A Major Victory in Massive OFAC Sanctions Penalty Case

I’m proud of my firm and my team’s big win that came out yesterday in a major, widely-watched sanctions case at the U.S. Court of Appeals for the District of Columbia Circuit. Read our last alert to see why win is important not just for our client but for the trade community.

The U.S. Court of Appeals for the District of Columbia Circuit ruled today in favor of our client Epsilon Electronics, Inc., in a case against the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the primary U.S. government body administrating trade restrictions against sanctioned countries like Iran and Cuba. This case is already the subject of exceptional interest and significance for the trade compliance community. The ruling is particularly timely in the aftermath of the agreement over Iran’s nuclear program resulting in the 2015 Joint Comprehensive Plan of Action (JCPOA), which led to partial but not complete sanctions relief for Iran.

shutterstock_88243024Today’s victory was a direct result of the zealous efforts of Akrivis Partner Teresa N. Taylor, who spearheaded the litigation strategy for Epsilon on this case and very successfully argued in favor of Epsilon in litigation and at oral argument on November 9, 2016. Ms. Taylor worked very closely with Farhad R. Alavi, Akrivis Managing Partner, on the technical interpretation of the complex web of U.S. sanctions and the commercial aspects surrounding the international transactions at issue.

It should be emphasized that the U.S. Court of Appeals for the DC Circuit is arguably the nation’s second most influential court and commonly referred to as the “mini Supreme Court,” both because it sends more cases to the U.S. Supreme Court than any other federal appellate circuit, and as many recent Supreme Court appointments have come from this court’s bench.

Factual Context

Epsilon Electronics is a small business in southern California in the automotive after-market business. In July 2014, OFAC imposed a massive $4,073,000 penalty on Epsilon, alleging that a series of shipments by the company to Asra International Corporation, LLC in Dubai, United Arab Emirates (UAE) were in fact destined for end-use in Iran, which would signify a breach of U.S. sanctions. $1.25 million of this penalty stemmed from five shipments in 2012 to Asra International, wherein OFAC imposed the maximum $250,000 statutory penalty at the time per shipment, although some of these shipments being only several hundred dollars in value and even though Asra International had a retail store in Dubai that was selling Epsilon’s products. This penalty was imposed despite Epsilon’s cooperation with OFAC during its investigation and it being a modestly sized family enterprise of limited sophistication.
This case turned on the issue of the Administrative Procedure Act (APA), U.S. sanctions on Iran, and U.S. Constitutional Claims. It is exceptionally challenging to bring APA cases before federal courts after a final agency action. Courts have relied on prior cases, which establish that federal agencies such as OFAC, the Bureau of Industry and Security (BIS), or the Environmental Protection Agency (EPA) are subject matter experts in their respective domains and that judges should give such agencies a high degree of deference and not second-guess their rulings on subject-specific matters. This premise holds that courts should only review federal agency actions when they are “arbitrary and capricious.” Akrivis argued this on Epsilon’s behalf, among many other claims.

The U.S. Court of Appeals for the District of Columbia Circuit today remanded the case to the district court, with instructions to remand the matter to OFAC for further consideration of the five alleged 2012 violations, and calculation of the total monetary penalty imposed for all liability findings. The Court’s order also remanded OFAC’s determination that Epsilon’s five shipments to Asra International in 2012 violated the regulations. OFAC’s determination that Epsilon had reason to know that the 2012 shipments were specifically intended for reexport to Iran was not supported by substantial evidence and was therefore arbitrary and capricious, as OFAC did not explain in the Administrative Record why e-mails between Epsilon and Asra regarding Asra’s stores in Dubai were not credible evidence.

What this means for Compliance

Beyond the many benefits accruing to Epsilon, today’s opinion is a standard bearer for the trade compliance community as it establishes several key precedents. First, as OFAC is rarely challenged and because OFAC’s holdings are not fully available for public access it offers a crucial, rare window into the inner workings of U.S. sanctions policy. Second, the case also demonstrates that agency enforcement actions can be subject to greater judicial review, which could lead to enhanced transparency in the dialogue between alleged violators and the government in the penalty phase at the administrative level. Third, it establishes that the government does not need to prove that goods or services actually reached the sanctioned destination, but it must clearly establish reason to know that such exports were intended specifically for the that destination.

