Bureau for International Narcotics and Law Enforcement Affairs; Prohibition on Assistance to Drug Traffickers

DEPARTMENT OF STATE

22 CFR Part 140

[Public Notice 2840]

Bureau for International Narcotics and Law Enforcement Affairs;

Prohibition on Assistance to Drug Traffickers

AGENCY: Department of State (Bureau for International Narcotics and Law

Enforcement Affairs).

ACTION: Final rule.

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SUMMARY: The Department of State issues these regulations to implement

Section 487 of the Foreign Assistance Act of 1961, as amended (``FAA'')

(22 U.S.C. 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

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 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. This rule establishes a single

government-wide enforcement mechanism for Section 487. The regulations

seek to achieve rigorous statutory enforcement in a

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manner consistent with efficient foreign assistance program

administration. They also seek to ensure protection of the procedural

rights and interests of assistance recipients.

DATES: Effective date: October 5, 1998.

FOR FURTHER INFORMATION CONTACT: Office of Policy, Planning and

Coordination, Bureau for International Narcotics and Law Enforcement

Affairs, Department of State, 202-647-0457, or Office of Law

Enforcement and Intelligence, Office of the Legal Adviser, Department

of State, 202-647-7324.

SUPPLEMENTARY INFORMATION: This rule implements 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

law further directs that regulations be issued to carry out the section

and be submitted to Congress before they take effect. The

responsibilities of the President under Section 487 have been delegated

to the Secretary of State (E.O. 12163). The Secretary of State is

issuing these regulations and has delegated the responsibility for

their implementation to the Assistant Secretary for International

Narcotics and Law Enforcement Affairs. The regulations are set forth in

a new part of the Code of Federal Regulations, 22 CFR Part 140.

Proposed regulations were published for comment on Feb. 9, 1995 (60 FR

7737) and modifications have been made in light of comments received.

The regulations have been submitted to Congress, as required by Section

487(c).

The procedures prescribed by these regulations apply to assistance

under the Foreign Assistance Act of 1961, as amended, 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. 140.4); 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(e)), money

laundering (Sec. 140.3(f)), and narcotics offense (Sec. 140.3(g)),

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

drug trafficking, it encompasses drug-related money laundering. One

commenting agency asked for further definition of the terms

``illicit,'' ``illicitly,'' and ``criminal.'' That comment was not

adopted because we believe such definitions are not necessary. We note

that the terms encompass activities that are illicit or illegal under

the laws applicable to such activities.

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

country'' (Sec. 140.3(d)) and ``covered assistance'' (Sec. 140.3(c)).

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, as determined annually by

the President and transmitted to the appropriate Congressional

committees as required by section 490(h) of the FAA.

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 by the agency providing assistance. These definitions are

intended to ensure rigorous application of the statutory prohibition on

assistance to drug traffickers, while fostering efficient program

administration. Several comments requested a more complete listing of

assistance that would be excluded from the term ``covered assistance''

by operation of other laws. Because such a list depends on specific

statutory exemptions and is subect to change, we have concluded that

further guidance in this area is more appropriately left to the

implementing regulations of the relevant agency, which will be in a

better position to keep the guidance current.

One agency recommended the addition of a definition of the term

``convicted;'' that definition has been added as Sec. 140.3(a).

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 term ``Country Narcotics Coordinator'' is defined in section

140.3(b). Comments from one agency acknowledged that the definition is

drafted to preserve flexibility by not specifying particular positions

at U.S. posts abroad but recommended further clarification to ensure

that a designated CNC would be qualified to handle sensitive law

enforcement information. The definition has not been changed, but we

note that the CNC is a key position often held by the Deputy Chief of

Mission at a U.S. diplomatic post. In the event that another person

were assigned to exercise these functions, that person would

necessarily have equally appropriate clearances to handle sensitive law

enforcement information.

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.'' Concerns were raised that the definition of a

``covered country'' as one on the list of major illicit drug producing

or drug-transit countries issued annually pursuant to section 490(h) of

the Foreign Assistance Act of 1961, as amended, would preclude action

concerning assistance to a portion of a country or to another country

on which relevant information is developed after issuance of the list.

