Last Friday the United States Department of the Treasury Office of Foreign Assets Control (OFAC) announced the promulgation of the Libyan Sanctions Regulations at 31 C.F.R. Part 570. As was discernible from Executive Order 13566 which imposed these sanctions, the Libyan Sanctions Regulations is a blocking program. Thus, it blocks the assets under U.S. jurisdiction of those parties designated pursuant to it. In addition, all U.S. persons are prohibited from engaging in transactions with those parties who have been designated pursuant to the Executive Order.

The following is a run down of some of the more interesting points from the Regulations:

1. The Libyan general licenses No. 2 and No. 3, formerly issued through the OFAC website, were replaced by the sanctions regulations, however, the other general licenses previously issued by OFAC were not replaced or incorporated into Part 570, although they remain in place and are available on the OFAC website.

2. OFAC does intend to supplement Part 570 with additional regulations that may include more general licenses, interpretative guidance, and definitions. Therefore, expect to see a more comprehensive set of regulations in the future.

3. OFAC has articulated that a “reasonable cause to believe” burden of proof exists for the designation of a party under E.O. 13566 for being part of the Government of Libya. In other words, there only needs to be a reason to believe that a party is or purports to be acting directly, or indirectly, on behalf of the state and the Government of Libya, as well as any political subdivision, agency, or instrumentality thereof, and the Central Bank of Libya or for any entity owned or controlled, directly or indirectly, by such parties.

While it is commendable that OFAC has promulgated these sanctions regulations so quickly, there is a sense that the regulations are incomplete and hence I will be looking forward to the more comprehensive set of regulations that will be forthcoming.

Also, I am always a bit disturbed by this “reasonable cause to believe” standard that is used when determining an SDN designation for being part of the Government of Libya. That is the same burden of proof utilized in making a designation under the Foreign Narcotics Trafficking Kingpin Designation program and I feel both in the case of that program and the Libya program that it is too low of a burden for placing a designation on a party that will have severe economic consequences. Hopefully there is more guidance set forth on this standard in the future additions to the Libyan Sanctions Regulations.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.