On October 16, 2018, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) designated certain Iranian entities and banks as Specially Designated Nationals (“SDNs”) pursuant to Executive Order (“EO”) 13224, which targets terrorists and those providing support to terrorism. A full list of those entities designated as part of this action is available here. US Persons (i.e., entities organized under US laws and their non-US branches; parties physically located in the United States; US citizens and permanent resident aliens wherever located or employed) are prohibited from dealing directly or indirectly with SDNs. Under the Iranian Transactions and Sanctions Regulations (“ITSR”), non-US entities owned or controlled by US Persons are also prohibited from dealing with SDNs that are located or based in Iran (regardless of their reason for designation) or owned or controlled by the Government of Iran (regardless of where they are located).
According to an OFAC press release, the Iranian entities have been designated for their direct or indirect involvement in providing millions of dollars in financial support to the Basij Resistance Force, a paramilitary organization associated with the Iran’s Islamic Revolutionary Guard Corps (“IRGC”) that allegedly recruits child soldiers. The IRGC is currently designated as an SDN under numerous US sanctions programs.
As a part of these actions, the following Iranian financial institutions previously designated on the Executive Order 13599 List have been moved to the Specially Designated Nationals and Blocked Persons List (“SDN List”): Bank Mellat, Sina Bank (a.k.a. Bonyad Finance and Credit Company, BFCC, and Sina Finance and Credit Company), and Parsian Bank (a.k.a. Bank-E Parsian). Prior to these SDN designations, it was permissible for US Persons and non-US entities owned or controlled by US Persons to deal with these banks in the context of certain types of transactions authorized under the ITSR, such as the general license for the sale and supply of agricultural commodities, medicines, and medical devices to Iran. With the addition of these Iranian banks to the SDN List, parties relying on such general licenses may no longer permit the participation of these banks in their transactions.
In addition, non-US parties dealing with these SDN banks as well as the other Iranian parties designated under EO 13224 could become the target of US secondary sanctions, even for the transactions that occur wholly outside of US jurisdiction (e.g., no US Persons, no US-dollar payments). This US secondary sanctions risk does not apply to non-US parties dealing with persons on the EO 13599 List.
These designations are separate and apart from the US Government’s withdrawal from the Joint Comprehensive Plan of Action (aka “JCPOA”), which is scheduled for completion by 11:59 pm Eastern on November 4, 2018. As part of this process, OFAC has advised in public guidance that entities on the EO 13599 List will be re-designated as SDNs no later than November 5, 2018. Those JCPOA-related developments are further described in our previous blog posts here and here.
Separately, on October 11, 2018, the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued an advisory about the Iranian government’s “illicit and malign” activities and attempts to exploit the financial system. This advisory is intended to assist US financial institutions to detect potentially illicit Iran-related transactions. The 19-page document is also intended to assist non-US financial institutions in understanding the obligations related to their US correspondent accounts, to avoid US sanctions exposure, and to address anti-money laundering/combating financing of terrorism risks that Iranian activity poses to the international financial system. FinCEN recommends that this advisory be shared with Chief Executive Officers, Chief Operating Officers, Chief Compliance Officers, Chief Risk Officers, AML/BSA Departments, and Legal Departments. FinCEN’s press release regarding the advisory is available here.