The Epsilon case is particularly important for U.S. businesses exporting to the Middle East, particularly the UAE because it reveals OFAC’s interpretations of key regulations, which will help companies chart out key compliance strategies. Further, the case’s importance extends far beyond the Middle East to companies doing business overseas, particularly regions with higher sanctions risks exposure, be they in the Persian Gulf region, Russia, Cuba, or elsewhere. This explains why this case has been the subject of numerous articles and presentations around the world.

The positive outcome in this case is a direct result of the hard work and diligence of Ms. Taylor, an experienced litigator and former federal law clerk. Prior to joining Akrivis, Ms. Taylor served in the office of the Chief Counsel at the U.S. Department of the Treasury and practiced at a leading global law firm. Ms. Taylor’s experience includes extensive work on federal litigation and investigatory matters involving U.S. trade laws. Ms. Taylor’s experience has helped Akrivis build a highly sophisticated federal white collar practice.

Mr. Alavi, also previously with leading global law firms, is a frequent commentator appearing in international media on U.S. sanctions and trade laws. He regularly advises U.S. and foreign companies on related complex compliance and cross-border commercial matters. More broadly, Akrivis’s team has long been established as a go-to firm for U.S. trade compliance, particularly the area of U.S. sanctions.

Akrivis Law Group, PLLC would also like to thank its team for their hard work, as well as Abu Dhabi-based attorney John P. McGowan, Jr., who submitted an amicus brief on behalf of his company JPM Legal Advisors Worldwide Ltd., and his counsel.

Citation: Epsilon Electronics, Inc. v. U.S. Department of the Treasury, Office of Foreign Assets Control, et al., No. 1:16-5118 slip op. (D.C. Cir. May 26, 2017)

The opinion can be ready by clicking on this link on the Court’s website.  A PDF version of this alert is available here.

The text of this post has been copied verbatim from Akrivis Law Group’s website.


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Aligning Expectations: Are we moving towards an Anti-Corruption Compliance Standard?

Like other areas, developing compliance with anti-corruption regulations is a tall endeavor whose requirements can vary based on a number of factors, including jurisdiction, size, and sophistication of the company.  The emerging International Standards Organization (ISO) 37001:2016 standard for Anti-Bribery Management Systems, issued in October 2016, may be a significant move towards some clarity and standardization in this area, right? Maybe, but not so fast.


A number of jurisdictions such as Singapore have adopted the ISO 37001 standard, and Microsoft announced earlier this year it will be the first public U.S. company to adopt the standard. Does this mean we will soon be seeing “compliance in a box” solutions that could help companies large and small circumvent the need for customized compliance programs? Probably not.

First off, the ISO 37001:2016 standard only covers bribery and not other activities like fraud prevention or anti-money laundering (AML).

Second, the jury is out on whether this standard will become an worldwide industry standard like ISO 9001 (quality management) or whether the early interest we are seeing will fizzle out.  US commentators think that while the guidance is a useful tool its core principles are effectively the same as what you already see in the US Department of Justice (DOJ), US Securities & Exchange Commission (SEC), US Foreign Corrupt Practices Act (FCPA) Guidelines, and the Federal Sentencing Guidelines.  There are also some minor differences.  For example, the standard does not allow for the facilitation (or so-called “grease”) payments, which can under certain circumstances be acceptable under the FCPA (but not the UK Bribery Act).

That said, having an independent third party audit and provide a certification for a company’s anti-bribery management system may carry appreciable weight with US regulators.  It remains to be seen what the DOJ and SEC say on this particular point. That being said, the DOJ did in February release guidance on the Evaluation of Corporate Compliance Programs.

But how can you define a standard when governments tend to look at many, not to mention different, factors?

Interestingly, for countries like Singapore and Peru (and others that follow them) it may be that government contractors or those seeking public tenders may eventually need to certify that they are ISO 37001 compliant to even bid for projects in certain countries.  In drafting contracts for international counterparties it may be less controversial to incorporate compliance provisions referencing a neutral ISO standard that say, referring to the FCPA.

While following a standard could be a great place to start, the reality is that anti-corruption laws are national in nature and not international, even though effort has been made to harmonize some of these laws.  A solid compliance program will adopt policies that are tailored to the requirements of the local jurisdiction but with an eye to establishing an over-arching “best practice” standard that would not cause reputational damage for the company in other countries.  Importantly, compliance programs also have an entirely proprietary dimension – they must cover key exposure points, which can vary not only from country to country but business to business and business line to business line.

