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 OFAC FAQs: Iran Sanctions

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CISADA (Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010)

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149. What activities by foreign financial institutions can subject them to CISADA sanctions?

As described in the Iranian Financial Sanctions Regulations, the sanctionable activities of a foreign financial institution are:

  • Facilitating the efforts of the Government of Iran (GOI) to acquire or develop Weapons of Mass Destruction (WMD) or delivery systems for WMD or to provide support for terrorist organizations or acts of international terrorism;
  • Facilitating the activities of a person subject to financial sanctions pursuant to UNSCRs 1737, 1747, 1803, or 1929, or any other Security Council resolution that imposes sanctions with respect to Iran;
  • Engaging in money laundering, or facilitating efforts by the Central Bank of Iran or any other Iranian financial institution, to carry out either of the facilitating activities described above; or
  • Facilitating a significant transaction or transactions or providing significant financial services for: (i) the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to the International Emergency Economic Powers Act (IEEPA), or (ii) a financial institution whose property and interests in property are blocked pursuant to IEEPA in connection with Iran’s proliferation of WMD, Iran’s proliferation of delivery systems for WMD, or Iran’s support for international terrorism.

 


150. Where can I find a list of Islamic Revolutionary Guard Corps (IRGC) affiliates and Iran-linked financial institutions “blocked pursuant to IEEPA”?

The list of blocked IRGC affiliates and blocked Iran-linked financial institutions is dynamic and is based on the identity of “designated” persons, which refers both to natural persons (i.e., individuals) and legal persons (such as corporations and other entities). The most recent list of designated persons – which includes most, but not all, blocked entities* – can be found at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. The listings of designated IRGC entities will be followed by the tag [IRGC]; those of designated Iran-linked financial institutions will have the tag [IFSR].

*Under Department of the Treasury regulations, designated persons are those that are named on the list. All interests in property of such persons are blocked, and such persons are considered to have an interest in all property and entities in which they own, directly or indirectly, a 50 percent or greater interest. As a result, such property and entities are also blocked, even if they do not themselves appear on the list.


151. How do the IFSR define “U.S. financial institutions”?

The Iranian Financial Sanctions Regulations define “U.S. financial institutions” to include: depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of these entities. Covered institutions include those branches, offices, and agencies of foreign financial institutions that are located in the United States.


152. How do the Iranian Financial Sanctions Regulations define “foreign financial institutions”?

The Iranian Financial Sanctions Regulations define “foreign financial institutions” to include foreign depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of these entities.


153. How do the Iranian Financial Sanctions Regulations (IFSR) define the term “knowingly”?

The term “knowingly” as used in the IFSR means that a person has actual knowledge or should have known of specific conduct, a circumstance, or a result. In other words, the IFSR could be implicated if the Treasury Department finds that a foreign financial institution knew or should have known that it engaged in one or more of the sanctionable activities.


154. How does the Treasury Department determine whether a transaction or financial service is “significant” for purposes of the Iranian Financial Sanctions Regulations?

As set out in the Iranian Financial Sanctions Regulations, in determining whether a transaction or financial service is “significant,” the Treasury Department may consider: (1) the size, number, frequency, and nature of the transaction(s); (2) the level of awareness of management of the transaction(s) and whether or not the transaction(s) are a part of a pattern of conduct; (3) the nexus between the foreign financial institution involved in the transaction(s) and a blocked Islamic Revolutionary Guard Corps individual or entity or blocked Iran-linked financial institution; (4) the impact of the transaction(s) on the goals of CISADA; (5) whether the transaction(s) involved any deceptive practices; and (6) other factors the Treasury Department deems relevant on a case-by-case basis.


155. When are the prohibitions and strict conditions on foreign financial institutions’ correspondent accounts or payable-through accounts in the United States effective?

A finding by the Treasury Department that a foreign financial institution knowingly engages in one or more of the sanctionable activities is necessary before the Treasury Department can prohibit or impose strict conditions on the opening or maintaining in the United States of correspondent accounts or payable-through accounts for that foreign financial institution.


156. How will U.S. and foreign financial institutions know that the Treasury Department has made such a finding?

As a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding. If the Treasury Department decides to impose strict condition(s), the Treasury Department will issue an order or a regulation that sets out the strict condition(s) to be imposed on the U.S. correspondent accounts or U.S. payable-through accounts of the relevant foreign financial institution and publish the order or regulation in the Federal Register. The Federal Register is available at www.gpo.gov/fdsys/. If the Treasury Department decides to prohibit the opening or maintaining of U.S. correspondent accounts or U.S. payable-through accounts for a foreign financial institution, the Treasury Department will add the name of the foreign financial institution to the Appendix to the Iranian Financial Sanctions Regulations and publish it in the Federal Register.


157. How will the Treasury Department enforce the Iranian Financial Sanctions Regulations (IFSR) with respect to U.S. entities?

Any U.S. person who violates the correspondent account provisions of the IFSR may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, and criminal penalties for willful violations of up to $1 million and 20 years in prison. A U.S. financial institution may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, if any person that it owns or controls violates the IFSR prohibition on engaging in any transaction with or benefitting the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to IEEPA, and if the U.S. financial institution knew or should have known that the person violated the Iranian Financial Sanctions Regulations.


158. Can the application of any part(s) of the Iranian Financial Sanctions Regulations be waived by the Department of the Treasury?

CISADA provides for a waiver of the sanctions under the Iranian Financial Sanctions Regulations if the Secretary of the Treasury determines that a waiver is necessary to the national interest of the United States.


