§ 588.512 Authorizing certain transactions in support of nongovernmental organizations’ activities.
(a) Except as provided in paragraph (c) of this section, all transactions prohibited by this part that are ordinarily incident and necessary to the activities described in paragraph (b) of this section by a nongovernmental organization are authorized, provided that the nongovernmental organization is not a person whose property or interests in property are blocked pursuant to this part.
(b) The activities referenced in paragraph (a) of this section are non-commercial activities designed to directly benefit the civilian population that fall into one of the following categories:
(1) Activities to support humanitarian projects to meet basic human needs, including disaster, drought, or flood relief; food, nutrition, or medicine distribution; the provision of health services; assistance for vulnerable or displaced populations, including individuals with disabilities and the elderly; and environmental programs;
(2) Activities to support democracy building, including activities to support rule of law, citizen participation, government accountability and transparency, human rights and fundamental freedoms, access to information, and civil society development projects;
(3) Activities to support education, including combating illiteracy, increasing access to education, international exchanges, and assisting education reform projects;
(4) Activities to support non-commercial development projects directly benefiting civilians, including those related to health, food security, and water and sanitation;
(5) Activities to support environmental and natural resource protection, including the preservation and protection of threatened or endangered species, responsible and transparent management of natural resources, and the remediation of pollution or other environmental damage; and
(6) Activities to support disarmament, demobilization, and reintegration (DDR) programs and peacebuilding, conflict prevention, and conflict resolution programs.
(c) 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.
(d) Specific licenses may be issued on a case-by-case basis to authorize nongovernmental or other entities to engage in other activities designed to directly benefit the civilian population, including support for the removal of landmines and economic development projects directly benefiting the civilian population.
Note 1 to § 588.512. This section does not relieve any person authorized thereunder from complying with any other applicable laws or regulations.
1) On 12-21-22, OFAC issued over 20 GLs similar to this one to list-based sanctions programs that did not previously have GL for “Certain Transactions in Support of Nongovernmental Organizations’ Activities”. The GLs are substantively identical across programs.
2) Refer generally to General Note on GLs Authorizing Transactions of and Related to Nongovernmental Organizations (NGOs) (System Ed. Note), for comments on the scope and operation of standard “NGO” GLs, but note that there are two aspects of the GLs implemented on 12-21-22 that differs from previously issued NGO GLs.
(i) Subsection (b) of this and all similar GLs carves out “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”. This limitation is also found in some, but not all, of the GLs implemented on 12-21-22 for the “Official business of certain international organizations and entities.”
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").
(ii) The GL is limited to "non-commercial activities designed to directly benefit the civilian population that fall into one of the [specified] categories..." This "directly benefit the civilian population" qualifier is unique to the list-based program GLs implemented on 12-21-22, and it is not clear how the scope of the GL changes vis-a-vis an otherwise similarly standard NGO GL that does not contain it.
3) See related guidance specific to these GLs at Supplemental Guidance for the Provision of Humanitarian Assistance. See comment D, in re: an apparently erroneous statement in the guidance document concerning the significance of the carveout at subsection (c) of the GL.
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.