For now, it is clear that no one size fits all, and attention to domestic nuances remains critical for compliance with anti-corruption requirements.

Note: Eric Ubias (Senior Counsel, Akrivis Law Group, PLLC) contributed to this post.

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Personal Remittances – More regulated than you may think

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.

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OFAC Licensing for…Conferences?

One morning in February I woke up to see an email from someone at the University of Copenhagen’s Faculty of Law inviting me to speak at a conference there titled “The Impact of the Nuclear Agreement with Iran,” to be held at the university in April.  The conference was sponsored by the university, the Carlsberg Foundation and another Danish organization.  The university would be kind enough to provide my airfare and accommodations.  Other speakers included a Danish sanctions lawyer (who would be my co-panelist), academics from Europe and beyond, the Danish Ambassador to Tehran, and the Iranian Ambassador to Denmark.  As I travel quite a bit, time in Washington is a precious commodity.  But this was hard to pass up.  Within days I decided I wanted to attend.  While I planned weeks in advance, I wound up getting my ticket less than a week before I left as my attendance was unclear until almost the last minute.  Why? U.S. sanctions on Iran.

Denmark - 2017

What do Iran sanctions have to do with speaking at a conference in Europe?  This is a particularly relevant question as there now, post nuclear-deal, many Iran-related symposia internationally.  What’s wrong with talking about Iran? Don’t U.S. persons talk to the media about Iran all the time?

One concern was that the conference was about Iran after the JCPOA but with a bit of what some may construe as a commercial angle.  Some Danish companies would be in attendance as they were interested to know about Iran’s business and political climate.  While US attorneys can advise foreign companies on sanctions with Iran, we cannot help them do business, meaning, we can’t advise them on how to circumvent sanctions.  This is at the crux of “facilitation.”  Even though I would just be talking about US law, my attendance and participation at this conference could be seen as helping facilitate the conference, which was not entirely but in part geared towards some aspects of Danish business related in Iran.

While that is a solid legal argument if I may so myself, OFAC’s issue was evidently something else, which I had also spotted. Iran’s Ambassador to Denmark was to also speak at the conference and potentially he and other Iranian Foreign Ministry personnel would be attending.  Talking in front of such people in the conference could be seen as a prohibited exportation of services to the Iranian Government (we can under certain limited circumstances obtain certain OFAC licenses to advise such entities on US sanctions laws). Even though my panel discussion would still be short and about the U.S. perspective on Iran post-sanctions, it could still be construed as a provision of a “service.”  Notably, § 560.554(b) of the Iranian Transactions and Sanctions Regulations (the “ITSR”) provides:

[T]he exportation, reexportation, sale, or supply of services directly related to the sponsorship by a U.S. person of a public conference or other similar public event in a third country that is attended by persons who are ordinarily resident in Iran, other than the Government of Iran, . . . is authorized, provided that attendance and participation at the conference or other similar public event is open for the public and that the conference or

Well, looks like the Government of Iran would be in attendance.  I therefore filed for a specific license. OFAC was exceptionally gracious and gave me one with ease, thankfully being very mindful of the imminent conference date. I went, spoke, and really enjoyed Denmark, its cultural offerings, and wonderful people. More on that in a later post.

But why is my experience important? For one, it again shows how far-reaching the sanctions regulations are, particularly for Iran deal supporters and critics who very wrongfully think all business between the US and Iran is now lawful.  Second, this is incredibly timely – think of all the conferences that have crept up around Europe, the United States, and the Middle East (including Iran) focused on Iran business– effectively “meet and greets” between people from within Iran and others outside, be they businessmen interested in doing a deal, or just simply to network. Now obviously, networking in and of itself is not necessarily a problem, neither is basic personal communication, but to attend and present at an Iran-focused forum where Iranian government officials would be in attendance is problematic.  This is not to mention facilitation, which could also be a major issue.

All this said, although OFAC does clearly not want U.S. persons to engage in unlawful commerce with Iran, it generally does maintain a favorable policy on people-to-people exchanges between the two countries.  This is likely why my license was issued.   My hope is that my experience helps illustrate to readers the far reach of U.S. sanctions laws on Iran, and the need to continue emphasizing compliance.