159. Where can I find the text of the Iranian Financial Sanctions Regulations?

The text of the Iranian Financial Sanctions Regulations can be found at: www.treasury.gov/resource-center/sanctions/Programs/Documents/ fr75_49836.pdf.


 

Executive Order 13599 (Blocking Property of the Government of Iran and Iranian Financial Institutions)

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On February 5, 2012, the President signed Executive Order 13599 to implement section 1245(c) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”) and to take additional steps with respect to Iran. Effective as of 12:01 a.m. eastern standard time on February 6, 2012, the order blocks all property and interests in property of the Government of Iran (including the Central Bank of Iran), all Iranian financial institutions, and all persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to the order. [02-06-2012]

160. Section 1 of E.O. 13599 blocks all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, that are in the United States, that come within the United States, or that come within the possession or control of U.S. persons (including overseas branches). Can you provide further clarification about this provision of E.O. 13599?

E.O. 13599 requires U.S. persons to block (i.e., freeze) all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, which also includes the Central Bank of Iran. This means that all individuals and entities that meet the definition of “Government of Iran” (“GOI”) as defined by section 7(d) of the new E.O. as well as all Iranian financial institutions (whether or not they meet the definition of the GOI) are now blocked. Previously, under the Iranian Transactions Regulations, 31 C.F.R. part 560 (the “ITR”), financial institutions and other U.S. persons were prohibited from engaging in transactions with the GOI. Under those prior rules, U.S. financial institutions receiving instructions to execute transactions involving these entities were not required to block the transactions, but were instead required to reject those instructions rather than carry them out, unless the transactions were exempt, authorized, or not prohibited by OFAC. The Executive Order defines an “Iranian financial institution” as a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the aforementioned entities.

As a result, transactions involving entities bearing the [IRAN] tag on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) will now need to be blocked unless exempt or authorized by OFAC. Going forward, the [IRAN] tag will connote that a person or entity meets the definition of the term “GOI” or “Iranian Financial Institution”. OFAC will continue to update the SDN List and may add, delete, or edit entries as appropriate.

E.O. 13599 blocks the property and interests in property of any individual or entity that comes within its definition of the term “Government of Iran” regardless of whether it is listed on the SDN List, and similarly it blocks the property and interests in property of all Iranian financial institutions as defined in the order regardless of whether the Iranian financial institution is listed on the SDN List.

E.O. 13599 builds upon the prohibitions in the ITR, which remain in effect.

Please note, pursuant to OFAC guidance, even when an entity does not itself appear on the SDN List or otherwise meet the definition of the GOI or an Iranian financial institution, the property and interests in property of that entity are blocked if the entity is owned, directly or indirectly, 50% or more by a person whose property and interests in property are blocked pursuant to an Executive Order or regulations administered by OFAC. [02-06-2012]


161. If all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions are blocked, can I conduct transactions involving the Government of Iran that have been previously authorized by OFAC?

Generally yes. Under new General License A, almost all transactions that are authorized under existing general licenses issued pursuant to the ITR or under existing OFAC specific licenses will continue to be authorized under the authority of E.O. 13599. However, transactions previously authorized under one existing ITR general license are not authorized pursuant to E.O. 13599. Specifically, the closing of accounts of the Government of Iran or an Iranian financial institution and the lump sum transfer of the balances to an account outside of the United States, which is authorized by sections 560.517(a)(3) & (b)(2) of the ITR, is not authorized by General License A, and, therefore, those transactions are prohibited by E.O. 13599 and the accounts must be blocked. In addition, General License A does not authorize any payments from blocked funds or debits to blocked accounts, with a limited exception for payments from funds or debits to accounts blocked under the Iranian Assets Control Regulations (the hostage crisis blocking program that began in 1979) that are authorized by specific licenses issued by OFAC.

New General License B authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances, to or from Iran, or for or on behalf of individuals ordinarily resident in Iran who are not included in the term “Government of Iran”, provided that such funds transactions are not made by, to, or through a financial institution blocked pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. part 544 (the “WMDPSR”), or the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594 (the “GTSR”), or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599.

Transactions not previously authorized by OFAC that involve property or interests in property of the Government of Iran, including the Central Bank of Iran, or of Iranian financial institutions must be blocked. [02-06-2012]


162. Are U.S. persons still required to comply with the Iranian Transactions Regulations?

Yes. E.O. 13599 builds upon the prohibitions of the ITR, and the prohibitions of the ITR remain in effect. [02-06-2012]


163. What are the differences and similarities between E.O. 13599 and the Iranian Transactions Regulations?

The ITR prohibit virtually all direct or indirect transactions involving Iran or the Government of Iran by U.S. persons or with a nexus to the United States, unless otherwise authorized by OFAC or exempted by statute, but they do not contain blocking provisions. E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of Iranian financial institutions, which also includes the Central Bank of Iran, unless it relates to a transaction that is exempted by statute or authorized by OFAC.

To illustrate the difference between how a transaction would be treated under the ITR and the new E.O., imagine a commercial wire transfer being processed through the U.S. financial system by order of a third-country, non-U.S. company for credit to a third-country financial institution in favor of a correspondent account it maintains for an Iranian financial institution. The transaction is not exempt or authorized by a general or specific license, and the Iranian bank is not blocked pursuant to the GTSR or the WMDPSR. Previously, under the ITR, any U.S. financial institution handling the transaction would have needed to reject the payment because allowing it to be processed would constitute a prohibited exportation of services to Iran. With the new E.O. in place, the U.S. financial institution would be required to block (“freeze”) that transaction. [02-06-2012]


164. The Iranian Transactions Regulations authorize U.S. depository institutions and U.S. registered brokers or dealers in securities to process transfers of funds to or from Iran if the transfer is a non-commercial, personal remittance. Are U.S. depository institutions and U.S. registered brokers or dealers in securities still authorized to process such payments to or from a Government of Iran-owned bank that is not otherwise designated pursuant to another part of 31 C.F.R. Chapter V?

