Allaying your bank’s concerns of your lawful Iran transaction

As I often tell my clients, there are major differences in what U.S. sanctions laws on Iran allow and and what actually can happen logistically, the key being that the latter is generally somewhat more narrow and limited than the former.  Most of these problems lie in funds transfers, which can be a major bottleneck preventing legitimate, lawful transactions from taking place.  This risk, however, can generally be managed and mitigated.

Take for example the sale of medical supplies or informational technology goods from the United States to Iran.  Many of these types of exports are authorized under general license (for those who don’t know, “general license” are activities which the U.S. Department of the Treasury’s Office of Foreign Assets Control, also known as its acronym OFAC, allows without the need for procuring a special license from OFAC, the caveat being that you generally have to adhere to all other applicable regulations). However, many of these sales often do not take place because the money cannot be moved (sometimes the goods themselves cannot be moved!).  Why? Banks are taking very conservative positions these days.  This is the result of many issues, a major one being that banks are afraid of being penalized.

So what is one to do? Unlike a typical transaction with an unsanctioned country, such as France or China, transactions with sanctioned countries like Iran (in authorized areas) require extra precaution and an extra layer of [substantial] care and diligence. I always say to my clients – put yourself in the bank’s shoes. Because Iran has effectively been booted out of the SWIFT messaging/funds transfer system and because over 20 Iranian financial institutions are subject to blocking regulations (meaning funds in which such institutions have an interest must be blocked if they come into the U.S. or in the possession of a U.S. person), many banks have become understandably quite cautious.  This means the onus falls on you, the business transacting with Iran.

Some banks may simply not want anything to do with a sanctioned country, even though what you are doing is completely legitimate.  However, many banks can be informed of legalities and can wrap their hands around something where the lawfulness is crystal clear. Making things crystal clear is your (or your counsel’s) job.

Banks want to and need to know what their customers are doing.  That is why it is your job to convince them that you are engaged in a lawful transaction.  This requires what I call “buttressing” a transaction.  This really fulfills two objectives – one is meeting your record-keeping requirements under OFAC regulations, but also walking the bank through the legality of what you are doing.  The point is that when they see a lawful transfer coming from a third country company that ostensibly has nothing to do with your business, they will realize that these funds are legitimate and lawful and your receipt of them is squarely within the law.

The key is creating solid paperwork that walks the bank through the transaction and the legalities. We do this routinely for our clients. Explaining the legalities to the bank’s higher ups (not just the branch officers, who almost never the decision makers when it comes to these transactions) can take you a long way in demonstrating to your bank that the transaction is lawful and that the funds should be processed. It’s hard to expect your financial institution to do your homework, and as such it is best to equip your bank with everything it needs to make an informed decision.

An international trade compliance (sanctions, export controls, customs, anti-corruption) and defense lawyer.

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Akrivis Law Group, PLLC
Washington, DC

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This website aims to provide notes and commentary on international legal, business, and political developments in economic and other sanctions. It is intended solely for information and entertainment purposes and should in no way be construed as legal advice. Laws, regulations, and policies change from time to time so some information on older posts can very easily be dated. If you have any questions or are unclear on any of the subject matters addressed or discussed on this site, please consult a licensed legal professional. Views presented in the comments and outside links do not necessarily reflect those of the website author. All external links on this website to articles and documents are external and provided for informational purposes only. They have no relation to the author of this website unless specified otherwise.

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Copyright 2023 Farhad R. Alavi.

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