On September 20, 2019, in response to recent attacks on certain Saudi Arabian oil facilities, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) took action pursuant to Executive Order 13224 against three Iranian entities: (i) the National Development Fund of Iran (“NDF”) (ii) Etemad Tejarat Pars Co., and (iii) the Central Bank of Iran (“CBI”).  Executive Order 13224 authorizes the designation of parties if, among other things, they attempt to commit, or pose a significant risk of committing, acts of terrorism.

Specifically, OFAC designated NDF, Iran’s sovereign wealth fund, and Etemad Tejarat Pars Co., an Iran-based company, as Specially Designated Nationals (“SDNs”).  According to OFAC’s press release, NDF was designated for providing financial support to Iran’s Islamic Revolutionary Guard Corps (“IRGC”).  The IRGC is currently designated as an SDN under numerous US sanctions programs.  Also according to the press release, Etemad Tejarat Pars Co. was designated for its role in concealing financial transfers for military purchases by Iran’s Ministry of Defense and Armed Forces Logistics, including funds originating from the NDF.  US Persons (i.e., US companies and their branches, US banks, US citizens and permanent resident aliens, any person physically located in the United States) and non-US entities owned or controlled by US Persons are now prohibited from dealing directly or indirectly with these newly-designated SDNs.  Further, non-US Persons dealing with these SDNs could become the target of US secondary sanctions, even for transactions that occur wholly outside of US jurisdiction (e.g., no US Persons, no US-dollar payments).

OFAC imposed new sanctions on the CBI also pursuant to Executive Order 13224 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to, the IRGC, the Qods Force, and Hizballah.  Although the CBI was already an SDN and non-US Persons already risked the imposition of secondary sanctions for engaging in certain transactions involving the CBI, this additional designation increases the secondary sanctions risk exposure for transactions involving the CBI, making the CBI an even more sensitive SDN from a secondary sanctions standpoint.  Notably, in addition to the availability of other legal bases for the imposition of secondary sanctions, any non-US banks dealing with the CBI in connection with humanitarian transactions could be subject to secondary sanctions for such activities, which, until now, had otherwise been carved out from existing secondary sanctions authorities applicable to the CBI.

The additional sanctions imposed on the CBI for terrorism-related reasons may impact the extent of dealings by US Persons and non-US entities owned or controlled by US Persons with the CBI that will continue to be authorized under the Iranian Transactions and Sanctions Regulations (“ITSR”) in the context of the sale and supply of agricultural commodities, medicines, and medical devices to Iran.  Given the multiple roles played by the CBI in the trade of humanitarian items with Iran, the additional sanction may make it more difficult (whether as a legal or practical matter) for US and non-US Persons to participate in the sale and supply of such humanitarian items to Iran.

 

 

Author

Paul Amberg is a partner in Baker McKenzie’s Amsterdam office, where he handles international trade and compliance issues. He advises multinational companies on export controls, trade sanctions, antiboycott rules, customs laws, anticorruption laws, and commercial law matters. Paul helps clients assess and address compliance risks presented by export controls, trade sanctions, antiboycott rules, customs laws, and anticorruption laws. His practice especially focuses on internal reviews, voluntary disclosure filings, and enforcement actions brought by, the US Government in relation to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), trade and economic sanctions programs, and US customs laws.

Author

Eunkyung advices clients on various regulatory compliance and trade issues, concentrating on the US export controls such as the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR), economic and trade sanctions, US customs and import laws, the US Foreign Corrupt Practices Act (FCPA), and foreign anti-bribery laws.

Author

Laura Klick is a US-qualified Associate in Baker McKenzie's London office, where she advises on a variety of trade and compliance matters involving US, UK, and EU export controls and economic sanctions. Laura regularly counsels individuals and multinational corporations on compliance, licensing, and enforcement matters involving the US Treasury, State, and Commerce Departments and assists clients in understanding and navigating the complex regulatory regime governing international trade and investment.