Prohibition on Assistance to Drug Traffickers

DEPARTMENT OF STATE

Bureau of International Narcotics Matters

22 CFR Part 140

[Public Notice 2159]

Prohibition on Assistance to Drug Traffickers

AGENCY: Bureau of International Narcotics Matters, Department of State.

ACTION: Proposed rule.

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SUMMARY: The Bureau of International Narcotics Matters plans to issue

regulations to implement Section 487 of the Foreign Assistance Act of

1961, as amended (22 U.S.C. Sec. 2291f). Section 487(a) directs the

President to take all reasonable steps to ensure that assistance

provided under the Foreign Assistance Act or the Arms Export Control

Act is not provided to or through any individual or entity that the

President knows or has reason to believe: (1) has been convicted of a

violation of, or a conspiracy to violate, any law or regulation of the

United States, a State or the District of Columbia, or a foreign

country relating to narcotic or psychotropic drugs or other controlled

substances; or (2) is or has been an illicit trafficker in any such

controlled substance or is or has been a knowing assistor, abettor,

conspirator, or colluder with others in the illicit trafficking of any

such substance. The law further directs that regulations be issued to

carry out the section and be submitted to Congress before they take

effect. The proposed regulation will be set forth in a new part of the

Code of Federal Regulations, 22 CFR part 140, which will establish a

single governmentwide enforcement mechanism for Section 487. The

proposed regulations seek to achieve rigorous statutory enforcement in

a manner consistent with efficient foreign assistance program

administration. They also seek to ensure protection of the procedural

rights and interests of assistance recipients.

DATES: Comments due: April 10, 1995.

ADDRESSES: Send comments to: Bureau of International Narcotics and Law

Enforcement Affairs, Room 7334, 2201 C Street NW., Washington, DC

20520.

FOR FURTHER INFORMATION CONTACT: William R. Brownfield, Office of

International Narcotics and Law Enforcement Affairs, Department of

State, 202-647-0457, or Jo Brooks, Office of the Legal Adviser,

Department of State, 202-647-7324.

SUPPLEMENTARY INFORMATION: This rule will implement Section 487 of the

Foreign Assistance Act of 1961, as amended (22 U.S.C. Sec. 2291f). The

requirements of Section 487 are described in the Summary, above.

The procedures prescribed by these regulations apply to assistance

under the Foreign Assistance Act of 1961 and the Arms Export Control

Act. The regulations are set up in three Subparts: General (Subpart A,

Secs. 140.1-140.3); Applicability (Subpart B, Sec. 104.4); and

Enforcement (Subpart C, Secs. 140.5-140.14).

The General Subpart (Subpart A) provides a statement of the

regulations' purpose (Sec. 140.1), based upon the language of Section

487 of the Foreign Assistance Act; identifies the authorities for

issuance of the regulations (Sec. 140.2); and defines key terms used in

the regulations (Sec. 140.3). The broad coverage of the regulations is

reflected in the definitions of drug trafficking (Sec. 140.3(b)), money

laundering (Sec. 140.3(c)), and narcotics offense (Sec. 140.3(d)),

which are intended to be comprehensive. As noted in the definition of

drug trafficking, it encompasses drug-related money laundering.

Two of the key terms defined in the regulations are ``covered

country'' (Sec. 140.3(e)) and ``covered assistance'' (Sec. 140.3(f)).

The term ``covered country'' corresponds to those countries listed on

the ``majors list,'' i.e., the list of major illicit drug producing

countries and major drug-transit countries, determined annually by the

President and transmitted to the appropriate Congressional committees

as required by Chapter 8 of Part I of the Foreign Assistance Act. The

term ``covered assistance'' is defined broadly, while excluding

assessed contributions to an international organization and assistance

that by operation of law is not subject to Section 487. The definition

further provides that assistance in amounts less than $100,000 is

excluded unless it pertains to: recipients of scholarships,

fellowships, or participant training; or a covered individual or entity

reasonably suspected of being or having been involved in drug

trafficking. These definitions are intended to ensure rigorous

application of the statutory prohibition on assistance to drug

traffickers, while fostering efficient program administration.

