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31 CFR § 510.506 - Investment and reinvestment of certain funds.

Date issued: Mar. 05 2018

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§510.506 Investment and reinvestment of certain funds.
Subject to the requirements of §510.203, U.S. financial institutions are authorized to invest and reinvest assets blocked pursuant to §510.201, subject to the following conditions:
(a) The assets representing such investments and reinvestments are credited to a blocked account or subaccount that is held in the same name at the same U.S. financial institution, or within the possession or control of a U.S. person, but funds shall not be transferred outside the United States for this purpose;
(b) The proceeds of such investments and reinvestments shall not be credited to a blocked account or subaccount under any name or designation that differs from the name or designation of the specific blocked account or subaccount in which such funds or securities were held; and
(c) No immediate financial or economic benefit accrues (e.g., through pledging or other use) to the Government of North Korea or any other person whose property and interests in property are blocked pursuant to §510.201(a).
External link location:
https://www.ecfr.gov/cgi-bin/text-idx?SID=39d526b0e9bbc0f7269459b6dd3007ab&mc=true&node=pt31.3.510&rgn=div5#se31.3.510_1506

TURBOFAC Commentary (187 words)

Notes Common to Most "Investment and reinvestment of certain funds authorized" General Licenses

This general license is common to over 15 sanctions programs that involve the blocking of assets, and is not included in sets of abbreviated sanctions regulations. As compared to the 200-level "Holding of funds in interest-bearing accounts; investment and reinvestment" provision that is cross-referenced, this provision appears to deal with securities and other asset classes not within the scope of the 200-level provision. It is not entirely clear how much discretion an investment manager has in determining how to reinvest funds, and OFAC does not appear to have provided public guidance on the question. If, for example, a holder of blocked corporate debt is repaid principal without an option to roll the debt over, may the proceeds be used toward reinvestment in any asset class? Furthermore, may funds be reinvested at the direction of the blocked person, or at least with the consent of the blocked person? Nothing in the GL suggests that such persons must be excluded from the investment decisions, but the GL is vague on the point.