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Trump Sanctions Iran

This heading is perhaps a bit more exciting than it should be, but maybe that’s necessary given the tone of the White House this week towards Iran, following that country’s recent missile tests.  Two days after US National Security Advisor Lt. Gen. (Ret) Michael Flynn announced that the administration was “officially putting Iran on notice,” the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) made a handful of designations of Iranian and other entities to its Specially Designated Nationals (SDN) list.

Today’s addition is relatively lengthy, with entities ranging from individuals in Iran to companies in the Persian Gulf and China.  They were designated under Executive Orders dating to the Bush Administration.  While this may sound exceptionally aggressive, it is relatively insignificant by many measures if viewed from a legal standpoint.  The Obama administration frequently made these types of designations.

The true impact of these designations is that they can potentially place a non-legal damper on Iran’s trade with the world.  While the SDN list is an “American” list – there are secondary sanctions, meaning that third country entities dealing with these entities could face some types of repercussions in their affairs in the United States.  Beyond that, all the designated entities are sure to be similarly blocked by other financial institutions and businesses around the world (for example, banks in Asia may also freeze their accounts or not do business with them).  This can naturally impact Iran’s access to missile technologies and related services.

More generally, the more negative press Iran receives and the more Iranian or Iran-related entities are designated on the SDN list.  It will raise the cost of due diligence, increase the number of potential flags. In the greater scheme of things, today’s designations may not be exceptionally significant and certainly more innocuous than any type of military response. It remains to be seen if any fundamental regulatory changes or new Executive Orders could be issued, both of which could have significantly more severe impact.

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Trump Ushers in Sweeping Immigration Changes – Updated

I normally don’t post anything on this blog outside of sanctions news and analyses.  However, due to the heightened concern and alarm surrounding President Donald Trump’s statements and Executive Order on Friday, I decided to provide a simple analysis that could useful to the many individuals and families that could be impacted.  Given that we are in the first hours of this Executive Order going into effect and the vagueness of its language, there is a possibility I may have to clarify certain points in this blog post later.

President Trump yesterday issued an Executive Order mandating sweeping changes to U.S. immigration policy.  This order, “Protecting the Nation from Foreign Terrorist Entry Into the United States” seeks to, among other things, protect U.S. citizens from “foreign nationals who intend to commit terrorist attacks in the United States… and to prevent the admission of foreign nationals who intend to exploit United States immigration laws for malevolent purposes.” While the U.S. media has largely focused on the impact of the Executive Order on the nationals of certain Muslim-majority countries, the changes called for in the Order, as seen below, are dramatic and impact individuals far beyond the boundaries of the Islamic world.

What is included in the new Executive Order?

  1. “Extreme Vetting.” Trump is acting on a campaign process of implementing “extreme vetting” of visitors and immigrants seeking to enter the United States, calling for the U.S. Departments of State and Homeland Security, and Director of National Intelligence to determine the scope of information required to admit individuals into this country, and to grant admissions and other benefits under the Immigration and Nationality Act (INA).  These are aimed in part at ensuring that the would-be immigrant or visitor is not a threat to U.S. national security.Beyond the immediate short term, the Executive Order calls for more robust screening for all visa applicants others seeking immigration benefits.  The Executive Order calls for combating the entry of both those seeking to enter the United States with the intent to cause harm and those who are at risk of causing harm.  The administration seeks to achieve this by creating and imposing a strict review standard for such applicants, including vetting parameters to screen them, including evaluating whether these persons are likely to be a “positively contributing member of society.”
  1. The so-called “Muslim Ban.” An immediately effective 90-day ban on issuing visas to aliens from seven countries (with narrow exceptions), specifically Iran, Sudan, Iraq, Libya, Somalia, Syria, and Yemen entering the United States.
  1. Review of Documentary Review Standards for Admission.  The Executive Order requires the Secretary of Homeland Security to review the documentary standards for aliens and determine what documents can be provided from the alien’s country of nationality for his or her case to be adjudicated for entry into the United States.  The Secretary must then provide a report within 30 days of those countries not providing what it deems to be adequate information, which will result in the Secretary of State requesting foreign governments to provide what the Department of Homeland Security (DHS) considers adequate information. If the foreign government does not comply within 60 days of that request, that country’s nationals will also be barred entry to the United States, with limited exception.  Beyond this standard, the Secretary of State and the Secretary of Homeland Security can make additional recommendations for more countries they deem to be deserving of similar treatment.
  1. Restrictions on Refugee Entry. There will be broad changes to the intake of refugees into the United States. Specifically:
  • 120-day suspension of the U.S. Refugee Admissions Program (USRAP). This is to allow reevaluation of the current USRAP system of granting entry to refugees, supposedly to prevent security threats from entering the United States. Refugees who are already in the process, however, can be admitted once the revised procedures are implemented.
  • Revision of Prioritization once USRAP resumes. Once the policy’s suspension ends, the government intends to prioritize refugee claims for religious-based persecution by individuals who are members of a minority religion in their own country.
  • A cap of 50,000 refugee admissions in the United States for Fiscal Year 2017.
  • Indefinite Bar on Admission of Syrian Refugees. This prohibition will be in effect until the Mr. Trump has determined that USRAP reforms are sufficient to ensure that the admission of Syrians as refugees is aligned with U.S. national interests.
  1. Suspension of the Visa Interview Waiver Program. This means visas will be required for renewals, irrespective of the visa holder’s country of nationality. It also calls for the expansion of staffing at foreign embassies and consulates to “ensure that non-immigrant visa-interview wait times are not unduly affected.”
  1. Review and Reevaluation of Visa Reciprocity Policies. The Secretary of State is to review non-immigrant reciprocity arrangements to ensure that they are parallel with U.S. policies and to align policies vis-à-vis nationals of the respective other country accordingly.