For ease of reference, the term ``covered individual or entity'' is

defined in Sec. 140.4, where it is used, rather than in the definition

section. Likewise, the term ``key individual'' is described in

Sec. 140.6(a)(3), where it is introduced.

The Applicability Subpart (Subpart B) explains the scope of the

regulations. Their applicability is keyed primarily to ``covered

individuals and entities'' that receive or provide direct or first-tier

``covered assistance'' and are located or providing assistance within a

``covered country.'' However, the regulations have been drafted

carefully to ensure they are given their full statutory scope, i.e.,

that they are applied whenever an affected agency has reasonable

grounds to suspect that a proposed recipient individual or entity may

be or may have been involved in drug trafficking or may have been

convicted of a narcotics offense (see Sec. 140.4(c); see also

Secs. 140.3(f)(2), 140.7(a), 140.9(a), and 140.11). They are also

applicable where a government agency providing covered assistance has

specifically designated a recipient beyond the first tier (see

Secs. 140.4(c), 140.7(b)). Additionally, the regulations apply to

individuals who receive a scholarship, fellowship, or participant

training (unless the assistance is provided through a multilateral

institution or international organization and the recipient has not

been designated by the agency providing assistance). Further assurance

that drug traffickers will not receive assistance is provided by the

requirement that where an agency providing covered assistance to a

multilateral institution or international [[Page 7738]] organization

does not designate the assistance recipient, the agency's agreement

with the multilateral institution or international organization shall

stipulate that such entity is to make reasonable efforts to ensure that

the assistance is not diverted in support of drug trafficking

(Sec. 140.7(c)).

The Enforcement Subpart (Subpart C) contains an overview

(Sec. 140.5), which outlines the Subpart's scope. The applicable review

procedures, criteria to be applied in deciding whether to withhold

assistance or take other measures, and procedures concerning violations

identified subsequent to the obligation of funds are set forth in the

Enforcement Subpart. The applicability of these procedures varies

depending on the nature of the proposed recipient. The general

framework is set forth in Sec. 140.6, in the context of covered

assistance to foreign government entities. Variations of that framework

are set forth in separate sections for: multilateral institutions and

international organizations (Sec. 140.7); recipients of scholarships,

fellowships, and participant training (Sec. 140.8); non-governmental

entities (Sec. 140.9); and intermediate credit institutions (140.10).

(Note: In Sec. 140.9 the use of the phrase ``non-governmental entity''

is meant to encompass a broader category of organizations than might be

encompassed by the term ``non-governmental organization'' or its

acronym, ``NGO.'' As explained in Sec. 140.9, it includes not only

private voluntary agencies and educational institutions, but also for-

profit firms and any other non-governmental organization.)

The review procedures set forth in the regulations are applied by

the Country Narcotics Coordinator (as defined in Sec. 140.3(a)), who is

responsible in the first instance for reviewing available information

to determine whether a proposed assistance recipient is to be denied

assistance or whether other measures are to be taken as a result of

Section 487 of the Foreign Assistance Act (see Sec. 140.6(a)). An

agency proposing assistance is responsible for providing the Country

Narcotics Coordinator with the name of each key individual within a

prospective recipient entity who may be expected to control or benefit

from assistance as well as other relevant information that is readily

available (Sec. 140.6(a)(3)).

The regulations provide a two-week period, extendable if necessary

for another two weeks, within which the Country Narcotics Coordinator,

in consultation with the head of the agency proposing assistance or the

agency head's designee, is to make a final determination whether to

provide or withhold assistance or take other measures. Section 140.6(b)

outlines the factors to be considered in determining whether to

withhold assistance or take other measures.