In response, Sec. 104.4(b) has been rewritten to include coverage of

assistance within any other country, or portion thereof, that the

Secretary of State or the Secretary's designee may at any time

determine should be treated as if it were a covered country in order to

fulfill the purpose of the regulations (Sec. 140.4(b)(1)). Furthermore,

the regulations have been drafted carefully to ensure they are given

their full statutory scope, i.e., that they are applied whenever an

agency providing covered assistance 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 regardless of the country involved (Sec. 140.4(b)(2); see also

Secs. 140.3(c)(2), 140.7(a), 140.9(a) and 140.11).

The regulations are also applicable where a government agency

providing covered assistance within a covered country has specifically

designated a recipient beyond the first tier (see Secs. 140.4(a),

140.7(b)). Additionally, they 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 organization does not

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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 factual circumstances that give rise to application of the

regulations are highly varied and may, on occasion, have potentially

serious or sensitive foreign relations, national security, or law

enforcement consequences. In rare circumstances, such potential

consequences may require that, in fulfilling the statutory requirements

of Section 487, the procedures set forth in the regulations be

expanded, modified, utilized in a different manner or not utilized.

This necessary flexibility is provided in the initial clause of

Sec. 140.4. In response to comments by one agency raising concerns

about possible disclosure of law enforcement investigatory information,

however, that section has been amended to provide that Secs. 140.13 and

140.14 will apply in all cases.

The Enforcement Subpart (Subpart C) contains an overview

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

determination 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); other non-

governmental entities and individuals (Sec. 140.9); and intermediate

credit institutions (Sec. 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 organizations.)

The determination procedures set forth in the regulations are

applied by the Country Narcotics Coordinator (as defined in

Sec. 140.3(b)), who is responsible in the first instance for reviewing

available information to determine whether a proposed assistance

recipient is to be granted or denied assistance or whether other

measures are to be taken to structure the provision of the assistance

in such a way as to meet the requirements of Section 487 of the Foreign

Assistance Act (Sec. 140.6(a)). Comments from one agency pointed out

that agencies providing information that will be used for this purpose

have a strong interest in how the system for reviewing information as

required under Sec. 140.6(a)(1) is developed and suggested that

parameters of such a system be included in the regulations. We have

decided not to change the regulations on this point although we will

provide guidance to CNCs separately on this matter in order to preserve

flexibility in developing and adjusting such a system over time.

Nevertheless, the State Department will consult with agencies that

supply information in developing that guidance. 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)). Questions as to who should be included in

the group of key individuals will be resolved by the CNC, with review

by the Assistant Secretary for INL at the request of the agency.

Section 140.6(a)(6) further provides that it is the Assistant

Secretary of State for International Narcotics and Law Enforcement

Affairs (rather than the Country Narcotics Coordinator), in

consultation with appropriate bureaus and agencies, who ordinarily will

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. Personal

involvement at or above the Assistant Secretary of State level is

appropriate in such a case because it involves inherently sensitive

foreign policy issues.

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

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

in consultation with the agency proposing the assistance and other

appropriate bureaus and agencies, is to make a determination whether

assistance is to be provided or withheld, or other measures are to be

taken to meet the requirements of section 487. The reference to other

appropriate bureaus and agencies was added in response to a comment

from one agency noting that the decision would need to be made on the

basis of information supplied by other, often law enforcement,

agencies. Section 140.6(b) outlines the factors to be considered in

determining whether to withhold assistance or take other measures. In

response to comments from one agency requesting additional guidance

concerning the standard ``reasonable belief,'' we have changed that

term as used in 140.6(b) to the exact words of the statute, ``reason to

believe'' that a proposed recipient has been engaged in drug

trafficking activities. When there is evidence that might lead to such

a finding, the CNC will decide whether reports are credible and sources

reliable, thus providing a reason to believe rather than merely raising

a suspicion.

In response to comments requesting further guidance on

implementation, a new subsection (b)(3)(v) has been added to make clear

that measures other than denial of assistance may be appropriate in

certain cases where a negative determination is made as to one or more

key individuals.