Some Likely Questions:

  • Does the ban cover U.S. Permanent Residents (Green Card Holders)?  

Most probably. The media has already reported at least some Permanent Residents arriving at U.S. ports of entry immediately after the signing of the Executive Order being held and perhaps sent back to their points of origin.  As of Saturday morning, the Acting Spokesman of the Department of Homeland Security (DHS) has confirmed that the ban includes U.S. Permanent Residents from the seven designated countries.

  • Does the ban apply to nationals of all Muslim-majority countries?

No. Based on the language in the Executive Order, only seven countries (Iran, Sudan, Iraq, Libya, Somalia, Syria, and Yemen) fall under the visa ban, although more countries, Muslim-majority or not, can later be added to the list of countries whose nationals will be denied visas and entry.

  • Are there exceptions to the “Muslim Ban” and other “blacklisted” states?

Yes.  Certain types of visa holders, including diplomats and certain international civil servants are excluded from these bans. Additionally, the Secretaries of State and Homeland Security have discretion to issue visas and other immigration benefits to such nationals on a case-by-case basis if they deem it to be in the national interest. This, however, is vague and not defined.

  • Are there Exceptions to Refugee restrictions?

Yes. There is some discretion for exceptions on a case-by-case basis, under certain narrow circumstances

  • Is this Executive Order Being Legally Challenged?

Yes. The New York Times has reported that there is already a lawsuit filed on behalf of two Iraqi nationals held at John F. Kennedy Airport in New York, and there has been a motion for class certification for all refugees and others detained at U.S. ports. A copy of the complaint with the backing of the American Civil Liberties Union (ACLU).


Friday’s Executive Order is very broad in scope and can cause potentially dramatic changes to U.S. immigration policy. Notably, however, it is also vague and this vagueness can wreak much confusion which can permeate to airport and airline personnel in foreign countries as well as U.S. Customs and Border Protection (CBP) officials at U.S. ports of entry.  It is natural to expect that some clarification will be forthcoming, and there could be constitutional challenges in the courts that could potentially enjoin at least parts of this Executive Order. Until there is such clarity, I advise all persons to err on the side of caution and not guess or self-interpret.  Please consult with an immigration expert before making any travel or visitation plans.


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Sudan Sanctions [Almost] Repealed

OFAC announced on Friday that the prohibitions in the Sudanese Sanctions Regulations, 31 CFR Part 538 (the “SSR”) will be effectively narrowed (not repealed!) via a Final Rule issued Tuesday, January 17 in the Federal Register.  This is in response to certain behavior by the Sudanese government viewed favorable and cooperative by the outgoing Obama administration.

