Farhad Alavi Discussing the Iran Nuclear Deal on BBC Persian

I was on BBC Persian on Thursday, September 17, 2015 discussing the Iran nuclear deal and the phase in of sanction relief.  The interview was in Persian (Farsi).

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US Company Fined $82,260 for Outsourcing IT Work to Iran

OFAC released a periodic enforcement notice on July 29, 2015, this time about Massachusetts-based Blue Robin, Inc. for violating the Iranian Transactions and Sanctions Regulations (ITSR).  Blue Robin was fined $82,260 by OFAC for the violations. The allegations center around Blue Robin’s outsourcing of about $205,000 of work to an Iranian technology company named PersiaBME.  This case brings three core issues to our attention:

(1) The sanctions are not over, and OFAC has not relented on sanctions enforcement.  Many people wrongly think the July 14, 2015 announcement of a Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 (US, UK, France, Russia, China, and Germany) meant that the sanctions regime against Iran is now over.  This should be obvious, but with all the news of various foreign delegations traveling to Iran to seal business deals and all the frozen funds being returned to Iran, it is understandable that some may think the sanctions are over.  Most importantly to U.S. persons is the fact that the sanctions regime as applies to them will remain largely intact, and even those changes have not been implemented yet, nor will they be implemented for a while.

(2) You cannot outsource technology work to Iran.  I get questions about this all the time.  “Can we outsource web design to Iran?” The answer is obviously no.  It is prohibited in the ITSR as it constitutes the importation of a prohibited service, and will remain so for the time being it seems – there is no indication this will be allowed any time soon.  There are a few minor exceptions to the prohibition on the importation of services, but they are very narrow and have many limitations.

(3) Voluntary Self-Disclosures (VSDs) and Compliance Programs should be taken seriously, even by smaller companies. Note the penalty was what it was because Blue Robin voluntarily self-disclosed its violations to OFAC, and because it is a small company experiencing financial difficulty, not in spite of that.  VSDs are a great way to mitigate any potential penalties with OFAC, and if they qualify as a “voluntary self-disclosure” under the OFAC penalty guidelines, they are entitled to a 50% discount off the maximum penalties under the IEEPA (the law that enables most sanctions regulations), which can be up to $250,000 or twice the value of the transaction, whichever is greater, per transaction.  This is not something just reserved for larger companies. Smaller companies need to also pay attention, and the same thing goes for compliance programs.  This is a factor that OFAC does take into consideration when determining penalties.

Many think that having a compliance program signals knowledge of the sanctions regulations and that this could bring about heftier penalties.  The reality is that compliance programs show diligence and care for the law.  It is certainly not a green light to violate, but compliance programs do reduce the risk of violations, and can help in the event of a violation.  A solid compliance program is not one that is necessarily verbose or complicated but rather one that is comprehensive but usable.  We have done a number of these for smaller entities. There is no one-size-fits all approach. OFAC is more understanding of an unknowing violation or mistake when a company has a compliance program than when it does not.  Not having one signals willful disregard for the law, and sanctions laws are something that are becoming increasingly known in the business community.  No company that does any work with overseas or in sensitive technologies should go without one.

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Iran and P5+1 Reach Landmark Deal: What Does It Include?

Following much anticipation, Iran and the P5+1 states (the United States, United Kingdom, France, Russia, China and Germany) announced on Tuesday morning Vienna time the reaching of a landmark deal on Iran’s nuclear deal.

What does it include?

The basic parameters were agreed upon by the parties in early April. The official text suggests some interesting developments on the U.S. unilateral sanctions front. As you may recall, I had previously written that the bulk of the U.S. sanctions infrastructure as applicable to U.S. persons will remain intact. That said, there are some key changes, including the following:

1. Removal of a wide host of EU sanctions and secondary U.S. sanctions that can punish third country companies for trading with Iran.

2. Delisting of many Iranian entities, including a large number of banks.

3. Allowing the sale of US civilian aircraft to Iran and related services.

4.. Allowing the importation of certain Iranian luxury goods (like caviar, rugs, and pistachios – items whose importation was prohibited under the 2010 Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, aka CISADA).

