How does the Nuclear Deal Affect Personal Transactions Involving Iran?

 

Happy new year! Best wishes for a healthy and prosperous 2016.  Today’s topic will deal with the recent nuclear deal between Iran and the P5+1 states (the United States, United Kingdom, France, Russia, China and Germany) announced in July 2015, known as the “Joint Comprehensive Plan of Action” or “JCPOA” or “برجام” in Persian).  Many have been confused about the scope of changes that will take place.  This post deals with the deal’s impact on personal transactions involving U.S. persons and Iran.

Many have wrongfully thought the JCPOA signals the end of requirements administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).  This, however, could not be farther from the truth.  If there is one thing you take away from this post, let it be that the JCPOA is not the end of U.S. sanctions on Iran.

The euphoria has been fantastical. Many in the Iranian-American community have talked about mentoring tech startups, investing in Iran, or perhaps selling consumer goods such as apparel and building materials to Iran.  It may be interesting to note that all these activities will continue to be prohibited even once the JCPOA is implemented!

  1. Will all sanctions against Iran be repealed?

Absolutely not.  As you may know, most unilateral U.S. sanctions on Iran were implemented by President Clinton in 1995.  Those laws continue to exist today in the form of the Iranian Transactions and Sanctions Regulations, 31 CFR Part 560 (the “ITSR”).  These sanctions apply to “United States persons,” which the law defines to include U.S. citizens and permanent residents (wherever they are located, even in Iran), individuals physically in the United States (such as individuals on an employment, student, or tourist visa), and U.S. companies and their foreign subsidiaries.  Remember, irrespective of any other passports you may hold, if you meet the definition of a “U.S. person,” the laws fully apply to you.

The JCPOA is an agreement on Iran’s nuclear program.  The ITSR are in place because of Iran’s alleged support of terrorism and its human rights abuses.  Therefore, the bulk of the ITSR will remain intact, with only minor changes.  The JCPOA is not a final settlement of all of the United States’ grievances vis-à-vis Iran.

What changes will the JCPOA bring about then?  First off, many European Union (EU) sanctions on Iran will be repealed.  Second, many U.S. sanctions on third country activities involving Iran will be removed.  For example, non-U.S., non-Iranian companies will no longer face potential reprisal if they invest in Iran’s petrochemical industry or sell Iran high amounts of refined petroleum.  This will impact the range of activities non-U.S., non-Iranian companies will be able to lawfully do with Iran, and to some extent foreign subsidiaries of U.S. companies (notably, U.S. persons will not be able to move opportunities they themselves cannot do to foreign subsidiaries or foreign companies).

  1. Will any changes will take place directly for U.S. persons?

Yes, but they will be measured.  First, the legal changes will be limited to the reauthorized importation of Iranian-origin dried goods (such as pistachios), caviar, and Iranian carpets.  Additionally, OFAC is expected to establish a licensing regime to authorize U.S. companies seeking to do business with certain parts of Iran’s civil aviation sector.  For example, U.S. companies will be able to obtain OFAC licenses to sell civilian aircraft to Iran.  This is generally the extent for U.S. persons.

Beyond the letter of the law, you can probably expect to see already authorized transactions with Iran to become a bit easier to execute.  For example, it may become easier to send and receive lawful remittances from Iran or to sell authorized medical, food or information technology (IT) items to Iran.  These are items that are to a large extent generally allowed, subject to certain conditions.  With less Iranian banks on OFAC’s Specially Designated Nationals (SDN) list (one of many blacklists maintained by the U.S. government), and Iran’s reentry into SWIFT, the financial transactions for these already-authorized transactions may become substantially easier.  Shipping lawful items and insuring such shipments may, within the confines of applicable law, become easier too.

  1. Will individuals still need licenses for personal transactions?

Generally, yes.  OFAC has over the years relaxed many of its requirements and issued a number of “general licenses,” which are general authorizations allowing certain transactions without requiring OFAC authorization, so long as you acted within the framework of the law.  However, many transactions will continue to require specific OFAC licenses.  These include the sale of many types of real property in Iran, the sale of all other assets there (including businesses, shares of stock, etc.), the opening and closure of bank accounts in Iran, and the engagement in many charitable activities.

U.S. persons will notably continue to be prohibited from investing in Iran (irrespective of where the funds originate), most employment in Iran, opening bank accounts there, and buying property in Iran absent specific OFAC authorization.

Notably, “facilitation” remains prohibited.  This is particularly important as many have been indicated interest at potentially mentoring Iranian tech startups or brokering deals with Iran.  With very limited exception, brokering, facilitating, enabling, and matchmaking remain strictly off limits for U.S. persons.

  1. Will OFAC take a softer approach towards sanctions violations?

Probably not.  Many view the JCPOA as a first step towards U.S.-Iran rapprochement.  It remains to be seen whether that is the case. However, what is clear is that the Obama Administration by many measures faced a very uphill battle to get this deal through Congress.  Many opposed to the JCPOA thought the deal was too accommodating of the Iranian government.  Given the negative opinion many have towards the deal, many believe that the Administration will be more resolved to show that it is not appeasing Iran and that it is still resolute on enforcing the sanctions that remain in place.  As such, it is fairly commonly believed that the OFAC and the U.S. Department of Justice (which enforces the sanctions from a criminal law perspective) will actually ratchet up their enforcement of the laws.

Summary

The JCPOA is a formidable step towards Iran’s economic reintegration with the rest of the world, but the sanctions are far from gone, particularly for U.S. persons.  Notably, the laws have not yet fully changed and the relief will be phased in.  Even once they do change, compliance should be at the forefront of the minds of not just businesses, but any individual seeking to engage in transactions with or involving Iran.  The euphoria surrounding the deal should not cloud one’s understanding and one should always seek the advice of those knowledgeable in this area rather than risk violating these very complicated laws and regulations.

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An international trade and regulatory lawyer.

Posted in Compliance, Iran, OFAC, Personal, Sanctions
Akrivis Law Group, PLLC
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Copyright 2017 Farhad R. Alavi.
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