The enforcement procedures applicable to recipients of

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

other non-governmental entities and individuals (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. 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 establish notification

and

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review procedures. One agency commented that only the law enforcement

agency whose investigation may be affected by disclosure of information

is in a position to make a determination regarding the appropriateness

of notifications and any decision to provide additional information. In

response to these comments, Sec. 140.13(a) has been amended to ensure

that no information beyond the statutory basis for withholding,

suspending or terminating assistance to a foreign government or entity

will be provided without the agreement of the originating agency.

Special care has also been taken to minimize the risk that notification

will interfere with an ongoing criminal investigation (Sec. 140.13(b)).

An agency proposing covered assistance may request review of a Country

Narcotics Coordinator's decision that the assistance must be withheld

or other measures taken to comply with section 487 (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 and Law

Enforcement Affairs for final determination (Sec. 140.14). As with

Sec. 140.13, in response to comments, Sec. 140.14(a) has been revised

to provide that decisions on appropriate action concerning U.S.

entities and individuals will be taken in consultation not only with

the agency proposing the assistance but also the agency or agencies

that provided information reviewed or relied upon in making the

preliminary decision. One agency expressed concerns that procedures

previously anticipated for review of denials of assistance under this

section could be viewed as introducing a standard of proof inconsistent

with section 487 and could lead to disclosure of classified materials

or law enforcement investigative information. The section has been

amended to remove references to pre-existing review procedures which

would not ordinarily be applicable in the context of assistance grants.

Section 140.14(b) also now states explicitly that the regulations shall

not be interpreted to create a right to classified information or law

enforcement investigatory information by such entity or individual.

This amendment involves a foreign affairs function of the United

States, as well as public grants, benefits and contracts, and is

accordingly not subject to the requirements of the Regulatory

Flexibility Act, as amended by the Small Business Regulatory

Enforcement Fairness Act of 1996. It is also exempt from review under

Executive Order 12866 but has been reviewed internally by the

Department to ensure consistency with the purposes thereof.

List of Subjects in 22 CFR Part 140

Drug traffic control, Foreign aid.

For the reasons set out in the preamble, 22 CFR 140 is added to

subchapter N as follows:

PART 140--PROHIBITION ON ASSISTANCE TO DRUG TRAFFICKERS

Subpart A--General

Sec.

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 Other non-governmental entities and individuals.

140.10 Intermediate credit institutions.

140.11 Minimum enforcement procedures.

140.12 Interagency review procedures.

140.13 Notification to foreign entities and individuals.

140.14 Special procedures for U.S. entities and individuals.

Authority: 22 U.S.C. 2651a(a)(4).

Subpart A--General

Sec. 140.1 Purpose.

(a) This part implements Section 487 of the Foreign Assistance Act

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

(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 of State

for International Narcotics and Law Enforcement Affairs 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 the purpose of this part:

(a) Convicted. The act of being found guilty of or legally

responsible for a criminal offense, and receiving a conviction or

judgment by a court of competent jurisdiction, whether by verdict or

plea, and including convictions entered upon a plea of nolo contendere.

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

Chief of Mission of a U.S. diplomatic post, in consultation with the

Assistant Secretary of State for International Narcotics and Law

Enforcement Affairs, in each foreign country to coordinate United

States government policies and activities within a country related to

counternarcotics efforts.

(c) 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, such as:

(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 a total amount less than $100,000 regarding a

specific activity, program, or agreement, 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 providing

assistance has reasonable grounds to suspect that a covered individual

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

(3) Payments of dues or other assessed contributions to an

international organization.

(d) 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

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FAA. The list of covered countries is submitted to Congress annually

and set forth in the International Narcotics Control Strategy Report.

(e) Drug trafficking. Any activity undertaken illicitly to

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

transport, or to assist, abet, conspire, or collude with others in

illicit activities, including money laundering, relating to narcotic or

psychotropic drugs, precursor chemicals, or other controlled

substances.

(f) 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 to have

been acquired legally.

(g) 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.

Subpart B--Applicability

Sec. 140.4 Applicability.