Section 140.6(b)(4) further provides that it is the Assistant

Secretary for International Narcotics Matters (rather than the Country

Narcotics Coordinator), in consultation with affected bureaus and

agencies, who shall make any decision to withhold assistance or take

other measures based on information or allegations that a key

individual who is a senior government official of a foreign government

has been convicted of a narcotics offense or has been engaged in drug

trafficking (Sec. 140.6(b)(4)). Personal involvement at the Assistant

Secretary level is appropriate in such a case because it involves

inherently sensitive foreign policy issues.

The enforcement procedures applicable to recipients of

scholarships, fellowships, and participant training (Sec. 140.8) and

U.S. and foreign non-governmental entities (Sec. 140.9) include a pre-

approval certification process. The regulations specify that false

certification may subject the signatory to U.S. criminal prosecution

under 18 U.S.C. Sec. 1001. (See Secs. 140.8(b), 140.9(c).) Although

this penalty is described in the regulations, it is established

independently by the referenced statute. The identification of a

penalty in the regulations is not meant to limit the application of any

criminal or civil penalty otherwise applicable.

Section 140.10 concerns the procedures applicable to intermediate

credit institutions. Such institutions are to be treated as either

foreign government entities or non-governmental entities, depending on

the nature of the particular institution. Section 140.10 also requires

that agreements with such intermediate credit institutions include a

contract clause concerning a refund procedure applicable to loans

exceeding $1,000 made by any intermediate credit institution.

Section 140.11 clarifies that the enforcement procedures

established by Secs. 140.6-140.10 are not exhaustive, but represent

only the minimum applicable procedures implementing Section 487 of the

Foreign Assistance Act.

The remaining provisions of the regulations, Secs. 140.11-140.14,

establish notification and appeal procedures. Special care has been

taken to ensure that notification will not be done in a manner that

would interfere with any criminal investigation that may be ongoing

(Sec. 140.13(b)). A Country Narcotics Coordinator's decision to

withhold assistance or take other measures may be appealed by the

agency proposing such assistance (Sec. 140.12). In addition, where the

prospective assistance recipient is a U.S. entity, U.S. citizen, or

permanent U.S. resident, a Country Narcotics Coordinator's preliminary

decision to withhold assistance is referred to the Assistant Secretary

of State for International Narcotics Matters for review and action. An

adverse decision affecting a U.S. entity, U.S. citizen, or permanent

U.S. resident may be contested in accordance with applicable agency

regulations regarding governmentwide debarment and suspension

(nonprocurement) and governmentwide requirements for drug-free

workplace (grants).

This amendment involves a foreign affairs function of the United

States. It is exempt from review under Executive Order 12866 but has

been reviewed internally by the Department to ensure consistency with

the purposes thereof. It is also excluded from the procedures of 5

U.S.C. Secs. 553 and 554.

List of Subjects in 22 CFR Part 140

Drug traffic control, Foreign aid.

For the reasons set out in the preamble, 22 CFR subchapter N is

proposed to be amended by adding part 140 to read as follows:

PART 140--PROHIBITION ON ASSISTANCE TO DRUG TRAFFICKERS

Subpart A--General

140.1 Purpose.

140.2 Authorities.

140.3 Definitions.

Subpart B--Applicability

140.4 Applicability.

Subpart C--Enforcement

140.5 Overview.

140.6 Foreign government entities.

140.7 Multilateral institutions and international organizations.

140.8 Recipients of scholarships, fellowships, and participant

training.

140.9 Non-governmental entities.

140.10 Intermediate credit institutions.

140.11 Minimum enforcement procedures.

140.12 Interagency appeal procedures.

140.13 Notification to foreign entities and individuals.

140.14 Notification to and opportunity to contest for U.S. entities

and individuals.

Authority: 22 U.S.C. 2651a.

Subpart A--General

Sec. 140.1 Purpose.

(a) These regulations implement Section 487 of the Foreign

Assistance Act of 1961, as amended (22 U.S.C. Sec. 2291f).