Although most U.S. sanctions limiting business activities by U.S. persons with Iran remain in place, areas already authorized by law (such as certain food, medicine, medical device, agricultural and IT sales) will very likely be made easier due to more third country companies entering the logistics fields (eg, banking, shipping, etc.) And many Iranian entities being delisted.

Notably, the laws have not yet fully changed and the relief will be phased in. As such, compliance should be at the forefront of all businesses’ minds. The sanctions are far from gone, but today’s accord is a formidable step towards Iran’s economic reintegration with the rest of the world.

This is of course just a sample of the potential sanctions relief granted Iran. I will write more on this in due course.

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[When] will the sanctions be undone?

There has been a lot of guesswork regarding the potential (often assumed to be “certain”) unraveling of the international sanctions regime against Iran once it reaches an agreement with the so-called P5+1 (United States, United Kingdom, France, China, Russia and Germany).

shutterstock_101051161

The flood of foreign businessmen traveling to Iran and the many articles out in the press lead us to believe that a deal is not only imminent and that it will be a boon.  Maybe so – arguably most serious experts in the sanctions field are having a difficult time gauging what will happen with reasonable accuracy and when it will happen. What can be clear is that the lights will not turn green on Tuesday (July 7, the parties’ self-imposed deadline), even if a deal is reached.

An Associated Press article today points to a phased deal wherein there will be no document signing this week by the parties, but wherein the parties will formally implement an agreement by the end of 2015. Therefore, even if all the sanctions are to be removed (which is almost fundamentally impossible), it will be quite some time.  The other question that nobody seems to want to answer is the issue of unilateral U.S. sanctions relief. Most of what has been lifted/suspended pertained to U.S. sanctions on third country activities in or with Iran (for example, investment by non-U.S. companies in Iran’s petrochemical industry). Almost all economic activity in or with Iran is off limits for U.S. persons (and foreign subsidiaries owned or controlled by U.S. persons).  U.S. authorities have been exceptionally cryptic about what, if anything will be lifted or suspended on that front.  So long as nothing happens in that realm, the opportunities for U.S. companies will remain limited (although less restricted areas, such as medical exports, may become logistically easier with more third country companies like banks and shippers coming in to fill challenges such as banking and shipping).

Notably, President Obama has considerable (but not often discussed) leeway on many unilateral sanctions with Iran, especially in the space of U.S. Department of the Treasury regulations, namely those administered by the Office of Foreign Assets Control (OFAC).  If the United States and Iran are having some bilateral discussions, expect to see some parts of the Iranian Transactions and Sanctions Regulations, 31 CFR Part 560 become relaxed or new general licenses (basically broad authorizations for certain activities subject to some terms and conditions) allowing U.S. companies and persons some more wiggle room.  Time will tell.

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BIS and OFAC Sanction Entities for Iranian aircraft sale

U.S. federal authorities have taken hefty measures against Iraq and UAE based entities in the latest move of sanctions enforcement, sending a clear signal that the U.S. sanctions regime against Iran remains in full force.  On May 21st 2015, The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an order denying the export privileges of Al Naser Airlines (Iraq), Bahar Safwa General Trading (Dubai), and Ali Abdullah Alhay (Iraq) for their efforts to illegally export civilian aircraft to Iran in violation of the Export Administration Regulations (EAR).  Al Naser Airlines, Syrian businessman Issam Shammout, and his UAE-based Sky Blue Bird Aviations were also added to the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) list for providing support to Iran’s Mahan Airlines.  OFAC designated Mahan Airlines in October 2011 for providing financial and technological support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).

The BIS, based on an Office of Export Enforcement (OEE) investigation, indicated that at least two Airbus aircraft were purchased by Al Naser Airlines in late 2014 and early 2015 and are now based in Iran under Mahan’s possession.  The aircraft contained controlled U.S.-origin components and technologies valued at more than 10% of the aircraft’s total value and as a result are subject to the EAR due to their dual use.  The investigation also showed that Ali Abdullah Alhay is a 25% owner of Al Naser Airlines and signed letters of intent and sales agreements for the aircraft.  Mr. Alhay made two electronic funds transfers (EFT) in the amounts of $815,000 and $600,000, respectively.  The majority of the purchase price was then paid via another EFT made by Bahar Safwa General Trading, an entity suspected of acting as a front company for Mahan, in the amount of $2.5 million in early 2015.

