OFAC Adopts New Regulations Concerning Business Transactions with the Palestinian Authority

May 17, 2006

Effective May 10, 2006, OFAC amended its Global Terrorism Sanctions Regulations, Terrorism Sanctions Regulations and Foreign Terrorist Organizations Sanctions Regulations to add general licenses (referred to below as "the May 10 amendments") authorizing certain transactions with the Palestinian Authority (PA). OFAC determined that, as a result of recent elections, HAMAS, a designated terrorist organization, has a property interest in the transactions of the PA. Thus, U.S. persons are generally prohibited from doing business with the PA. The May 10 amendments codify certain exceptions to this prohibition. In the introduction to the Final Rule implementing the amendments, OFAC clarifies that "the prohibitions involving the Palestinian Authority do not bar all transactions involving individuals and entities in Palestinian territory." 

The May 10 amendments authorize transactions with the Palestinian Authority by (i) persons who conduct official business on behalf of the United Nations; (ii) U.S. persons who are employees of the governments of states bordering the West Bank or Gaza; (iii) U.S. persons engaging in transactions incident to travel, employment, residence and maintenance within the jurisdiction of the PA; (iv) U.S. persons paying taxes and fees to the PA; (v) U.S. persons dealing with the Palestinian Authority Presidency (as defined in the regulations), the Palestinian Judiciary, Palestinian legislators not affiliated with HAMAS, and certain independent agencies; and (vi) U.S. persons providing in-kind donations of medicine. These general licenses are subject to the provision that no authorized payment may include a debit to an account of the PA on the books of a U.S. financial institution, or to any other blocked account. 

Thus, U.S. companies may continue to transact business with individuals and entities in Palestinian territory who are not affiliated with the PA, as well as with the PA itself under the limited circumstances summarized above. 

For further information, please contact Judith A. Lee (202-887-3591) or
Radu Costinescu (202-955-8259) in Gibson, Dunn & Crutcher’s Washington, D.C. office.

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.