[[Page 7739]]

(b) Section 487(a) directs the President to ``take all reasonable

steps'' to ensure that assistance under the Foreign Assistance Act of

1961 (FAA) and the Arms Export Control Act (AECA) ``is not provided to

or through any individual or entity that the President knows or has

reason to believe'':

(1) has been ``convicted of a violation of, or a conspiracy to

violate, any law or regulation of the United States, a State or the

District of Columbia, or a foreign country relating [to] narcotic or

psychotropic drugs or other controlled substances''; or

(2) ``is or has been an illicit trafficker in any such controlled

substance or is or has been a knowing assistor, abettor, conspirator,

or colluder with others in the illicit trafficking in any such

substance.''

Sec. 140.2 Authorities.

Authority to implement FAA Section 487 was delegated by the

President to the Secretary of State by E.O. 12163, as amended, and

further delegated by the Secretary to the Assistant Secretary for

International Narcotics Matters by Delegation of Authority No. 145,

dated Feb. 4, 1980 (45 FR 11655), as amended.

Sec. 140.3 Definitions.

The following definitions shall apply for purposes of these

regulations:

(a) Country Narcotics Coordinator. The individual assigned by the

chief of mission in each foreign country to coordinate United States

government policies and activities within a country related to

counternarcotics efforts. As determined by the State Department's

Bureau of International Narcotics Matters, these responsibilities may,

as necessary, be performed by another person.

(b) Drug trafficking. Any activity undertaken illicitly to

cultivate, produce, manufacture, distribute, sell, finance or

transport, or otherwise assist, abet, conspire, or collude with others

in illicit activities relating to, narcotic or psychotropic drugs,

precursor chemicals, or other controlled substances, including drug-

related money laundering.

(c) Money laundering. The process whereby proceeds of criminal

activity, are transported, transferred, transformed, converted, or

intermingled with legally acquired funds, for the purpose of concealing

or disguising the true nature, source, disposition, movement, or

ownership of those proceeds. The goal of money laundering is to make

funds derived from or associated with illicit activity appear legally

acquired.

(d) Narcotics offense. A violation of, or a conspiracy to violate,

any law or regulation of the United States, a State or the District of

Columbia, or a foreign country relating to narcotic or psychotropic

drugs or other controlled substances.

(e) Covered country. A country that has been determined by the

President to be either a ``major illicit drug producing'' or ``major

drug-transit'' country under Chapter 8 of Part I of the FAA. The list

of covered countries is maintained by the State Department's Bureau of

International Narcotics matters.

(f) Covered assistance. Any assistance provided by an agency of the

United States government under the FAA or AECA, except that it does not

include:

(1) Assistance that by operation of the law is not subject to FAA

Section 487, including:

(i) Disaster relief and rehabilitation provided under Chapter 9 of

Part I of the FAA; and

(ii) Assistance provided to small farmers when part of a

community-based alternative development program under Part I or Chapter

4 of Part II of the FAA;

(2) Assistance in an amount less than $100,000, except that the

procedures in Sec. 140.8 for recipients of scholarships, fellowships,

and participant training shall apply regardless of amount. However,

assistance shall be deemed covered assistance regardless of amount if

the agency has reasonable grounds to suspect that a covered individual

or entity may be or may have been involved in drug trafficking; or

(3) Assessed contributions to an international organization.

Subpart B--Applicability

Sec. 140.4 Applicability.

(a) Except as otherwise provided herein or as otherwise determined

by the Secretary of State or the Secretary's designee, the procedures

prescribed by these regulations apply to any ``covered individual or

entity,'' i.e., any individual or entity, including any foreign

government entity and any U.S. or foreign non-governmental entity, that

is:

(1) (i) Receiving or providing covered assistance under a direct or

first-tier grant, loan, guarantee, cooperative agreement, contract, or

other direct agreement with an agency of the United States; or

(ii) Receiving covered assistance in the form of a scholarship,

fellowship, or participant training, except as provided in

Sec. 140.7(c); and

(2) Located in or providing assistance within a covered country.