General License B under E.O. 13599 authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances to or from Iran provided that the payment is not made by, to, or through a financial institution designated by OFAC under the WMDPSR, or the GTSR, or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599. Exempt or authorized transactions to or from Iran may also be processed subject to the above conditions.

Such transactions must be processed through a third country, as U.S. banks are prohibited from operating correspondent accounts for Iranian banks. The transactions may involve the use of blocked Iranian financial institutions as long as the Iranian financial institution is blocked solely pursuant to E.O. 13599 (and not pursuant to any other Executive order or part of 31 C.F.R. chapter V) and there is a third-country, non-U.S. financial institution as an intermediary between the U.S. financial institution and the Iranian financial institution. [02-06-2012]


165. To what extent are U.S. persons expected to conduct enhanced due diligence to determine if transactions contain a Government of Iran interest?

E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, unless otherwise exempt or authorized by OFAC.

Please contact the OFAC Hotline at 202-622-2490 or 1-800-540-6322, or by email at OFAC_Feedback@treasury.gov, for guidance regarding entities that you suspect are owned or controlled by the Government of Iran that do not appear on the SDN List. As a general matter, OFAC expects financial institutions to conduct due diligence on their own direct customers (including, for example, their ownership structure) to confirm that those customers are not persons whose property and interests in property are blocked.

With regard to other types of transactions where a financial institution is acting solely as an intermediary and fails to block transactions involving a sanctions target, OFAC will consider the totality of the circumstances surrounding the bank’s processing of the transaction to determine what, if any, regulatory response is appropriate. [02-06-2012]


166. OFAC’s SDN List contains a list of entities identified by OFAC as being the Government of Iran. Should U.S. persons now block the property and interests in property of those entities?

Yes, U.S. persons should now block the property and interests in property of the Government of Iran entities appearing on the SDN List, unless OFAC has authorized the underlying transaction or the transaction is exempt. [02-06-2012]


167. OFAC has granted my company a license under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) and the ITR. Can I continue to conduct the licensed transaction?

Under General License A issued pursuant to E.O. 13599, transactions authorized under existing specific licenses issued pursuant to TSRA and the ITR are authorized under E.O. 13599 until the specific license expires, per the terms of the license. [02-06-2012]


168. OFAC has issued me a (non-TSRA) specific license related to Iran, or the Government of Iran. Can I continue to conduct the licensed transactions?

Under General License A issued pursuant to E.O. 13599, transactions authorized by (non-TSRA) specific licenses issued prior to the issuance of E.O. 13599 and issued pursuant to any part of 31 C.F.R. chapter V are also authorized under E.O. 13599. As set forth in General License A, in most cases these new authorizations under E.O. 13599 are in effect until theexpiration date of the individual specific license, or, if the specific license has no expiration date, until April 6, 2012. [02-06-2012]


 

NDAA (Section 1245 of the National Defense Authorization Act for Fiscal Year 2012)

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On December 31, 2011, the President signed into law the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”). Section 1245 of this statute requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the Central Bank of Iran (“CBI”). It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI. Although the sanctions on foreign financial institutions authorized by section 1245 are similar to the financial sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (22 U.S.C. 8513(c)) (“CISADA”) (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the two statutes. [02-14-2012]

169. What is the NDAA?

On December 31, 2011, the President signed into law the NDAA. Section 1245 of the NDAA requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the CBI. It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI. [02-14-2012]


170. What activities can trigger sanctions on a foreign financial institution under the NDAA?

For private financial institutions, the Act mandates that the President sanction those institutions that are found to knowingly conduct or facilitate any significant transactions with a U.S.-designated Iranian financial institution or with the CBI – whether for the purchase of petroleum or otherwise – unless the transaction is for the sale of food, medicine, or medical devices to Iran. For all transactions with the CBI other than petroleum purchases, this provision takes effect on February 29, 2012, i.e., 60 days after the enactment of the Act. The timing of the petroleum purchase sanctions is discussed immediately below.

Private financial institutions and all other foreign financial institutions – including central banks or foreign state-owned or -controlled banks – potentially face sanctions under the NDAA if they knowingly conduct or facilitate significant financial transactions for the purchase of Iranian petroleum or petroleum products with a U.S.-designated Iranian financial institution or with the CBI after the provision takes effect as early as June 28, 2012, i.e., 180 days after enactment.* This NDAA provision may be held in abeyance beyond June 28, 2012, depending on the President’s determination on the availability and price of alternative supplies. Foreign central and foreign state-owned or -controlled banks are also subject to these sanctions if the transactions are for the sale of petroleum or petroleum products to Iran and they occur after June 28, 2012.

All foreign financial institutions, including private and state-owned institutions, remain subject to section 104(c) of CISADA, which calls for sanctions on foreign financial institutions that are found to have knowingly engaged in facilitating significant transactions for specific Iranian-linked individuals and entities. (See CISADA: The New U.S. Sanctions on Iran, available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/CISADA_english.pdf.) [02-14-2012]

*Irrespective of the timeframes set forth in the NDAA, any foreign financial institution that knowingly facilitates significant transactions with any U.S.-designated Iranian financial institution would still be subject to CISADA.


