A key problem I often see among those whose who want to transfer money from Iran is the issue of designated Iranian banks. To be clear, all Iranian banks are on OFAC’s Specially Designated Nationals (SDN) list (the biggest of the black-lists maintained by the US Government), but of course certain of these banks can be used for some transactions (like non-commercial, personal remittances or certain medical/food transactions). However, OFAC has a zero-tolerance policy with other financial institutions (e.g., Banks Saderat, Melli, Mellat, and Tejarat, among others). This means that dealings with such banks are prohibited even for generally licensed transactions, unless of course the US person obtains OFAC authorization, which can be challenging.
How does this impact people in real life? Say you are selling your property in Iran. Basically from the buyer not issuing a check on a designated bank’s account to not depositing the check in such a bank to not wiring the money to an exchanger’s account at such a bank, no step should involve any designated banks. Granted, a US bank that receives the wire from a jurisdiction like Dubai or Turkey may not see any indicia of such a bank’s involvement back in Iran. That does not mean it is legal to deal with such a bank or that nobody will find out. In fact, US depository institutions are required to block such funds if they feel that a designated bank like Saderat had an interest in them, unless of course, the transfer is licensed by OFAC.
For those who are interested in the technicalities, two of the key regulations for the designation of certain Iranian banks are the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 CFR Part 544 (the “WMDPSR”) and the Global Terrorism Sanctions Regulations, 31 CFR Part 594 (the “GTSR”). More broadly, the authority is contained in Executive Orders 13382 (June 28, 2005) and 13224 (September 23, 2001). The former deals with non-proliferation and the latter addresses anti-terrorism efforts.
Notably, the current regulations do not mean that any money somebody may have left you in a Bank Melli account, for example, is off limits. One can obtain a specific OFAC license to transfer such funds to the United States, but you must obtain that license before you do anything with that bank. And no, moving funds out of such a bank does not render them “clean” in OFAC’s eyes – in fact almost all dealings (including closing accounts therein) with such entities is illegal without OFAC authorization. Even if you are not directing or directly engaging in such transactions, the US government’s position is that these funds are generally tainted unless they are otherwise licensed.
A number of activities by US persons with Iran that needed specific licenses can now be done under general license. However, it is incumbent on the US person(s) to ensure that designated entities have no role in the transactions? May claim this is challenging. Of course it is hard, however, this highlights the fact that US persons engaging in activities in Iran must recognize that US law follows them when it comes to sanctions. It also illustrates that it is imperative to maintain ownership over the entire transaction process as you are responsible to take ownership.
Notably, obtaining such licenses generally appears to take longer than many other license requests from OFAC to engage in other personal transactions. Given the sensitivity towards these banks, the review period seems to be more intense. As such, it is best to make sure the application is ideally filed substantially in advance. Again, remember that transactions that involved certain banks do not need licenses, even though all Iranian financial institutions are on the SDN list. It is critical that one understand the full spectrum of what is and is not permitted to avoid any compliance violations (and potential blocking of funds).