Except as otherwise provided herein or as otherwise specially

determined by the Secretary of State or the Secretary's designee

(except that decisions on notification and/or disclosure shall in all

cases be subject to the provisions of Secs. 140.13 through 140.14), the

procedures prescribed by this part apply to any ``covered individual or

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

government entity, a multilateral institution or international

organization, or a U.S. or foreign non-governmental entity: (a)(1) That

is receiving or providing covered assistance as a party to a grant,

loan, guarantee, cooperative agreement, contract, or other direct

agreement with an agency of the United States (a ``first-tier''

recipient); or

(2) That is receiving covered assistance

(A) Beyond the first tier if specifically designated to receive

such assistance by a U.S. government agency; or

(B) In the form of a scholarship, fellowship, or participant

training, except certain recipients funded through a multilateral

institution or international organization, as provided in

Sec. 140.7(c); and

(b)(1) That is located in or providing covered assistance within a

covered country or within any other country, or portion thereof, that

the Secretary of State or the Secretary's designee may at any time

determine should be treated, in order to fulfill the purpose of this

part, as if it were a covered country; or

(2) As to which the agency providing assistance or any other

interested agency has reasonable grounds to suspect current or past

involvement in drug trafficking or conviction of a narcotics offense,

regardless of whether the assistance is provided within a covered

country.

Examples:

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

for International Development providing covered assistance, Ministry

Y of Government A, the government of a covered country, enters into

a $150,000 contract with Corporation X. Ministry Y 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. If

Corporation B is located in or providing assistance within a covered

country, it is a covered entity and the 12 individuals receiving

participant training are covered individuals. University Y is not a

covered entity.

(3) University C, which is not located in a covered country,

receives a $1 million regional assistance research project grant

from the Agency for International development, $80,000 of which 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, or if University C were

located in a covered country, then University C would be a covered

entity.)

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 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) Determination 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(a)(6),

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 covered assistance to or through a proposed

recipient, the agency providing the assistance 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 this part.

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

to the Country Narcotics Coordinator the name of each key individual

within the recipient 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 agency providing the assistance shall

consult with the Country Narcotics Coordinator, and the decision shall

be made by the Country Narcotics Coordinator. If the agency proposing

the assistance disagrees with the Country Narcotics Coordinator's

decision regarding who should be included within the group of key

individuals, the agency may request that the decision be reviewed by

the Assistant Secretary of State for International Narcotics and Law

Enforcement Affairs in consultation with other appropriate bureaus and

agencies. Any such review undertaken by the Assistant Secretary of

State for International Narcotics and Law Enforcement Affairs shall be

completed expeditiously.

(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 this

part, based on the

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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 this

part, then the Country Narcotics Coordinator shall have another

fourteen calendar days to make a final determination whether the

assistance shall be provided or withheld or such other measures taken.

(6) 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 of State for International Narcotics and Law

Enforcement Affairs, or by a higher ranking official of the Department

of State, in consultation with other appropriate bureaus and agencies.

For the purpose of this part, ``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.

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

or take other measures shall be based on knowledge or reason to believe

that the proposed recipient, within the past ten years, has:

(i) Been convicted of a narcotics offense as defined in this part;

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 reason to believe that the proposed

recipient has been engaged in drug trafficking activities within 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 activities with

an unexplained failure to prosecute by the local government;

(iii) Adequate reliable information indicating involvement in drug

trafficking.

(3) If the Country Narcotics Coordinator knows or has reason to

believe 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 this part,

the Country Narcotics Coordinator must then decide whether withholding

assistance from the entity or taking other measures to structure the

provision of assistance to meet the requirements of section 487 is

warranted. This decision shall be made in consultation with the agency

proposing the assistance and other appropriate bureaus and agencies. 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) Whether such individual has acted alone or in collaboration

with others associated with the entity;

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

itself have been used to support drug trafficking; and

(v) Whether the provision of assistance to the entity can be

structured in such a way as to exclude from the effective control or

benefit of the assistance any key individuals with respect to whom a

negative determination has been made.

(c) Violations Identified Subsequent to Obligation. The foregoing

procedures provide for a determination before funds are obligated. If,

however, subsequent to an obligation of funds an assistance recipient

or a key individual of such 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 this part 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 provisions of Sec. 140.6 shall apply.