171. Does the NDAA repeal or amend Section 104(c) of CISADA?

No. Any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for a U.S.-designated, Iranian-linked financial institution can be sanctioned under section 104(c) of CISADA and section 561.201 of the Iranian Financial Sanctions Regulations (“IFSR”) even if those transactions are not sanctionable under section 1245(d) of the NDAA. Though the NDAA imposes sanctions on foreign financial institutions similar to financial sanctions under CISADA and the IFSR (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the statutes. [02-14-2012]


172. How does Executive Order 13599, “Blocking Property of the Government of Iran and Iranian Financial Institutions,” and the blocking of all Iranian financial institutions affect the financial sanctions provisions in CISADA? Do CISADA sanctions now apply to financial transactions with any Iranian financial institution?

CISADA applies to transactions with only those Iranian financial institutions that are designated in connection with Iran’s WMD or terrorism activities and are denoted on OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN list) with the [IFSR] tag. While E.O. 13599 does block the property of all Iranian financial institutions, that action is not grounded in the authorities that relate to counterproliferation or counterterrorism, and therefore does not implicate CISADA. [02-14-2012]


173. Are there any exceptions to the sanctions provisions in the NDAA?

Yes. The NDAA includes an exception that prohibits the President from imposing sanctions “with respect to any person for conducting or facilitating a transaction for the sale of food, medicine, or medical devices to Iran.” [02-14-2012]


174. What are definitions for the following NDAA terms: “significant financial transaction,” “knowingly,” “owned or controlled by the government of a foreign country,” “food, medicine, and medical devices,” “foreign financial institution,” “Iranian financial institution,” “significantly reduced,” and “whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”?

“significant financial transaction”

The IFSR, which implement section 104(c) of CISADA, identify factors to be used in determining what is significant (as it relates to transactions) in 31 C.F.R § 561.404, which allows the Secretary of the Treasury to consider the “totality of the facts and circumstances” while providing a list of seven broad factors that can play a role in the determination, including: (1) the size, number, and frequency of transactions; (2) the nature of the transaction(s); (3) the level of awareness of management and whether the transaction(s) are part of a pattern of conduct; (4) the nexus between the transaction(s) and a blocked person; (5) the impact of the transaction(s) on statutory objectives; (6) whether the transaction(s) involve deceptive practices; and (7) such other factors that the Secretary deems relevant on a case-by-case basis. Treasury anticipates closely modeling the definition of “significant” for NDAA purposes on the IFSR.

We anticipate utilizing a broad definition of “financial transaction” that encompasses “any transfer of value involving a financial institution.” The term “transaction” includes, but is not limited to, the following:

  • The holding of nostro, vostro, or loro accounts for or with the Central Bank of Iran or designated banks, such as Bank Melli Iran and/or Bank Saderat Iran, including any of their branches or subsidiaries worldwide (collectively the “Listed Parties”);
  • The provision of trade finance and/or letter of credit services for or with Listed Parties;
  • The provision of guarantees or similar instruments for or with Listed Parties;
  • The provision of investment products or instruments for Listed Parties and/or the participation with Listed Parties in investments;
  • The receipt or origination of wire transfers on behalf of or involving Listed Parties;
  • The acceptance of commercial paper (both retail and wholesale) drawn on Listed Parties, and the clearance of such paper (including, but not limited to, checks and similar drafts);
  • The receipt or origination of ACH or ATM transactions with Listed Parties; and/or
  • Any other transactions for or on behalf of, directly or indirectly, Listed Parties and/or with Listed Parties serving as correspondents, respondents, or beneficiaries. That would include transactions where the Listed Parties do not appear on the face of the transaction but where the transaction is undertaken with knowledge of the involvement of a Listed Party based on a relationship that exists through a third party such as a money exchange or trading house.

knowingly”

The IFSR defines “knowingly” with respect to conduct, a circumstance, or a result, to mean that an entity or individual had actual knowledge, or should have known, about the conduct, the circumstance, or the result. 31 C.F.R. § 561.314. Treasury anticipates closely modeling the definition of this term on the IFSR.

“owned or controlled by the government of a foreign country”

The Iranian Transactions Regulations (“ITR”) define “an entity owned or controlled by the Government of Iran” in section 560.313. Borrowing from that definition, a financial institution “owned or controlled by the government of a foreign country” would be deemed to include a financial institution in which a foreign government owns a 50% or greater interest or which is otherwise controlled by a foreign government. Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR definition.

“food, medicine, and medical devices”

“Food”: The October 2011 general license for the ITR and the Sudanese Sanctions Regulations (“SSR”) authorizing certain food exports to Iran and Sudan defines “food” as “items that are intended to be consumed by and provide nutrition to humans or animals in Iran – including vitamins and minerals, food additives and supplements, and bottled drinking water – and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals in Iran.” The regulations also specify that food does not include alcoholic beverages, cigarettes, gum, or fertilizer. Treasury anticipates closely modeling the definition of this term under the NDAA on this license definition.