BIS also reported that Al Naser, Bahar Safwa General Trading, and Mr. Alhay have also attempted to obtain other controlled aircraft, including some located in the United States, in similarly patterned transactions during the same recent time period. Specifically, Mr. Alhay signed letters of intent, sales agreements and paid $450,000 commitment fee for two Airbus A320 jets. Bahar Safwa General Trading wired two EFTs in the amount of $2 million and $986,000 respectively for the same aircraft in late February 2015.  OEE Special Agents detained both Airbus A320s prior to their planned export from the United States, based on the risk of diversion to Iran and specifically Mahan Airlines.

The BIS order adds Al Naser, Mr. Alhay, and Bahar Safwa General Trading to an existing Temporary Denial Order (TDO) against Iran’s Mahan Airlines.  TDOs deny the export privileges of a company or individual to prevent an imminent or on-going export control violation.  These orders are issued for a renewable 180-day period and also deny the designated party’s right to receive exports and re-exports from the United States or conduct other transactions that are subject to the EAR.  The assets of designated persons and companies (those placed in the SDN list) are blocked and U.S. persons are generally prohibited from dealing with them.

BIS stated that adding the three named entities to the TDO was necessary to provide notice to U.S. persons and companies that they should cease dealing with these parties in export and re-export transactions involving items subject to EAR or other activities prohibited by the TDO.  This action is claimed to be consistent with the public interest to preclude future violations of the EAR and prevent Mahan Airways’ efforts to evade the TDO.  BIS controls exports and re-exports of commodities, technology and software to support national and foreign policy, including nuclear, chemical and biological weapons, and missile non-proliferation, human rights, regional stability, and curbing terrorism.

This enforcement action shows that the U.S. sanctions regime against Iran remains strong and vigilant, despite the preliminary agreement between the “P5+1” nations (the United States, United Kingdom, France, Russia, China, and Germany) and Iran reached in April.  Furthermore the move by BIS and OFAC should serve to discourage U.S. persons and companies from dealing with similar parties and engaging in transactions that are subject to the EAR without complying with the rules.  Sanctions laws have not changed yet, and April’s preliminary agreement should not distract businesses from compliance, as sanctions enforcement is still in full force.  Additionally, irrespective of the contours of any agreement reached by the P5+1, U.S. authorities have largely indicated that the sanctions regime against Iran will not vanish overnight.  Contrary to what is being portrayed by the media, the U.S. Federal government is still effectively enforcing sanctions against Iran. Businesses and individuals seeking to engage in transactions with Iran should revise and update compliance programs and be alert of the use of fronts and front companies.  Businesses should not get ahead of themselves, and must take care to notice and comply with all the limitations that continue to exist.

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تاثیر توافقات هسته ای بین ایران و گروه 5+ 1 و تعلیق احتمالی برخی از تحریم های آمریکا

This article is in Persian (Farsi) and addresses some of the confusion about the recent preliminary P5+1 nuclear agreement with Iran. An English version will be posted on Akrivislaw.com

اعلام رسمی خبر توافق ایران و اعضای گروه 5+1 (ایالات متحده آمریکا، انگلستان، فرانسه، روسیه، چین، و آلمان) در تاریخ 2 آوریل 2015 (برابر با 13 فروردین 1394) در مورد پرونده هسته ای ایران موجی از امید و هیجان را به وجود آورد.

طرفین مذاکره امیدوار هستند که این توافق اولیه مبنای صدور برنامه جامع عملکرد مشترک آنها (Joint Comprehensive Plan of Action)[1]  در تاریخ 30 ژوئن 2013 (برابر با 9 تیر 1394) قرار گیرد. در حقیقت این توافقنامه در ادامه معاهده موقت 24 نوامبر 2013 می باشد که بخش محدودی از تحریم های ایران که از ژانویه 2014 اعمال شده بود را، به حالت تعلیق در می آورد.