Examples:

(1) Under a $500,000 project grant agreement with the Agency for

International Development providing covered assistance, Government A

enters into a $150,000 contract with Corporation X. Government A is

a covered entity. However, Corporation X is not a covered entity

because the contract is not a direct contract with an agency of the

United States.

(2) Under a $1,000,000 grant from the Department of State

providing covered assistance, Corporation B makes a $120,000

subgrant to University Y for the training of 12 individuals.

Corporation B is a covered entity and the 12 individuals receiving

participant training are covered individuals. University Y is not a

covered entity.

(3) University C receives a $1 million regional assistance

research project grant from the Agency for International

Development, but only $80,000 is provided for research in covered

countries. University C is not a covered entity. (However, if

$100,000 or more were provided for research in a covered country or

countries, then University C would be a covered entity.)

(b) For purposes of Sec. 140.4(a), where a government agency

providing covered assistance specifically designates a recipient of

such assistance, the recipient shall be deemed a covered individual or

entity.

(c) Unless otherwise determined by the Secretary of State or the

Secretary's designee, these regulations do not apply to assistance to

or through individuals and entities in non-covered countries. However,

an affected agency shall apply these regulations if the agency has

reasonable grounds to suspect that an individual or entity located in

or providing covered assistance in a non-covered country may be or may

have been involved in drug trafficking or may have been convicted of a

narcotics offense.

Subpart C--Enforcement

Sec. 140.5 Overview.

This subpart sets forth the enforcement procedures applicable

pursuant to Sec. 140.4 to the various types of covered individuals and

entities with respect to covered assistance. Section 140.6 establishes

the procedures applicable to foreign government entities, including any

such entity that is covered by the definition of a ``foreign state''

set forth in the Foreign Sovereign Immunities Act, 28 U.S.C. Sec.

1603(a). Section 140.7 establishes the procedures applicable to

multilateral institutions and international organizations. Section

140.8 establishes the procedures applicable to recipients of

scholarships and fellowships and participant trainees. Section 140.9

establishes the procedures applicable to non-governmental entities.

Section 140.10 [[Page 7740]] sets forth additional procedures

applicable to intermediate credit institutions. Sections 140.11 through

140.14 contain general provisions related to the enforcement process.

Sec. 140.6 Foreign government entities.

(a) Review procedures. (1) The Country Narcotics Coordinator shall

be responsible for establishing a system for reviewing available

information regarding narcotics offense convictions and drug

trafficking of proposed assistance recipients under this section and,

except under the circumstances described in Sec. 140.6(b)(4),

determining whether a proposed recipient is to be denied such

assistance or other measures are to be taken as a result of the

application of FAA Section 487.

(2) Prior to providing assistance to or through a proposed

recipient, the head of the agency providing the assistance, or the

agency head's designee, shall provide the Country Narcotics Coordinator

in the country in which the proposed recipient is located or, as

appropriate, where assistance is to be provided, the information

specified in Sec. 140.6(a)(3) in order that the Country Narcotics

Coordinator may carry out his or her responsibilities under these

regulations.

(3) In each case, the agency proposing the assistance shall provide

to the Country Narcotics Coordinator the name of each key individual

within the entity who may be expected to control or benefit from

assistance as well as other relevant identifying information (e.g.,

address, date of birth) that is readily available. If a question arises

concerning who should be included within the group of key individuals

of an entity, the head of the agency providing the assistance, or the

agency head's designee, shall consult with the Country Narcotics

Coordinator, and the final decision shall be made by the Country

Narcotics Coordinator.

(4) Within fourteen calendar days after receiving the name of a

proposed recipient and other relevant information, the Country

Narcotics Coordinator shall determine whether any available information

may warrant withholding assistance or taking other measures under these

regulations, based on the criteria set forth in Sec. 140.6(b). If,

during that period, the Country Narcotics Coordinator determines that

available information does not so indicate, he or she shall notify the

proposing agency that the assistance may be provided to the proposed

recipient.

