International Law Advisory - OFAC Codifies Palestinian Authority Restrictions in Code of Federal Regulations

Further to our April 14, 2006 advisory, on Wednesday, March 10 the Department of Treasury, Office of Foreign Assets Control (“OFAC”) issued a regulation in the Federal Register incorporating recently-enacted restrictions relating to the Palestinian Authority into the Global Terrorism Sanctions Regulations (31 C.F.R. Part 594), the Terrorism Sanctions Regulations (31 C.F.R. Part 595), and the Foreign Terrorist Organizations Sanctions Regulations (31 C.F.R. Part 597).  The text of the Federal Register notice (71 Fed. Reg. 27,199) can be viewed here.

As discussed in our April 14 advisory, OFAC had issued a notice in April setting forth a general prohibition on dealings by U.S. persons with the Palestinian Authority, owing to Hamas’s effective control of the Palestinian Authority following its electoral victory in the Palestinian legislative elections in January 2006.  Hamas has been designated as a terrorist entity under all three of the above-referenced anti-terrorism regulations.  However, OFAC also issued a series of general licenses authorizing certain types of transactions with the Palestinian Authority, including dealings with the Palestinian Authority Presidency, Judiciary, and members of the Palestinian Legislative Council that are not members of Hamas.  The six general licenses are summarized in our April 14 advisory. The regulations issued on May 10 do not change the scope of any of the restrictions or general licenses published by OFAC in April, but simply codify those provisions in 31 C.F.R. Parts 594, 595, and 597.  The May 10 notice also clarifies that “the prohibitions involving the Palestinian Authority do not bar all transactions involving individuals and entities in the Palestinian territories.”  Accordingly, the sanctions against the Palestinian Authority should not be viewed as a full-scale economic sanctions regime such as, for instance, those that are currently in force against Cuba, Iran, and Sudan (which generally prohibit dealings not only with the specified governments, but also with persons located in those countries or citizens thereof).  Rather, the restrictions are a targeted measure focusing on Hamas and on the Palestinian Authority.  Nevertheless, U.S. persons who are engaged in business in the Palestinian territories (or with persons who reside therein) should be careful to ensure that their activities do not involve Palestinian Authority elements not covered under the OFAC general licenses, and do not otherwise involve dealings with specifically-designated terrorist entities, including Hamas. (A list of the terrorist entities that have been designated by OFAC are available for review on the OFAC website.

Should you have any questions regarding the issues discussed herein, please contact Ed Krauland at 202-429-8083 or David Lorello at 202-429-6757.