“Medicine”: ITR section 560.530(e)(2) states that: “For the purposes of this part, the term medicine has the same meaning given the term ‘drug’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).” Similarly, under the Trade Sanctions Reform and Export Act (“TSRA”), 22 U.S.C. 7201(5), “[t]he term ‘medicine’ has the meaning given the term "drug" in section 321 of title 21.” Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“Medical Devices”: ITR section 560.530(e)(3) states that: “For the purposes of this part, the term medical device has the meaning given the term ‘device’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).” Similarly, under TSRA, 22 U.S.C. 7201(4), “[t]he term "medical device" has the meaning given the term ‘device’ in section 321 of title 21.” Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“foreign financial institution”

“Foreign financial institution” is defined in section 1245 of the NDAA with reference to section 104(i) of CISADA (22 U.S.C. § 8513(i)). As further defined in the IFSR, a “foreign financial institution” is “any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent. It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing.” 31 C.F.R. § 561.308. It does not include “the international financial institutions identified in 22 U.S.C. 262r(c)(2), the International Fund for Agricultural Development, or the North American Development Bank.” 31 C.F.R. § 561.308. Treasury anticipates closely modeling the definition of this term under the NDAA on the IFSR.

“Iranian financial institution”

This term is defined in E.O. 13599 as: “a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the foregoing.” Such financial institutions include, but are not limited to, any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, or commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent. It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing.

“significantly reduced”

The Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of Energy, and the Director of National Intelligence, will make determinations as to whether any country has significantly reduced the volume of Iranian crude oil purchases. Any determinations will be preceded by a process of rigorous due diligence. The Secretary of State intends to consider relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran, including the quantity and percentage of the reduction in purchases of Iranian crude oil over the relevant period, termination of contracts for future delivery of Iranian crude oil, and other actions that demonstrate a commitment to substantially decrease such purchases.

“whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”

The President will make a determination, based on the reports required by subparagraph (A) of Section 1245(d)(4) of the NDAA, as to whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient to permit purchasers of petroleum and petroleum products from Iran to reduce significantly in volume their purchases from Iran. [02-14-2012]


175. What is the scope of “petroleum products” under the law?

As defined by the U.S. Energy Information Administration (EIA), petroleum products include unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. In keeping with the EIA’s standard definition, petroleum products do not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels. [02-14-2012]


176. If oil is being provided as payment for an outstanding debt, is such a transfer considered a “financial transaction”?

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]


177. If the CBI is involved in providing settlement services for a transaction, or is otherwise acting solely as an intermediary in a transaction between a non-designated Iranian bank and a foreign financial institution, is the foreign financial institution deemed to be engaging in a transaction with the CBI?

Section 1245 targets any significant transactions “with” the CBI; a transaction involving the CBI in an intermediary role would likely be viewed as a transaction “with” the CBI. [02-14-2012]


178. Are barter trades involving the CBI considered “financial transactions” under Section 1245?

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]


179. Does the definition of “significant financial transaction” exclude the passive holding of CBI reserves? Is the U.S. willing to give assurances that this will not be a basis for sanctions?

This will be a case-by-case determination and will require specifics on what “passive holding” entails. As a general matter, we would likely not view the holding of reserves as sanctionable in the following circumstances: the accounts are frozen or restricted, under which the CBI would be allowed to maintain accounts that it had already opened as of December 31, 2011, but would otherwise be unable to direct the disposition of those funds, with ordinary commercial interest payments and routine roll-overs of time deposits under pre-existing instructions being the only new transactions. [02-14-2012]


180. Are payments made under contracts existing prior to the date of enactment of the NDAA statute (December 31, 2011) exempted from the definition of “significant transactions”?

No general exception will be provided for payments arising out of pre-existing contracts. The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above. [02-14-2012]


181. Will the U.S. refrain from sanctioning foreign financial institutions that receive funds from the CBI to repay loans? What if these loans were granted for projects that might be subject to the food, medicine, and medical device exemptions under the NDAA?

As noted, no general exception will be provided for payments arising out of pre-existing contracts. The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above. Regarding payments for food, medicine, and medical devices, the NDAA does not allow sanctions based on transactions for the sale of food, medicine, or medical devices to Iran. Payments related to the export of broader humanitarian items would be dealt with in our analysis of what constitutes a “significant financial transaction” and would be considered on a case-by-case basis. [02-14-2012]


182. Is there a difference between entities that have been designated by the United States Government for illicit conduct, such as proliferation of weapons of mass destruction or support for terrorism, and those that are being blocked under E.O. 13599? How can I tell which entities appear on the SDN List for which reasons?

Both blocked and designated entities appear on the SDN List.

“Blocked” persons, in the context of E.O. 13599, appear on the SDN List due to the United States Government’s identification of these entities as the Government of Iran and/or as an Iranian financial institution. Such entities are identified on the SDN List with the tag [IRAN]. For example, Bank Keshavarzi is a Government of Iran owned Iranian financial institution and is identified with the [IRAN] tag. Additionally, the National Iranian Oil Company (NIOC) is a non-financial institution that has been identified as the Government of Iran and bears the [IRAN] tag.

“Designated” persons appear on the SDN List due to the United States Government’s having determined that they meet the criteria set forth in any of a number of other Executive Orders concerning, for example, assisting Iran’s weapons of mass destruction development, or aiding international terrorism and designating them for such activities. Such entities are identified on the SDN List with various tags other than [IRAN], such as [NPWMD] or [SDGT]. For example, Islamic Republic of Iran Shipping Lines is listed as: “IRISL [NPWMD].”

Note that many entries on the SDN List have more than one tag. For example: Bank Saderat Iran has three tags: [SDGT], indicating that it has been sanctioned for providing services to terrorism; [IRAN], indicating that it is the Government of Iran; and [IFSR], referring to the Iranian Financial Sanctions Regulations to signal to third country financial institutions that engage with entities with this tag that they risk sanctions under CISADA. [02-14-2012]


 

Executive Order 13606 (the GHRAVITY E.O.)