(5) If, during the initial fourteen-day period, the Country

Narcotics Coordinator determines that information exists that may

warrant withholding assistance or taking other measures under these

regulations, then the Country Narcotics Coordinator shall have another

fourteen calendar days to make a final determination whether to provide

or withhold the assistance or take such other measures.

(b) Criteria to be applied. (1) A decision to withhold assistance

or take other measures shall be based on knowledge or a reasonable

belief that the proposed recipient individual or entity, or one or more

key individuals within a proposed recipient entity, during the past ten

years, has:

(i) Been convicted of a narcotics offense as defined in these

regulations; or

(ii) Been engaged in drug trafficking, regardless of whether there

has been a conviction.

(2) Factors that may support a decision to withhold assistance or

take other measures based on the belief that the proposed recipient has

been engaged in drug trafficking during the past ten years when there

has been no conviction of such an offense may include, but are not

limited to, the following:

(i) Admission of participation in such activities;

(ii) A long record of arrests for drug-trafficking with an

unexplained failure to prosecute by the local government;

(iii) Several reliable and corroborative reports.

(3) If the Country Narcotics Coordinator determines that a key

individual (as described in Sec. 140.6(a)(3)) within a proposed

recipient entity has been convicted of a narcotics offense or has been

engaged in drug trafficking under the terms of these regulations, the

Country Narcotics Coordinator must then decide whether withholding

assistance or taking other measures in connection with the entity

itself is warranted. This decision shall be made in consultation with

the head of the agency proposing the assistance, or the agency head's

designee. In making this determination, the Country Narcotics

Coordinator shall take into account:

(i) The extent to which such individual would have control over

assistance received;

(ii) The extent to which such individual could benefit personally

from the assistance;

(iii) The degree to which financial or other resources of the

entity itself have been used to support drug trafficking; and

(iv) Whether such individual has acted alone or in collaboration

with others associated with the entity.

(4) A decision to withhold assistance or to take other measures

based on information or allegations that a key individual who is a

senior government official of the host nation has been convicted of a

narcotics offense or has been engaged in drug trafficking shall be made

by the Assistant Secretary for International Narcotics Matters in

consultation with the affected bureaus and other interested agencies.

For purposes of these regulations, ``senior government official''

includes host nation officials at or above the vice minister level,

heads of host nation law enforcement agencies, and general or flag

officers of the host nation armed forces. In making the decision

whether to withhold assistance or take other measures because of

information or allegations that a senior government official of the

host nation has engaged in drug trafficking, the criteria set forth in

Secs. 140.6(b)(2) and (3) shall apply.

(c) Violations identified subsequent to obligation. The foregoing

procedures require a review before funds are obligated. If, however,

subsequent to an obligation of funds an assistance recipient is found

to have been convicted of a narcotics offense or to have been engaged

in drug trafficking (e.g., the head of a recipient entity changes

during the course of an activity and the new head is found to have been

engaged in drug trafficking), appropriate action should be taken,

including, if necessary, termination of the assistance. Agreements

shall be written to permit termination of assistance in such

circumstances.

Sec. 140.7 Multilateral institutions and international organizations.

Assistance provided to or through multilateral institutions or

international organizations is subject to these regulations as follows:

(a) Where the government agency providing assistance has reasonable

grounds to suspect that a recipient multilateral institution or

international organization may be or may have been involved in drug

trafficking, the agency shall apply the provisions of Sec. 140.6.

(b) Where the government agency providing assistance designates the

recipient of assistance from the multilateral institution or

international organization and the designated recipient is a covered

individual or entity, the agency shall apply the provisions of these

regulations that would apply if the assistance were provided directly

to the designated recipient.