در پی مسرت و رضایت ناشی از خبر توافقات در هفته گذشته، موجی از ابهام در مورد وضعیت فعلی و آینده تحریم های ایالات متحده آمریکا بر ایران ایجاد شده است. در اینجا مفصلاً شرح داده خواهد شد که در حالیکه هنوز رفع برخی از تحریم ها در هاله ای از ابهام قرار داد، تا به حال هیچ قانونی تغییر نکرده است. حتی اگر توافق نهایی در تاریخ 30 ژوئن 2015 محقق شود، بیشتر تحریم ها که معاملات روز به روز فی مابین آمریکا و اشخاص آمریکایی[2] با ایران را در بر میگیرد، همچنان موثر باقی خواهد ماند.

     ساختار تحریم آمریکا از بین نرفته است

پارامترهای مذکور در توافق 2 آوریل گروه 5+1 با ایران به روشنی ابراز می دارد که ایالات متحده مجموعه تحریم های خود را علیه ایران در آینده نزدیک پایان نخواهد داد. اولاً، لازم به ذکر است که با وجود اعلام توافق هفته گذشته، هیچیک از قوانین تحریم تغییر نکرده است. همچنین شرایط توافق هنوز نهایی نشده است و تا صدور برنامه جامع عملکرد مشترک (JCPOA) اجرا نخواهد شد و حتی پس از آن بیشتر تغییرات به صورت مرحله به مرحله پیش خواهد رفت و همچنین برنامه زمان بندی این تغییرات هنوز مورد توافق قرار نگرفته است.

در حقیقت با محقق ساختن مراحل مختلف مذکور در برنامه جامع عملکرد مشترک از طرف ایران برخی از تحریم های از پیش معین شده به صورت مرحله به مرحله معلق خواهد شد، این ها در حقیقت تحریم های اعمال شده به منظور بازداشتن ایران از فعالیت های هسته ای هستند. ایالات متحده آمریکا به صراحت اعلام کرده است که قوانین و مقررات تحریم آمریکا ناشی از اتهام حمایت از تروریسم بین الملل و فعالیت های خلاف حقوق بشر دوستانه ایران در میان تحریم های قابل لغو نخواهد بود.

بر اساس پارامتر های اعلام شده در برنامه جامع عملکرد مشترک، تحریم های آمریکا که محتمل است به حالت تعلیق در آیند در حوزه نفت و گاز، صنعت خودروسازی، معاملات فلزات گران قیمت و صنعت پتروشیمی ایران و غیره خواهد بود.

لغو بسیاری از این تحریم ها نیاز به عملکرد کنگره آمریکا دارد، اگر چه رئیس جمهور در موارد محدودی اختیار دارد که این تحریم ها را تعلیق کند. دفتر کنترل دراییهای خارجی (OFAC) که زیر مجموعه وزارت دارایی آمریکا است در یک بیانیه عمومی در تاریخ 3 آوریل به طور مجزا و موکدا به این موضوع اشاره کرده است که هنوز قوانین و مقررات تغییر نکرده است و تحریم ها لغو نشده  اند. به علاوه تا به امروز هیچگونه مذاکره ای در مورد تحریم های یک جانبه که به صورت اولیه اجرا شد و هم اکنون مانع برقراری روابط بازرگانی بین ایران و آمریکا می شوند صورت نگرفته است.

چه پرامترهای تحت تاثیر قرار نگرفته اند؟

تحریم های آمریکا که معاملات روز به روز اشخاص حقیقی و حقوقی ایرانی- آمریکایی را در بر می گیرد به احتمال بسیار زیاد تا آینده نزدیک به قوت خود باقی خواهند ماند. بسیاری از اصول مذکور در قوانین تحریم و معاملات ایرانیان (ITSR) CFR 560  31 در مذاکرات هسته ای مورد اشاره قرار نگرفته است، به همین خاطر این محدودیت ها همچنان موثر خواهند بود.

