Personal Remittances – More regulated than you may think

Posted on May 13, 2017 by Farhad Alavi — Leave a comment

Chalk this one up as one more sign of how granular U.S. sanctions on Iran still are and why you should still be careful.

We recently helped a client obtain an OFAC license to close out a bank account in Iran and transfer the funds to the United States. Most of the money was sent from a third country exchanger (sarafi), but a very small amount (under $10,000) was remaining. This week, an email came asking if the client could have her brother hand carry the cash to the United States, rather than having to send it over via a third country exchange. This is something that probably happens daily, if not hourly.

Personal, non-commercial remittances (or so-called “family remittances”) are among some of the lesser regulated funds transfers between the US and Iran. Individuals can send funds for their family (like gifts) in unlimited amounts, between both countries, provided the transfer meets all applicable provisions of US law, for example, no sanctioned banks, or ensuring the funds come into the US through a third country (like the UAE or China). US persons can even hand carry cash remittances for family in Iran, such as someone from the US taking $1,000 for their mother there.

But it effectively stops there. You can hand carry cash to Iran, so long as you’re not carrying it on behalf of somebody else. Meaning, your sister can’t give you $1,000 to take with you to Iran to give to your mother. The converse (hand carrying for someone else from Iran to the US) is also true – it’s not allowed. This was confirmed to us via email by the OFAC Licensing Officer responsible for the above-mentioned license. Such transfer needs to be specified in the license request filed with OFAC and therefore such authorization will be provided in any subsequent license based on that request. And that’s just one example of many.

You could say that current sanctions mean that dealing with Iran, even on a personal level, is kind of like walking along 6 inches away from an electrical fence. You’re OK so long as you don’t touch the fence, but if you do, a whole set of problems can arise. Oftentimes, transactions that are otherwise legal are effectively tainted by our own clients (before they retain us!), meaning a transfer, if done right from the beginning, may not need an OFAC license, but the client (or a relative or agent in Iran) may wind up doing something along the way that makes the client need to obtain a license. Therefore, seeking compliance is not something you do in the final phase but from the get-go..

This example highlights that individuals seeking to engage in a financial transaction should consider all aspects of the transaction and should plan beforehand. The premise of legalities and authorizations in OFAC is based not just on the underlying transaction (meaning what you did to get that money, like sell a property or receive a gift) but also how that transaction was carried out (who the parties involved are, what banks are involved, how the money gets to you in the US, etc.). Lesson learned – don’t assume and take things for granted. At the end of the day, you’re still talking about Iran, which remains (contrary to the belief of some) subject to the most robust sanctions regime in US history.

Cleaning up is far more difficult and costly than preventing.