By adding a new section, § 560.538, OFAC effectively unblocked Government of Sudan property and issued a general license allowing most transactions with Sudan previously prohibited by the SSR and Executive Orders 13067 (November 5, 1997) and 13412 (October 6, 2006).   These include previous bars on the importation and exportation of goods and services to and from Sudan.

What is interesting is that the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) which governs agricultural, medical device/supply and medicinal exports to Sudan is still in place.

Furthermore, note that this is a general license, not a repeal, and as such all other OFAC regulations generally apply, including bars on dealing with blocked individuals, as well as document retention requirements, etc. Furthermore, the US Export Administration Regulations (the “EAR”) governing dual-use items is still in place as well.  This means that items having dual use that are subject to the EAR will still require licenses in many instances if the end-use of the technology is in Sudan.

These are key points as oftentimes many confuse general license topics with exceptions. These are not exceptions and therefore, one must still exercise proper care to ensure compliance with certain requirements that continue to govern dealings with that country.

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OFAC Sanctions and Personal Affairs in Iran

2017 has started and a new administration will be in the White House in less than three weeks. January 16 will mark exactly a year since implementation of the Joint Comprehensive Plan of Action (the “JCPOA”, also referred to commonly as the nuclear deal) between Iran and the “P5+1” (the United States, United Kingdom, France, Russia, China, and Germany).  I notice that many still read my blog post on our sister blog MENALawyer.com titled Do you need a license to bring money from Iran? which I wrote in May 2011! It’s time to revisit this topic given that so much has changed and the sheer amount of confusion that still exists.  This post is not a summary of all regulations impacting the personal affairs of Iranian-Americans, nor even the recent changes. It may be useful in illustrating what issues are still concerns, however.

Understand what a “U.S. person” is.

The Iranian Transactions and Sanctions Regulations, 31 Part 560 (the “ITSR“), which is one of the main bodies of U.S. sanctions laws that impact Iranian-Americans, primarily covers “United States persons.” This means any U.S. citizen or Permanent Resident (Green Card holder) wherever they are (including Iran), but also means anybody physically in the United States (such as on a tourist visa).  There are no exceptions for also having Iranian citizenship or Canadian or UK citizenship for that matter. If you are a U.S. citizen or Permanent Resident or if you are physically in the U.S., you are a U.S. person and are under the same restrictions as all other U.S. persons.

Transactions versus Amounts

While the amount of funds to be transferred from Iran to the United States is important for OFAC purposes, it is key to address each “type” of funds differently – the rules on selling certain property are in some ways different from the rules on selling shares of stock, or receiving a family gift or inheritance, depending on the facts. These nuances must be recognized.

Selling Property in Iran – Seller Beware!

This remains a pressing issue.  If you are a U.S. person under the ITSR you will need a specific license from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) for many property sales and related services.  There are certain limited cases in which real property (i.e., real estate) can be sold under general license (i.e., you will not need to apply to OFAC for a specific license) so long as the transaction conforms to OFAC’s many regulations, such as not dealing with certain parties, transferring the funds the right way. This does not cover sales of things that are not real property, like household items, shares of stock, businesses, etc.

Iranian Bank Accounts

Again, many still do not realize this, but as a U.S. person, you cannot open or maintain a bank account in any Iranian financial institution, whether that financial institution is on the OFAC Specially Designated Nationals (SDN) list or not, unless you have a specific license.   Further, you cannot cause anybody else to open a bank account for you, for example, under that person’s name.  The transfer of funds from Iran to the United States is highly regulated and must be done in a legally compliant way.

Funds Transfers out of Iran and U.S. Bank Accounts

The language of the JCPOA technically enables foreign, non-U.S. banks to work with their Iranian counterparts. In other words, there is no real legal bar on an Iranian bank being able to wire funds to say a European bank, which could in turn send those funds to an individual’s account in the United States.  This, however, has not really happened as many banks around the world are afraid of dealing with Iran.  As such, the vast majority of personal transfers out of Iran use exchange houses (so called “Sarrafis”).  This is not necessarily illegal, provided one deals with the right parties, and that the transfer otherwise complies with U.S. regulations.   Furthermore, banks in the United States increasingly want to be assured that the funds that are coming into your account are compliant, and as such, they often ask us for supporting documentation, like affidavits, etc. to prevent account closure or sending the wire back to the transmitter (e.g., in Dubai, Turkey, Kuwait, Hong Kong, etc.).