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On April 22, 2012, the President signed Executive Order 13606 Blocking The Property And Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (the “GHRAVITY E.O.”). Effective 12:01 a.m. eastern daylight time on April 23, 2012, the GHRAVITY E.O. blocks all property and interests in property of persons listed in its Annex, and all persons determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, to meet the criteria in the order. [04-23-2012]

183. Why did the President issue the GHRAVITY E.O.?

The GHRAVITY E.O. follows prior Executive orders issued by the President in response to the commission of human rights abuses by the Governments of Iran and Syria. With the GHRAVITY E.O., the President recognized that the commission of serious human rights abuses against the people of Iran and Syria by their governments, facilitated by computer and network disruption, monitoring, and tracking by those governments, threatens the national security and foreign policy of the United States. The GHRAVITY E.O. targets this activity in order to deter and disrupt such abuses. [04-23-2012]


184. What does the GHRAVITY E.O. do?

The GHRAVITY E.O. blocks (i.e., freezes) the property and interests in property of, among others, any person determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, (1) to have operated, or to have directed the operation of, information and communications technology that facilitates computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria; or (2) to have sold, leased, or otherwise provided, directly or indirectly, goods, services, or technology to Iran or Syria likely to be used to facilitate such activities.

U.S. persons in possession of property or interests in property belonging to persons listed in the Annex to the GHRAVITY E.O., or designated in the future by Treasury under the E.O., are obligated to block the property and report the blocking to OFAC within 10 days of blocking. Entities that are 50% or more owned by persons blocked by the GHRAVITY E.O. are also blocked, regardless of whether such entities appear on the Annex or OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN list”). [04-23-2012]


185. What type of activities does the GHRAVITY E.O. target?

The GHRAVITY E.O. targets the provision and use of information and communications technology to facilitate computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria. It is not intended to block exports of technology that enable the Syrian and Iranian people to freely communicate among themselves and with the outside world.

“Information and communications technology” means any hardware, software, or other product or service primarily intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display, including via the Internet. [04-23-2012]


186. How do I know that a person has been designated under the GHRAVITY E.O.?

Persons designated under the GHRAVITY E.O. appear on the publicly available SDN list bearing the [HRIT] tag. U.S. persons are obligated to block property involving the persons bearing the tag [HRIT] on the SDN list, unless the transaction is exempt or otherwise authorized by OFAC. [04-23-2012]


187. Does the GHRAVITY E.O. prohibit me from exporting technology to companies that do business with Iran or Syria?

This E.O. does not generally prohibit transactions involving persons that do business with Iran or Syria, unless the person has been designated pursuant to this order. You should consult with the Department of Commerce’s Bureau of Industry and Security (BIS) regarding exports to companies that do business with Syria. [04-23-2012]


188. If I am a non-U.S. company that exports information and communications technology to Iran or Syria, will I be designated under the GHRAVITY E.O.?

The measures in this order are designed primarily to address the need to prevent entities located in whole or in part in Iran and Syria from facilitating or committing serious human rights abuses. These measures are not designed to prevent the provision of information and communications technology necessary to enable the Iranian and Syrian people to freely communicate with each other and the outside world. That said, those providing communications technology to Iran or Syria that has the potential to facilitate computer or network disruption, monitoring, or tracking should exercise great caution given Iran and Syria’s use of this technology to assist in the commission of serious human rights abuses. [04-23-2012]


189. Would I need authorization from OFAC or BIS if I wanted to export goods or technology to persons blocked under the GHRAVITY E.O.?

Yes. For more information regarding exports of goods or technology to persons blocked under the GHRAVITY E.O., please contact OFAC or BIS. [04-23-2012]


190. Are existing licenses issued by the U.S. Government involving persons designated under the GHRAVITY E.O. still valid?

U.S. persons who have been issued licenses involving persons designated under the GHRAVITY E.O. should check with the issuing agency regarding the validity of their licenses. [04-23-2012]


 

FSE Executive Order (Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria)

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191. What does Executive Order 13608 “Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria” do?

This Executive Order gives Treasury new authorities. First, it strengthens Treasury’s ability to address behavior by foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions on Syria or Iran. This E.O. also gives Treasury the authority to impose sanctions on foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions.

Transactions by U.S. persons or within the United States involving persons sanctioned under this authority are prohibited, effectively cutting the listed persons off from the U.S. marketplace and financial system. By cutting off access to the U.S. marketplace and financial system to such sanctions evaders, Executive Order 13608 provides Treasury with a powerful tool to prevent and deter such behavior and to hold such persons accountable and to convince them to change their behavior. Publicly identifying such persons will also allow U.S. persons to avoid unwittingly engaging in transactions with identified foreign persons that may expose U.S. persons to the risk of sanctions violations. [05-01-2012]


192. Why was this authority needed?

Executive Order 13608 expands Treasury’s ability to address the behavior of foreign persons determined to have violated or attempted to violate U.S. sanctions on Syria or Iran, or to have facilitated deceptive transactions on behalf of persons subject to those sanctions, where the foreign person had no physical, financial, or other presence in the United States and did not submit to U.S. administrative proceedings. Treasury may use this authority where it appears that a foreign person violated U.S. sanctions on Iran or Syria but may not meet criteria for designation under existing Executive Orders. Executive Order 13608 will provide a means through which Treasury can limit the risk to U.S. commercial and financial systems posed by foreign persons determined to have violated U.S. sanctions on Iran or Syria, or to have engaged in deceptive transactions for or on behalf of persons subject to U.S. sanctions on Iran or Syria.