(c) Where the government agency providing assistance does not

designate the recipient of assistance from the

[[Page 7741]] multilateral institution or international organization,

these regulations do not apply to such recipients of assistance, except

that the agency's agreement with the multilateral institution or

international organization shall stipulate that such entity is to make

reasonable efforts to ensure that the assistance is not diverted in

support of drug trafficking.

Example:

The State Department provides $600,000 to the United Nations for

the United Nations Drug Control Program, specifically designating

that Government D receive $150,000 and Corporation E receive $60,000

for programs in a covered country. Individuals who will receive

training are not specifically designated by the State Department.

The United Nations is a covered entity based on Sec. 140.4(a)(1)(i);

Government D is a covered entity based on Secs. 140.4(b) and

140.7(b); Corporation E is not a covered entity under Secs. 140.4(b)

and 140.7(b) because it has been designated to receive less than

$100,000 in assistance. Participant trainees are not covered

individuals because they fall under the exception contained in

Sec. 140.7(c) (see also Sec. 140.4(a)(1)(ii)).

Sec. 140.8 Recipients of scholarships, fellowships, and participant

training.

(a) Procedures. Individuals who are located in a covered country

and who are proposed recipients of scholarships, fellowships, or

participant training are subject to the review procedures, criteria,

and procedures concerning violations identified subsequent to

obligation set forth in Sec. 140.6. Such review of recipient

individuals is in addition to the provisions applicable to the entity

providing the assistance.

(b) Certifications. Individuals who are located in a covered

country and who are proposed recipients of scholarships, fellowships,

or participant training shall also be required to certify prior to

approval that, within the last ten years, they have not been convicted

of a narcotics offense, have not been engaged in drug trafficking, and

have not knowingly assisted, abetted, conspired, or colluded with

others in drug trafficking. False certification may subject the

assistance recipient to U.S. criminal prosecution under 18 U.S.C. Sec.

1001 and to withdrawal of assistance under these regulations.

Sec. 140.9 Non-governmental entities.

(a) Procedures. Section 140.9 applies to private voluntary

agencies, educational institutions, for-profit firms, or any other non-

governmental entity. A non-governmental entity that is not organized

under the laws of the United States shall be subject to the review

procedures and criteria set forth in Secs. 140.6(a) and (b). A non-

governmental entity that is organized under the laws of the United

States shall not be subject to such review procedures and criteria.

However, an affected agency shall follow such procedures if the agency

has reasonable grounds to suspect that a proposed U.S. non-governmental

entity or a key individual of such entity may be or may have been

involved in drug trafficking or may have been convicted, within the

last ten years, of a narcotics offense. Procedures set forth in

Sec. 140.6(c) concerning violations identified subsequent to obligation

shall apply to both U.S. and foreign non-governmental entities.

Examples:

(1) A $100,000 grant to a covered U.S. university for

participant training would not be subject to the review procedures

and criteria in Secs. 140.6(a) and (b). However, a proposed

participant would be subject to the review procedures and criteria

in Secs. 140.6 (a) and (b) as part of the agency's approval process.

(2) A $100,000 grant to a covered foreign private voluntary

agency for participant training would be subject to the review

procedures and criteria in Secs. 140.6(a) and (b). In addition, each

proposed participant would be subject to the review procedures and

criteria in Secs. 140.6(a) and (b) as part of the agency's approval

process.

(b) Refunds. A clause shall be included in grants, contracts, and

other agreements with both U.S. and foreign non-governmental entities

requiring that assistance provided to or through such an entity that is

found to have been engaged in drug trafficking, as defined in these

regulations, shall be subject to refund.

(c) Certifications. Prior to approval of covered assistance, key

individuals (as described in Sec. 140.6(a)(3)) in both U.S. and foreign

non-governmental entities shall be required to certify that, within the

last ten years, they have not been convicted of a narcotics offense,

have not been engaged in drug trafficking and have not knowingly

assisted, abetted, conspired, or colluded with others in drug

trafficking. False certification may subject the signatory to U.S.

criminal prosecution under 18 U.S.C. Sec. 1001.