In sum, it is key to make sure you have a correct grasp of the regulations. First off, understand that U.S. unilateral sanctions on Iran continue to exist, and that these regulations continue to have a ripple effect on even third country businesses.  Your status as a U.S. person still substantially limits the scope of what you can lawfully do with Iran.  While U.S. policy generally favors the divestment from Iran by U.S. persons, one must make sure the transfer complies with all aspects of the law, and this does not stop at just OFAC regulations.  The regulations remain complex and they are not a place for guesswork.  This is especially key given the very vigilant enforcement of sanctions violations, which shows no sign of subsiding even with the new administration.

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New Revisions to OFAC’s Iran Sanctions Impact Humanitarian Exports and Flow of Goods

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) yesterday announced a series of key revisions to the Iranian Transactions and Sanctions Regulations (the “ITSR”), one of the key bodies of regulations implementing the still far-reaching U.S. sanctions infrastructure in place against Iran.  Most specifically, OFAC has made key changes to existing regulations allowing the exportation to Iran of many humanitarian items that make such exporters in some ways more commercially feasible to U.S. persons. It also has substantially revised the definition of what constitutes goods of Iranian origin.

shutterstock_101051161These recent changes are consistent with a general trend towards clarifying the complex U.S. sanctions framework and loosening restrictions on transactions that have traditionally been licensable.

Iran Sanctions Generally

Iran remains subject to a very comprehensive unilateral U.S. embargo.  The January 2016 implementation of the Joint Comprehensive Plan of Action (JCPOA) between Iran and the so-called “P5+1” states (the United States, United Kingdom, France, Russia, China, and Germany) over Iran’s nuclear program removed many so-called “secondary sanctions” limiting third country commercial activity with Iran across a wide spectrum, but left the unilateral U.S. embargo intact. The ITSR is perhaps the cornerstone of these sanctions, impacting “United States persons” and barring their ability to export or import most goods, services, and technologies to and from Iran.

TSRA Revisions Impacting Medical and Agricultural Exports to Iran

Yesterday’s changes continue the Obama Administration’s ongoing trajectory of easing restrictions on the flow of humanitarian goods to Iran, for which there has been a licensing scheme for nearly two decades.  The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) covers three key areas with respect to Iran – specifically medicine, medical supplies, and agricultural commodities.

In the medical field, OFAC has announced that it will be replacing its list of authorized medical supplies, which was a list of items that could be exported to Iran by U.S. persons under general license – meaning, so long ascertain parameters were adhered to, specific licensing from OFAC was unnecessary.  This effective “white list” is being replaced with a List of Medical Devices Requiring Specific Authorization, which will be published in the Federal Register today.  If a given item is named on the List of Medical Devices Requiring Specific Authorization, a specific license will still be needed to export the item to Iran.  This presumably widens the scope of items that can be exported to certain parties and end-users in Iran without having to first obtain an OFAC license.

With respect to agriculture, the scope of general license commodities is also being expanded somewhat, albeit more narrowly.

Most notably, OFAC is also allowing the exportation of software needed to operate, maintain, or repair such medical items, so long as the item is EAR99 or would be EAR99 if in the United States.

Very importantly, OFAC has added a general license authorizing training related to medicines, medical products and agricultural commodities exported to Iran. The re-importations of such exported goods to the United States for repair and safety purposes (such as product recalls). Training previously required specific licensing.

Iranian-Origin Goods

The second key area of OFAC’s revisions to the ITSR is the revision of the definition of what constitutes “goods of Iranian origin.” The new changes do not allow more “Iranian” goods to enter the United States but insead clarifies that this term does not include items that have transited through Iranian waters or were unloaded and reloaded in Iran. It also excludes goods lawfully exported to Iran under the ITSR (for example, lawful medical supplies) that are then taken out of Iran.  The limitation on goods that have entered Iranian commerce remains, and therefore the exclusions of this clarified definition do not cover foreign, non-U.S. goods that have been traded in Iran.  This revised definition can help reduce some of the confusion that may exist with respect to goods that have transited through Iran and their position vis-à-vis the United States and U.S. persons.

What can we make of these revisions?

