We’ve been getting a lot of questions at the office as to what President Trump’s May 8, 2018 announcement to cease U.S. participation in the Joint Comprehensive Plan of Action (JCPOA, also known as the “Iran Deal”), an agreement between Iran and the “P5+1” (U.S., UK, France, Russia, China, and Germany) over Iran’s nuclear program. In the midst of this sanctions snap-back and sliding value of the Iranian Rial, many Iranian-Americans naturally have some cause for consternation and confusion.
Importantly, the general laws on remittances and asset divestiture from Iran are largely the same for U.S. persons, which the sanctions regulations define as U.S. citizens and permanent residents wherever they are (including in Iran) or other people physically in the United States. While we can no longer import Iranian-origin food products or carpets, regulations governing the sale of personal assets, the transfer of personal and family funds and the receipt of gifts remain intact. The only noticeable difference legally is that certain Iranian banks like Melli, Mellat, Sepah, and Tejarat will soon return to the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) list of Specially Designated Nationals and Blocked Persons (the “SDN” list). This means that transactions involving such entities will largely require specific OFAC licenses to be permissible to avoid blocking (aka “freezing”) by U.S. banks, for example.
Beyond the law however, we are seeing some tangible differences from the pre-JCPOA era. For one, the size of transfers appears to be shrinking, although this may be a direct result of the spike in the Dollar’s value versus the Iranian Rial/Toman. In other words, for example, a $500,000 asset divestiture may require more funds transfers now than before.
Also, banks appear to be stepping up scrutiny of Iran-related transfers (such as gifts, proceeds from the sale of real estate, etc.) Remember, the law does require you to keep proper records of Iran-related transactions and these laws are not new. However, recent trends we have seen point to the increased importance of this. It is not only a legal requirement but a best practice that banks will likely look for more and more when processing funds transfers for their clients.
The best you can do is be firm on what the law is – often many people start inquiring as to what U.S. law is after they have begun the divestment or transfer process. That’s too late. Many transactions require licenses and while the laws on such licensing haven’t changed because of the JCPOA (other than issues connected to banks that will go back on the SDN list and an increased number of other entities that are being designated by OFAC), the logistics are getting a bit more difficult. These logistical issues can naturally create legal exposure points, so it’s best to be thorough and comprehensive. Exercising best practices is not only a matter of complying with the law but keeping good documents and properly informing your U.S. financial institution through the right channels (i.e., informing the right people, not just anybody at the bank).
Remember, banks often look for erratic activity in accounts, much like credit card companies do. Oftentimes remittance transfers from Iran (like the transfer of inheritance or the sale of a home) will be unlike transactions typical to your account, and the source is not going to be identifiable as funds must be processed from a third country. This can arouse suspicion for a completely lawful transfer. Therefore, as bank compliance departments increase their scrutiny, there will be more responsibility on the part of customers to ensure that the underlying transaction (1) was lawful, and either allowed by OFAC by general or specific license (and you have a specific license if needed); and that (2) all aspects of the handling and transfer of the funds are lawful. Otherwise you can run a high risk of having your funds rejected, or your account. It is key to provide proper documentation to your bank’s compliance team to ensure everything is not only done legally but also transparently.