از آنجمله موارد ذیل قابل توجه می باشند:

  • صادرات مجاز به ایران (مستقیم یا غیر مستقیم) همچنان به برخی از تجهیزات پزشکی، دارویی، مواد غذایی، کالاهای کشاورزی و سخت افزار و نرم افزار های فناوری اطلاعات محدود خواهد بود.
  • واردات بسیاری از کالاها از ایران همچنان ممنوع خواهد بود.
  • فروش بسیاری از اموال غیر منقول و دارایی ها در ایران به وسیله اشخاص آمریکایی همچنان به اخذ مجوز از دفتر کنترل دارایی های خارجی ((OFAC نیاز خواهد داشت.
  • سرمایه گذاری در ایران از قبیل خرید ملک و یا مشارکت در فعالیت های تجاری  همچنان به مجوز دفتر کنترل داراییهای خارجی ((OFAC نیاز خواهد داشت، حتی اگر سرمایه از ابتدا در ایران بوده باشد و از خارج از کشور به ایران منتقل نشده باشد.
  • داشتن حساب در بانک های ایران همچنان برای اشخاص آمریکایی ممنوع بوده و بستن این حساب ها نیاز به اخذ مجوز دارد.
  • بانک های آمریکایی همچنان وجوهی را که محتمل است از ایران ارسال شده باشد  با دقت بررسی خواهند کرد، حتی اگر این وجوه از کشورهای ثالث مانند هنگ کنگ، ترکیه و یا امارات متحده عربی ارسال شده باشند.

لازم به یادآوری است که ممنوعیت های ITSR اشخاص آمریکایی[3] را در بر می گیرد که در این میان اتباع آمریکایی و مقیمان دائمی (دارندگان کارت سبز) را هم صرف نظر از محل سکونت فعلی آنها شامل می شود. اشخاصی که به صورت فیزیکی در آمریکا هستند، اشخاص حقوقی که طبق قوانین ایالات متحد آمریکا تشکیل شده اند و یا هر نهادی در خارج از کشور که به آنها تعلق دارد یا توسط آنها اداره می شود، مشمول این بند خواهد بود و تابعیت آمریکایی این افراد هر گونه تابعیت خارجی دیگر آنها را تحت شعاع قرار خواهد داد.

اجرای قوانین تحریم همچنان ادامه خواهد داشت

 نظر از اینکه بیشتر ساختار مقررات تحریم فعلی ایران همچنان به قوت خود باقی خواهد بود، دفتر کنترل دارایی های خارجی (OFAC) صراحتا اعلام کرده است که به اجرا کردن قوانین تحریم ادامه خواهد داد. در یک بیانیه رسمی در تاریخ 3 آوریل 2015، OFAC اظهار داشت که:

                   تا به امروز و تا تاریخ شروع اجرای برنامه جامع عملکرد مشترک،

                   به غیر از تحریم های تعلیق شده طبق JPOA همه تحریم ها مجری

                    آمریکا به دقت اعمال خواهد شد.

 تخلفات سابق بر این به دقت مورد بررسی قرار خواهد گرفت و بدیهی است که قوانین فعلی اعمال خواهد شد. به همین خاطر، موافقتنامه اخیر به هیچ وجه نباید مجوزی برای تخطی از قوانین تحریم در نظر گرفته شود. در صورت تغییر قوانین و یا لغو تحریم ها فراتر از موارد توافق شده به صورت یک جانبه از سوی آمریکا، همچنان باید به پیروی از قوانین تحریم توجه خاصی مبذول گردد.

 فضای رضایتمندی در پی توافق لوزان و آینده ایران برای پیوستن مجدد به جامعه جهانی مسلما قابل درک است، هر چند که درک واقعیت بسیار مهم است، علی الخصوص پس ازاینکه مقامات آمریکایی اعلام کردند که تحریم ها یک دفعه از بین نخواهند رفت.

 حتی کوچکترین تخلفات از قوانین تحریم می توانند سوء سابقه کیفری ایجاد کنند و پیامدهای سنگین مالی و اتلاف وقت را در پی داشته باشند و همچنین در مورد معاملات بازرگانی می توانند باعث سوء شهرت شود. درها هنوز باز نشده اند، به همین خاطر مطلع بودن از قوانین مجری و عمل کردن بر طبق آنها بسیار مهم است.

این مقاله که به منظور به روز کردن اطلاعات موکلین ارائه شده است، صرفا جنبه اطلاع رسانی دارد و به هیچ وجه نباید به عنوان نظر حقوقی تفسیر شود. در صورتی که هر یک از موارد مورد بحث در این مقاله برای شما مبهم بود و یا در مورد آن سوال داشتید، لطفا با مشاور حقوقی دارای مجوز مشورت کنید. این مقاله از نسخه اصلی انگلیسی که در سایت[1] ما در دسترس می باشد به فارسی ترجمه شده است. در صورت وجود هرگونه اختلاف در مفاهیم انگلیسی و فارسی، متن انگلیسی حاکم خواهد بود.