The significance of the changes announced yesterday are twofold.  On one hand, the most apparent impact is that they somewhat broaden the scope of goods and services that can be exported to OFAC without having to first obtain specific authorization. Most of these activities were arguably licensable before, meaning OFAC would issue a license for them if one applied for such authorization.  Secondly, and arguably more importantly, these revisions render the business aspect of exporting TSRA categories of items more aligned with those of non-sanctioned countries.  In other words, this makes the export of such items much easier and practical – instead of merely allowing the export of certain goods, ancillary and necessary products and services can also be exported to Iran. This may give U.S. companies substantially more comfort In addition to having more scenarios under which certain goods and services can be exported to Iran without obtaining specific licensing. Placing the engagement of ancillary activities such as training, repairs, and recalls can help alleviate the reservations some U.S. companies in the medical and agricultural space may have with regarding to exporting to Iran as it can help dramatically reduce transactions costs.

Notably, the ITSR continues to remain a web of very complex laws, and professional guidance is always highly recommended. Even lawful, general license and exempt transactions often have many legal caveats, requiring diligent, painstaking attention to the nuances of applicable laws and regulations. Furthermore, given the continued reservation of many U.S. and global businesses to deal with Iran, explanation of the legalities of TSRA and other lawful transactions with Iran to U.S. vendors, banks, and shippers remains imperative.

Posted in Compliance, Iran, OFAC, Personal, Sanctions

Are Melli and Sepah ascending towards global compliance standards?

Very interesting reports emerged this long weekend about a very unique and curious “crisis” in Iranian politics.  Specifically, it was reported that Bank Melli and Bank Sepah, two of Iran’s largest financial institutions, had recently rejected business related to the country’s Islamic Revolutionary Guard Corps (IRGC, commonly referred to as the Sepah).  The reason presented was the issues facing the IRGC, which still remains on the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list.  The Iranian banks’ decisions show a readily-apparent desire to rejoin the international banking community – a significant challenge for financial institutions in Iran even after the Joint Comprehensive Plan of Action (JCPOA, the so-called nuclear deal) was implemented in January 2016 as part of sanctions relief afforded Iran. This has certainly not pleased certain elements in Iran’s political system. But why?

Being on the SDN list effectively means the IRGC is banned from dollar transactions and still cannot deal with foreign entities owned or controlled by U.S. persons.  The Guards, which control large swaths of Iran’s economy, face much bigger problems, however.  Given the de-risking trends we have seen in banks in recent years, the sanctions have indeed led to a cascading effect – the positions embraced by international banks on matters concerning designated entities, sanctions, and anti-money laundering, among other compliance concerns, is often far more conservative than what may be required by law.  For example, despite the vast majority of banking restrictions on Iran being lifted in the wake of the JCPOA and U.S. Secretary of State John Kerry and U.S. Treasury officials explicitly stating non-U.S. banks can engage in legitimate, lawful business with Iran, no major global financial institutions have yet taken the plunge.

How does this relate to the IRGC and what’s going on now? Many banks around the world will not work with the IRGC even if their national laws do not necessarily ban it. However, as Iran seeks to reengage the world and accede to standards called for by the Action Task Force (FATF), a multilateral group that calls for increased transparency to counter international money laundering, it will need to start playing by the rules of international banking and finance.  And that’s what it’s come to with Bank Melli and Bank Sepah.

These old, large institutions, both state-owned, now find themselves in a political “catch-22” situation – on one hand, the Iranian government has not traditionally prioritized foreign direct investment or trade, seeking instead to bolster its ideological agenda even if at the expense of growth and economic development – on the other hand, Iran’s decision to enter nuclear talks and reach an agreement signals its need for its economy to be reconnected with the rest of the world.  What we are seeing now may signal an eventual bifurcation of the Iranian economy – one group seeking to do business considered transparent and clean under international best practices and standards established by groups like the FATF or laws like the UK Bribery Act and U.S. Foreign Corrupt Practices Act (FCPA), and then a second group that will conduct business as usual.  Reconnecting with the world requires playing by the international order’s rules, an action that many centers of power in Iran may oppose due to such behavior’s ramifications.  It remains to be seen if Iranian entities will follow on Melli and Sepah’s actions and begin turning their back on business that will close their door to the world economy, and whether designated groups will themselves begin to lift the rogue status granted them by global political and financial circles.

Posted in Compliance, Iran, OFAC, Sanctions
Akrivis Law Group, PLLC
Washington, DC

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