On October 5, 2026, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published an alert (the “Alert”) warning that foreign financial institutions (“FFIs”) that continue to transact with sanctioned Iranian financial institutions “could be targeted at any time without advance notification.” OFAC also amended Iran-related FAQ 156 to remove earlier language indicating that OFAC would generally contact an FFI about its conduct before making a finding that the FFI knowingly engaged in sanctionable activity. The Alert forms part of Operation Economic Outcast, which OFAC launched on August 24, 2026, to cut off financial resources that support the Iranian regime (see our previous blog post here). It follows a series of actions taken by OFAC in September 2026, including sanctions against Iran’s aviation sector and its adoption of a presumption of denial for Iran-related specific license applications (see our previous blog post here).
According to the Alert, FFIs that provide financial services to Iranian banks or their subsidiaries or branches in third countries risk being sanctioned for operating in or supporting sanctioned sectors of Iran’s economy (including the financial sector), and could face civil and criminal enforcement penalties where Iran-related transactions cause US persons to violate sanctions. OFAC also advises FFIs exposed to Iranian “shadow banking” activities to take steps to detect and disrupt those activities using existing guidance from the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), such as its May 11, 2026, alert on sanctions evasion by Iran’s Islamic Revolutionary Guard Corps (see our previous blog post here).
Concurrently, OFAC amended Iran-related FAQ 156, which explains how an FFI will learn that OFAC has found that it has knowingly engaged in sanctionable activity. The prior version stated that, “[a]s a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding.” That sentence has been replaced with a reference to the Alert. The FAQ otherwise continues to provide that OFAC will publish any strict conditions on an FFI’s US correspondent or payable-through accounts in the Federal Register, and will add any FFI subject to an account prohibition to the List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List).
Given the heightened potential to face US sanctions targeting with no prior warning, FFIs with exposure to Iranian banks, including through correspondent banking relationships, should consider reviewing those relationships promptly.
We will continue to monitor and update on any further developments in US sanctions targeting Iran under Operation Economic Outcast.
