Opn. No. ( 1984 )

Hon. Frank W. Bratt Chairman New York State Soil and Water Conservation Committee

Your associate counsel has informed us that in order for the Office of State Comptroller to perform its statutory responsibilities as custodian of the State Abandoned Property Fund, it is necessary that your office be issued specific licenses by the Office of Foreign Assets Control, United States Department of the Treasury, to acquire blocked foreign assets which would be subject to the provisions of the New York Abandoned Property Law. Licenses will be issued by the Treasury Department only upon demonstration that State law complies with sections 500.205 and 515.205 of Title 31 of the Code of Federal Regulations regarding the crediting of interest to blocked foreign accounts held custodially by a state. Under the Federal Regulations, this demonstration must include an opinion of the state attorney general that the requisite state statutory authority exists (31 C.F.R. § 500.561[c], 515.554[c]). Your associate counsel has requested this opinion.

Transactions by, on behalf of or in accordance with the direction of any foreign country or any national of such country or transactions involving property in which a foreign country or any national thereof has an interest are prohibited except as specifically authorized by the Secretary of the Treasury by means of regulations, licenses and other authorizations (31 C.F.R. § 500.201, 515.201). Any transfer of assets which is in violation of this provision is null and void and may not be the basis for the assertion or recognition of any interest in, or right, remedy, power or privilege with respect to such assets (31 C.F.R. § 500.203, 515.203). Assets subject to this prohibition are designated as a "blocked account", which means an account in which a foreign national has an interest, with respect to which account payments, transfers or withdrawals may not be made except in accordance with an authorization or license for such action (31 C.F.R. § 500.319,515.319).

Blocked property may be transferred to a state agency in accordance with the laws of the state governing abandoned property provided that the state agency receives a license from the United States Department of the Treasury ( 31 C.F.R. § 500.561[b], 515.554[b]). To be eligible for a license, the state agency must demonstrate that it has the statutory authority under state law to comply with the requirements of sections 500.205 and 515.205 of the regulations and must include an opinion of the state attorney general that such statutory authority exists (31, CFR, §§ 500.561[c], 515.554[c]). Under 31 C.F.R. § 500.205(f) and515.205(f), a state agency charged with custody of abandoned property may hold blocked assets provided:

"interest is credited to the blocked account in which the property is held by the agency, or the property is held by the agency in a blocked account in a domestic bank. The interest credited to such accounts by an agency which does not elect to hold such property in a domestic bank shall not be less than the maximum rate payable on the shortest time deposit available in any domestic bank in the state."

This Office has reviewed State statutory authority and we conclude that the necessary statutory authority exists for compliance with31 C.F.R. § 500.205(f) and 515.205(f). Under chapter 260 of the Laws of 1984, which was approved on June 25, 1984, any property received by the State Comptroller which is subject to the interest crediting provisions of Parts 500 and 515 of the Foreign Assets Control Regulations is required to be credited with interest at a rate not less than the maximum rate payable on the shortest time deposit available in any domestic bank in this State. Interest must be credited for so long as such property continued to be subject to the Foreign Assets Control Regulations.

We conclude that New York State law provides the necessary authority for compliance with 31 C.F.R. § 500.205(f) and 515.205(f) regarding the crediting of interest to blocked foreign accounts held custodially by a state.

Dated: December 28, 1984 Hon. Edward V. Regan State Comptroller Office of the State Comptroller