented in sanctions regulations that did not previously have the GL [1]. Refer to “Treasury Implements Historic Humanitarian Sanctions Exceptions” (Press Release) (https://home.treasury.gov/news/press-releases/jy1175).(“Treasury is issuing these GLs across sanctions programs that did not previously have humanitarian exceptions, implementing a new standardized baseline set of authorizations across OFAC-administered programs.”)
[1] See https://home.treasury.gov/system/files/126/usg_io_official_business_regulations_amendment.pdf
2) See general discussion of the “official business” licenses and exemptions at General Note on Exemptions and General Licenses for the “Official Business” of the U.S. Government (and/or United Nations) and Employees, Contractors, or Grantees Thereof. This provision is standard; there is no reason to believe that it is or will be interpreted differently than its analogues in other sanctions programs, except insofar as (i) the non-UN entities listed in the GL may be program specific, and (ii) there is a subsection (b) stating that "[t]his section does not authorize funds transfers initiated or processed with knowledge or reason to know that the intended beneficiary of such transfers is a person blocked pursuant to this part, other than for the purpose of effecting the payment of taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services."
3) The 'blocked intended beneficiary' limitation found in this GL has not, as of 6-1-23, been subject to interpretation, but it would appear to be limited to actual funds transfers where funds are being sent to a blocked person, as opposed to funds transfers sent to a third person in connection with a transaction (e.g. a purchase of goods) from which a blocked "benefits". In the context of "funds transfer", beneficiary is a term of art. The purpose of the "taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services" carveout to the funds transfer exclusion is presumably aimed at facilitating the activities of the organizations at issue where blocked persons are organizations that control areas in which the international organizations listed operate.
Query: is payment in kind to blocked persons prohibited by the "funds transfer" limitation? The term "funds transfer", as used by OFAC, has a specific meaning that does not cover all forms of "payments" (see e.g. 560.405, referencing "Payments or transfers of funds").
4) A Novel Use of “Knowledge or Reason to Know”
With respect to the “does not authorize funds transfers initiated or processed with knowledge or reason to know” provision, as a general matter, OFAC does not (and arguably cannot) issue a monetary penalty when a person does not have “knowledge or reason to know” of the facts giving rise to a violation. But still, such persons have engaged in technical violations of the law, which may have implications beyond the risk of being a target for enforcement action and therefore encourage derisking. See generally General Note on the Terms "Knowingly," "Should Have Known" And "Reason to Know" In the Primary Sanctions, Secondary Sanctions and Derivative Designation Contexts (System Ed. Note).
What OFAC appears to be doing with this provision is discourage derisking by making it such that, where a funds transfer is initiated or processed without “knowledge or reason to know” that the beneficiary is blocked, then such funds transfer is actually an authorized transaction, provided that it otherwise meets the description set out in paragraph (a) of the GL. In Supplemental Guidance for the Provision of Humanitarian Assistance (corrected version), OFAC says that “NGOs may provide humanitarian assistance in environments that are affected by targeted sanctions…without the need for a license from OFAC, so long as they are not knowingly transferring funds to blocked persons”. This implies that if they are transferring funds to blocked persons without knowledge, this is not a violation.