June 8, 2016
On June 8, the U.S. Treasury released additional guidance on what transactions U.S. and foreign entities can have with Iranian entities following the lifting of sanctions as part of the nuclear deal. “U.S. financial institutions can transact with, including by opening or maintaining correspondent accounts for, non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships or otherwise transact with Iranian financial institutions that are not on the SDN (Specially Designated Nationals) List,” according to the Action Office of Foreign Assets Control (OFAC).
The updated frequently asked questions document appears to be part of a U.S. effort to reassure foreign banks that they are free to do business with Iranian entities that are not sanctioned. In May, Secretary of State John Kerry met with nine executives from leading European banks. “I think it’s important to have clarity, and the clarity is that European banks, as long as it’s not a designated entity, are absolutely free to open accounts for Iran, trade, exchange money, facilitate a legitimate business agreement, bankroll it, lend money,” he told reporters.
The following are excerpts from “Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan” published by OFAC.
Broadly, what U.S. sanctions against Iran remain in place after Implementation Day? What activities involving Iran trigger sanctions after Implementation Day?
A number of U.S. sanctions authorities with respect to Iran remain in place after Implementation Day, including those set out below.
i. Primary U.S. Sanctions. The U.S. domestic trade embargo on Iran remains in place. Even after Implementation Day, with limited exceptions, U.S. persons including U.S. companies – continue to be broadly prohibited from engaging in transactions or dealings with Iran or its government. In addition, the Government of Iran and Iranian financial institutions remain persons whose property and interests in property are blocked under Executive Order 13599 and section 560.211 of the ITSR, and U.S. persons continue to be broadly prohibited from engaging in transactions or dealings with the Government of Iran and Iranian financial institutions, with the exception of transactions that are exempt from regulation or authorized by OFAC. Unless an exemption or express OFAC authorization applies, U.S. persons continue to have an obligation to block the property and interests in property of all individuals and entities that meet the definition of the Government of Iran or an Iranian financial institution, regardless of whether or not the individual or entity has been identified by OFAC on the E.O. 13599 List (see FAQ I.2). In addition, non-U.S. persons continue to be prohibited from knowingly5 engaging in conduct that seeks to evade U.S. restrictions on transactions or dealings with Iran or that causes the export of goods or services from the United States to Iran.
ii. Designation authorities. In addition, after Implementation Day, the United States retains a number of authorities to counter Iran’s other activities, including the following authorities which are also listed in section VII.B of the Guidance Document:
· Support for terrorism: Executive Order 13224 (blocking property and prohibiting transactions with persons who commit, threaten to commit, or support terrorism);
· Iran’s human rights abuses:
o Executive Orders 13553 and 13628 (implementing sections 105,105A, and 105B of CISADA (related to persons who are responsible for or complicit in human rights abuses committed against the citizens of Iran; transfers of goods or technologies to Iran that are likely to be used to commit serious human rights abuses against the people of Iran; and persons who engage in censorship or similar activities with respect to Iran)); and
o Executive Order 13606 (relating to the provision of information technology used to further serious human rights abuses);
· Proliferation of WMD and their means of delivery, including ballistic missiles: Executive Orders 12938 and 13382;
· Support for persons involved in human rights abuses in Syria or for the Government of Syria: Executive Orders 13572 and 13582; and
· Support for persons threatening the peace, security, or stability of Yemen: Executive Order 13611.
These authorities generally provide the ability to impose blocking sanctions on individuals and entities that meet specified criteria, including for providing material support to persons engaged in the activities targeted by the authority.
iii. Secondary Sanctions targeting dealings by non-U.S. persons with Iran-related persons remaining on the SDN List after Implementation Day or involving trade in certain materials involving Iran. After Implementation Day, secondary sanctions continue to attach to significant6 transactions with: (1) Iranian persons that are on the SDN List; (2) the Islamic Revolutionary Guard Corps (IRGC) and its designated agents or affiliates; and (3) any other person on the SDN List designated under Executive Order 13224 or Executive Order 13382 in connection with Iran’s proliferation of weapons of mass destruction (WMD) or their means of delivery or Iran’s support for international terrorism (see FAQ A.6). In addition, sanctions targeting certain activities related to trade in materials described in section 1245(d) of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) that are outside the scope of the JCPOA and related waivers remain in place.