Such a listing under Executive Order 13608 also provides Treasury with the capability to put the world on notice as to such foreign persons’ activity and the risk of similar future activity. Such identification will help prevent U.S. persons from unwittingly engaging in transactions with foreign persons that may pose a risk of sanctions violations. [05-01-2012]


193. What are the repercussions of an individual or entity being identified under Executive Order 13608?

If an individual or entity is made subject to sanctions under this authority, U.S. persons generally may no longer provide to or procure from such individual or entity any goods, services, or technology. From a practical standpoint, it means that the sanctioned individual or entity will be cut off from the U.S. commercial and financial systems. [05-01-2012]


194. Are U.S. persons required to block the property of individuals and entities identified under Executive Order 13608?

No. Identifications or listings under Executive Order 13608 do not block any assets. However, a U.S. person may not provide or procure goods or services, including financial services, or technology to or from a listed person without authorization from OFAC, unless the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act (e.g., certain travel-related transactions). [05-01-2012]


336. How do I know whether a person is identified under E.O. 13608?

Please refer to the Foreign Sanctions Evaders (FSE) List. [02-06-2014]


195. I am a financial institution. What do I do if I receive a wire transfer involving a listed party?

A U.S. financial institution must reject any wire transfer involving a listed person and file a report with OFAC within 10 days. [05-01-2012]


196. I am a financial institution and I hold an account for a listed person. What do I do with the funds?

The account is not blocked; however, it is restricted and you cannot allow it to be operated without authorization from OFAC. [05-01-2012]


197. What are U.S. persons obligated to do with property of a person listed under Executive Order 13608?

Property of a listed person is not blocked, but U.S. persons must have authorization from OFAC to provide or procure such property to or from a listed person, or to provide or procure services to or from a listed person in connection with such property. Additionally, wire transfers involving the assets of an Executive Order 13608-listed person must be rejected. [05-01-2012]


198. May a U.S. person deal with an Executive Order 13608-listed person so long as the dealing does not involve Iran or Syria?

No. U.S. persons are prohibited from all transactions or dealings described in Executive Order 13608 with persons listed under Executive Order 13608, unless authorized by OFAC or where the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]


199. How is an identification or listing under Executive Order 13608 different from a designation?

Like a designation, a U.S. person is prohibited, unless authorized by OFAC or if the underlying transaction is exempt from regulation under the International Emergency Economic Powers Act, from dealing with an identified or listed person. Unlike a blocking designation, the property and the interests in property of a person listed under Executive Order 13608 are not blocked. [05-01-2012]


200. How is this different from lists maintained by the Department of Commerce?

Treasury’s authority under Executive Order 13608 has some similarities to Commerce’s authority under the Export Administration Regulations (“EAR”). Commerce may impose denial orders on persons (both foreign and U.S.) who have committed violations of the EAR or present an imminent risk of committing a violation. These individuals or organizations are listed on Commerce’s Denied Persons List. It is prohibited to deal with Denied Persons in any export transaction involving items (commodities, software, and technology) subject to the EAR. Treasury’s authority under Executive Order 13608 complements Commerce’s authority by addressing at least two types of sanctions violations that are outside the scope of the EAR. Specifically, Treasury may prohibit the provision of services (in addition to goods and technology) to or from identified or listed persons and Treasury may prohibit transactions or dealings involving goods and technology that are not subject to the EAR. However, unlike Commerce’s authority, Treasury’s authority to sanction or list an individual or entity under Executive Order 13608 may be implemented only with respect to foreign individuals or entities. [05-01-2012]


201. May a U.S. person deal with a person listed under Executive Order 13608 in a transaction that was previously licensed by OFAC?

No. U.S. persons cannot have any dealings with a person identified or listed under this Executive Order absent specific authorization from OFAC pursuant to the Executive Order 13608, unless the transaction is exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]


202. What if the transaction is already underway?

If a transaction is underway at the time of a listing, a U.S. person must cease dealing with the listed person and the U.S. person is prohibited from engaging in transactions or dealings in or related to any goods, services, or technology to or from the listed person, unless the transaction is exempt under the International Emergency Economic Powers Act, or until such time that OFAC authorizes the transactions pursuant to the Executive Order 13608. Additionally, if the transaction underway involves a wire transfer, a U.S. financial institution must reject it and file a report with OFAC within 10 days.

Like all of its programs, OFAC has the authority under Executive Order 13608 to license transactions that are consistent with U.S. foreign policy. [05-01-2012]


203. Can a U.S. person use a listed person to facilitate personal remittances to or from Iran or Syria?

No. Without specific authorization from OFAC, U.S. persons cannot use a listed person to process personal remittances. [05-01-2012]


204. Will Treasury pursue an enforcement action before identifying or listing a person pursuant to Executive Order 13608?

The authorities granted under this Executive Order are in addition to current authorities that Treasury has to pursue an enforcement action for violations of U.S. law, and Treasury is not required to pursue a civil enforcement action prior to identifying or listing a person pursuant to Executive Order 13608. [05-01-2012]


 

Treasury CISADA Findings Against Bank of Kunlun

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207. What were the criteria for this finding? How many other institutions were you looking at and why did you decide to take action against Bank of Kunlun?

Based on information made available to the Treasury Department, the Department has found that China’s Bank of Kunlun has knowingly facilitated significant transactions for various Iranian-linked banks designated by the United States under our WMD or terrorism authorities.