(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 provisions of this part shall apply as 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 multilateral institution

or international organization, this part do not apply, other than as

provided in paragraph (a) of this section, except that the agency's

agreement with the multilateral institution or international

organization shall stipulate that such entity is to make reasonable

efforts, as necessary, 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 of a covered country receive $150,000 and

Corporation E receive $60,000 for training 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); 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

(Sec. 140.3(c)(2)). Participant trainees are not covered individuals

because they fall under the exception contained in Sec. 140.7(c)

(see also Sec. 140.4(a)(2)).

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, except those falling under the exception

contained in Sec. 140.7(c), are subject to the review procedures,

criteria, and procedures concerning violations identified subsequent to

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

individuals is in addition to the provisions applicable to the

recipient 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,

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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 this part.

Sec. 140.9 Other non-governmental entities and individuals.

(a) Procedures. Section 140.9 applies to private voluntary

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

governmental entities and private individuals. 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

Sec. 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 agency providing assistance shall

follow such review procedures and criteria, as modified by section

Sec. 140.14, 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 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 Sec. 140.6(a) and (b). However, a proposed

participant would be subject to the review procedures and criteria

in Sec. 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 Sec. 140.6(a) and (b). In addition, each

proposed participant would be subject to the review procedures and

criteria in Sec. 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

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

in this part, shall be subject to refund or recall.

(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 of State for

International Narcotics and Law Enforcement Affairs or the Assistant

Secretary's designee, in consultation with the agency proposing the

assistance and other appropriate bureaus and agencies, shall determine

(consistent with the definition of ``foreign state'' set forth in the

Foreign Sovereign Immunities Act, 28 U.S.C. 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 by the ICI to an

individual or entity subsequently found to have been convicted of a

narcotics offense or engaged in drug trafficking, as defined in this

part, 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 providing assistance must apply in order to implement FAA

Section 487. Under individual circumstances, however, additional

measures may be appropriate. In those cases, agencies providing

assistance are encouraged to take additional steps, as necessary, to

ensure that the statutory restrictions are enforced.

Sec. 140.12 Interagency review procedures.

If the agency proposing the assistance disagrees with a

determination by the Country Narcotics Coordinator to withhold

assistance or take other measures, the agency may request that the

determination be reviewed by the Assistant Secretary of State for

International Narcotics and Law Enforcement Affairs in coordination

with other appropriate bureaus and agencies. Unless otherwise

determined by the Assistant Secretary of State for International

Narcotics and Law Enforcement Affairs, the assistance shall continue to

be withheld pending resolution of the review.

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 this part,

the agency administering such assistance shall so inform the affected

entity or individual. Except as the agency administering such

assistance, the Country Narcotics Coordinator, and the agency or

agencies that are the source of information that formed the basis for

withholding, suspending, or terminating assistance may otherwise agree,

the entity or individual shall be notified solely of the statutory

basis for withholding, suspending, or terminating assistance.

(b) Before such notification, the Country Narcotics Coordinator

shall be responsible for ascertaining, in coordination with the

investigating agency, that notification would not interfere with an on-

going criminal investigation. If the investigating agency believes that

there is a significant risk of such interference, the Country Narcotics

Coordinator, in coordination with the investigating agency, shall

determine the means of compliance with this statute that best minimizes

such risk.

Sec. 140.14 Special procedures for U.S. entities and individuals.

(a) If the Country Narcotics Coordinator makes a preliminary

decision that evidence exists to justify withholding, suspending, or

terminating 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 and Law

Enforcement Affairs for appropriate action, to be taken in consultation

with the agency proposing the assistance and the agency or agencies

that provided information reviewed or relied upon in making the

preliminary decision.

(b) If a determination is made that assistance is to be withheld,

suspended, or terminated under this part, the Assistant Secretary of

State for International Narcotics and Law Enforcement Affairs, 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 respond before action is taken. In no

event, shall this part be interpreted to create a right to classified

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information or law enforcement investigatory information by such entity

or individual.

Dated: May 31, 1998.

Madeleine K. Albright,

Secretary of State.

[FR Doc. 98-17870 Filed 7-6-98; 8:45 am]

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