[1]http://www.akrivislaw.com

 

[1] (JCPOA)

[2]31 CFR § 560.314 (2014(  “شخص آمریکایی” اشاره دارد به تعریف شخص آمریکایی در

[3] United States Person

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Farhad Alavi Discusses Iran/P5+1 Nuclear Deal on Al Jazeera English

So, I was on Al Jazeera English last night discussing the landmark deal between Iran and the P5+1 states (United States, United Kingdom, France, China, Russia, and Germany).  Here is the clip:

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Landmark Deal Reached in Iran Nuclear Negotiations

Iran and the “P5+1” countries (the United States, United Kingdom, France, Russia, China, and Germany) reached a landmark understanding today.  This agreement involved strict limitations and very strict inspections on Iran’s nuclear program, which President Obama claims to be the most intrusive inspections of any country’s nuclear file.  Some of these limitations will last as long as 20 years.

The deal offers Iran some sanctions relief in return for the limitations on its nuclear program.  Specifically, it will result in the removal of those United Nations (U.N.) Security Council, U.S. and European Union (EU) sanctions that were imposed as a result of Iran’s nuclear program.  Notably, however, the deal will not cause the removal of sanctions imposed on Iran for its support of international terrorism, its human rights abuses, or its ballistic missiles program.  As such, a fairly robust framework of U.S. sanctions will remain in place, likely including the Iranian Transactions and Sanctions Regulations (the “ITSR”).  More details and analysis to follow soon.

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Will Iran be Open for Business Tomorrow?

There has been some news in the past few hours that the P5+1 and Iran have reached some type of breakthrough deal in their marathon negotiations over Iran’s nuclear energy program.  Many do seem to be hopeful of what such an accord (if it is indeed finalized tomorrow morning in Lausanne, as it is supposedly intended to) will bring to Iran’s relations with the world, both politically and economically. This is not a political blog, so I’m not about to opine on the former, and it’s not really an economic blog, but I do discuss economic sanctions and business issues. So what will happen tomorrow if a deal is signed?

1. The sanctions will not be removed on Wednesday! 

Remember, this is just a preliminary agreement that defines the contours of the final agreement, whose deadline is June 30, 2015. We will likely, however, get some insight as to what sanctions (UN and U.S.) will be repealed and which will be suspended, and on what timetable that may happen. There has been quite some debate on this. Iran wants certain permanent repeals, and as we know, this is not entirely possible as such actions in the case of unilateral U.S. sanctions need congressional approval in some cases.

2. The sanctions will not be removed in entirety on June 30.

It remains to be seen what course Iran’s relations with the rest of the world, particularly the west, will take after a final agreement is inked. Is this the first step towards detente and open relations? Or is it just a one-off deal? This remains to be seen, but if we are to be optimistic and think the first is the more likely, it is still critical to realize that this is just the first leg of a long marathon, not just for political relations and not just for sanctions. Now whether an opening follows the same speed at which U.S.-Iran relations at least now seem to be moving at remains to be seen. That said, as I have frequently commented (twice on Voice of America’s Persian service this week alone), any guesses now as to what will change, are, for at least the next few hours, guesses. But do not expect to see a Starbucks on every street corner in Tehran next month.

A solid guess is that Iran will want reprieve on its oil sales and on banking. Will Iran rejoin the SWIFT messaging system used for international payments? Will the Central Bank of Iran (CBI) be de-listed by the United States? Possibly. Will blocking regulations on a number of Iranian financial institutions be removed? Maybe.

There will surely be quite a bit of euphoria in the wake of a deal on Wednesday, assuming it happens. This euphoria is not undeserved. As such, it will be critical that anybody remotely interested in any type of activity with Iran constantly keep abreast of not only changes in the law, but the phasing in of those changes.  This is still a hot topic for civil and criminal enforcement in the United States and a more positive atmosphere will not in and of itself change the law.

Till Wednesday!

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Posted in Compliance, Iran, OFAC, Sanctions

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.

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