Sec. 140.10 Intermediate credit institutions.

(a) Treatment as Non-Governmental Entity or as a Foreign Government

Entity. Intermediate credit institutions (``ICIs'') shall be subject to

either the procedures applicable to foreign government entities or

those applicable to non-governmental entities, depending on the nature

of the specific entity. The Assistant Secretary for International

Narcotics Matters or the Assistant Secretary's designee, in

consultation with the head of the agency proposing the assistance or

the agency head's designee, shall determine (consistent with the

definition of ``foreign state'' set forth in the Foreign Sovereign

Immunities Act, 28 U.S.C. Sec. 1603(a) and made applicable by

Sec. 140.5) whether the ICI will be treated as a non-governmental

entity or a foreign government entity.

(b) Refunds. In addition to measures required as a consequence of

an ICI's treatment as a non-governmental entity or a foreign government

entity, a clause shall be included in agreements with all ICIs

requiring that any loan greater than $1,000 provided to an individual

or entity found to have been convicted of a narcotics offense or

engaged in drug trafficking, as defined in these regulations, shall be

subject to refund or recall.

Sec. 140.11 Minimum enforcement procedures.

Sections 140.6 through 140.10 represent the minimum procedures that

each agency is required to apply in order to implement FAA Section 487.

Under individual circumstances, however, additional measures may be

appropriate. In those cases, agencies are encouraged to take additional

steps, as necessary, to ensure that the statutory restrictions are

enforced.

Sec. 140.12 Interagency appeal procedures.

If the agency proposing the assistance disagrees with a

determination by the Country Narcotics Coordinator to withhold

assistance or take other measures, the head of the agency, or the

agency head's designee, may request that the determination be reviewed

by the Assistant Secretary of State for International Narcotics Matters

in coordination with other affected bureaus and agencies. The

assistance shall continue to be withheld pending resolution of the

appeal.

Sec. 140.13 Notification to foreign entities and individuals.

(a) Unless otherwise determined under Sec. 140.13(b), if a

determination has been made that assistance to a foreign entity or

individual is to be withheld, suspended, or terminated under these

regulations, the agency administering such assistance shall so inform

the affected entity or individual. Except as the agency administering

such assistance and the Country Narcotics Coordinator may otherwise

determine, the entity or individual shall be notified solely of the

statutory basis for withholding assistance.

(b) Before such notification, the Country Narcotics Coordinator

shall be responsible for determining that notification would not

interfere with an on-going criminal investigation. If an

[[Page 7742]] investigation is underway, the Country Narcotics

Coordinator, in consultation with the investigating agency, shall

determine whether notification is appropriate or whether other action

should be taken.

Sec. 140.14 Notification to and opportunity to contest for U.S.

entities and individuals.

(a) If the Country Narcotics Coordinator makes a preliminary

decision that evidence exists to justify withholding assistance to a

U.S. entity, U.S. citizen, or permanent U.S. resident, the matter shall

be referred immediately to the Assistant Secretary of State for

International Narcotics Matters for appropriate action, to be taken in

coordination with the agency proposing the assistance.

(b) If a determination has been made that assistance is to be

withheld, suspended, or terminated under these regulations, the

Assistant Secretary of State for International Narcotics Matters, or

the Assistant Secretary's designee, shall notify the affected U.S.

entity, U.S. citizen, or permanent U.S. resident and provide such

entity or individual with an opportunity to contest the action in

accordance with the provisions of applicable agency regulations

regarding governmentwide debarment and suspension (nonprocurement) and

governmentwide requirements for drug-free workplace (grants) (for

example, regulations set forth in 22 CFR part 137 (State Department) or

22 CFR part 208 (Agency for International Development)).

Dated: February 1, 1995.

Robert S. Gelbard,

Assistant Secretary for International Narcotics Matters.

[FR Doc. 95-3279 Filed 2-8-95; 8:45 am]

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