See section VII of the Guidance Document for additional information regarding U.S. legal authorities directed toward, or that have been used to address, U.S. concerns with respect to Iran, which are outside the scope of the JCPOA and remain in place following Implementation Day. [01-16-2016]
C. 2. What sanctions on the CBI were lifted? What sanctions on the CBI remain?
As a general matter, non-U.S. persons, including foreign financial institutions, can engage in financial and banking transactions with the CBI beginning on Implementation Day without exposure to sanctions. U.S. persons, however, continue to be broadly prohibited from engaging in transactions or dealings with the Government of Iran and Iranian financial institutions, including the CBI, with the exception of transactions that are exempt from regulation or authorized by OFAC. In addition, unless an exemption or express OFAC authorization applies, U.S. persons must, pursuant to Executive Order 13599 and the ITSR, continue to block the property and interests in property of these persons. [01-16-2016]
C. 7. After Implementation Day, are foreign financial institutions allowed to clear U.S. dollar transactions involving Iranian persons?
After Implementation Day, foreign financial institutions need to continue to ensure they do not clear U.S. dollar-denominated transactions involving Iran through U.S. financial institutions, given that U.S. persons continue to be prohibited from exporting goods, services, or technology directly or indirectly to Iran, including financial services, with the exception of transactions that are exempt or authorized by a general or specific license issued pursuant to the ITSR. U.S. persons continue to be prohibited from engaging in any transactions involving Iran, including in currencies other than the U.S. dollar, with the exception of transactions that are exempt or authorized by OFAC. [01-16-2016]
C. 15. Can U.S. financial institutions transact with, including by opening or maintaining correspondent accounts for, non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships with Iranian financial institutions that are not on the SDN List?
Yes. U.S. financial institutions can transact with, including by opening or maintaining correspondent accounts for, non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships or otherwise transact with Iranian financial institutions that are not on the SDN List. It remains prohibited, however, for non-U.S. financial institutions to route Iran-related transactions through U.S. financial institutions or involve U.S. persons in such transactions, unless the transactions are exempt from regulation or authorized by OFAC. Non-U.S., non-Iranian financial institutions should have appropriate systems and controls to ensure that they do not route Iran-related transactions through U.S. financial institutions, unless the transactions are exempt from regulation or authorized by OFAC. [06-08-2016]
C. 16. Can a non-U.S., non-Iranian entity (including a non-U.S., non-Iranian financial institution) engage in transactions with Iranian persons not on the SDN List even though one or more U.S. persons serve on that entity’s Board of Directors or as senior managers (e.g., Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Compliance Officer)? Must these U.S. persons be recused or “walled off” from the entity’s Iran-related business?
The presence of one or more U.S. persons on the Board of Directors or serving as a senior manager of a non-U.S., non-Iranian entity does not necessarily preclude that entity from transacting with Iranian persons that are not on the SDN List. Unless authorized by OFAC, however, U.S. persons must be walled off or “ring-fenced” from Iran-related business because, with limited exceptions, U.S. persons continue to be broadly prohibited from engaging in or facilitating transactions or dealings with Iran or its government. The prohibitions on the exportation or reexportation of services to Iran and facilitation have been in place for decades, and are consistent with prohibitions applied across a range of U.S. sanctions programs administered by OFAC. Non-U.S., non-Iranian entities establishing policies regarding how to wall off the U.S. persons from the institution’s Iran-related business should consider instituting a blanket recusal policy (as opposed to case-by-case abstentions, which, depending on the facts and circumstances, could be considered a prohibited facilitation and/or export of services under the ITSR) for U.S. person directors, senior managers, and other employees with respect to Iran-related matters. The institution of a blanket recusal policy requiring that all U.S. person employees of a non-U.S., non-Iranian entity not be involved in Iran related activities would not be considered prohibited activity under the ITSR. In instances where national laws prohibit the recusal of a U.S. person executive from the decision-making processes of his or her non-U.S. employer, including those involving Iran-related business, the executive or employer should consult with their counsel and/or approach OFAC for additional guidance. [06-08-2016]
Click here for the full FAQ.