Upon finding that Bank of Kunlun was knowingly engaged in these activities that are sanctionable under CISADA, the Secretary of the Treasury has prohibited U.S. banks from opening or maintaining correspondent accounts or payable-through accounts in the United States for Bank of Kunlun – effectively cutting off Bank of Kunlun’s direct access to the U.S. financial system.

Since CISADA was signed into law in July 2010, Treasury has engaged with over 120 financial institutions and bank regulators in more than 60 countries all over the world to brief them on the financial provisions of CISADA, and, in cases where we had specific concerns, has shared information about those concerns.

This global engagement campaign has proven highly successful, as we have seen the overwhelming majority of financial institutions with which we have engaged change their business practices – even close any correspondent accounts with U.S. designated Iranian banks – to ensure that their access to the U.S. financial system is not put at risk.

The July 31, 2012 action against Bank of Kunlun was in response to its ongoing relationships with U.S.-designated Iranian banks.

Note: The Treasury Department had also made a CISADA finding against Iraq’s Elaf Islamic Bank on July 31, 2012. On May 17, 2013, Elaf Islamic Bank was delisted and its name was removed from the Part 561 List. [05-17-2013]


208. How are you defining “significant” transactions and financial services?

In determining whether transactions or financial services are significant, the Secretary of the Treasury may consider a number of factors related to the transactions or services, including, but not limited to: size, number, and frequency; type, complexity and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern of practice or is an isolated event; the ultimate economic benefit conferred upon the designated person(s); and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.

Bank of Kunlun

Bank of Kunlun has provided hundreds of millions of dollars’ worth of services to U.S. designated Iranian banks. These financial services include maintaining accounts, transferring payments, and serving as the paying bank for letters of credit opened by U.S. designated Iranian banks. The facilitation of hundreds of millions of U.S. dollars worth of transactions with U.S. designated Iranian banks over the past year is significant.

In 2012, after Treasury designated Bank Tejarat, Bank of Kunlun transferred hundreds of payments totaling approximately $100 million dollars for accounts it holds for Bank Tejarat and made a payment for an IRGC affiliate pursuant to a letter of credit opened by Bank Tejarat. [05-17-2013]


209. What happens to the correspondent and payable-through accounts held by Bank of Kunlun in the United States?

To our knowledge, Bank of Kunlun does not currently hold correspondent accounts with U.S. financial institutions.

The July 31, 2012 action prohibits financial institutions in the United States from opening or maintaining correspondent or payable-through accounts for Bank of Kunlun. [05-17-2013]


210. What are the consequences for a U.S. financial institution that maintains or opens a new correspondent or payable-through account for Bank of Kunlun?

A U.S. financial institution that maintains or opens a correspondent or payable-through account for Bank of Kunlun is subject to civil penalties in the amount of up to $250,000 or twice the value of the transaction, whichever is greater.

Criminal penalties of up to $1 million can be imposed for willful violations, and individuals who willfully violate the prohibition can face up to 20 years in prison. [05-17-2013]


211. If a foreign financial institution continues to do business with Bank of Kunlun, could that lead to a CISADA finding against the other institution?

Any foreign financial institution that knowingly facilitates significant transactions on behalf of designated Iranian banks – whether directly or indirectly – may face CISADA sanctions. OFAC defines “knowingly” in this context as meaning the financial institution knew or should have known of the conduct, circumstance, or result. Bank of Kunlun has demonstrated its willingness to move hundreds of millions dollars on behalf of designated Iranian banks. Accordingly, we would expect heightened due diligence in any dealings with Bank of Kunlun. [05-17-2013]


212. Does this finding affect Bank of Kunlun’s branches or subsidiaries around the world? Does this finding affect any holding companies?

The prohibitions implemented as a result of today’s action apply to Bank of Kunlun and all of its offices, around the world. [05-17-2013]


213. Are United States financial institutions that do not hold correspondent or payable-through accounts for Bank of Kunlun required to block or reject transactions that otherwise involve Bank of Kunlun?

No. U.S. financial institutions are not required to block or reject financial or trade transactions that involve Bank of Kunlun.

That said, we would expect heightened due diligence in any dealings with Bank of Kunlun given its demonstrated willingness to facilitate transactions on behalf of Iranian banks designated by well over a dozen countries worldwide. [05-17-2013]


214. What is the licensing process for U.S. financial institutions that need to conduct transactions in order to close correspondent or payable-through accounts with a foreign financial institution sanctioned pursuant to CISADA?

Treasury regulations provide a 10-day period in which U.S. financial institutions are authorized to engage in the transactions necessary to close an affected account. If a U.S. financial institution that is in the process of closing an affected account seeks to engage in transactions beyond those already authorized, Treasury may issue specific licenses on a case-by-case basis. [05-17-2013]


215. What is the difference, in practical effect, between this and a designation under one of your other authorities, like E.O. 13382?

The July 31, 2012 CISADA finding prohibits the opening or maintaining of correspondent accounts or payable-through accounts in the United States for Bank of Kunlun. This action does not require the immediate freezing of any assets that Bank of Kunlun may hold within U.S. jurisdiction. [05-17-2013]


 

Executive Order 13622, "Authorizing Additional Sanctions With Respect to Iran"

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On July 30, 2012, the President signed Executive Order 13622 to authorize additional sanctions with respect to Iran. Effective as of 12:01 a.m. Eastern Standard Time on July 31, 2012, the order provides additional sanctions authorities to the Secretary of the Treasury and the Secretary of State. The order builds, in part, on prior authorities set forth in the National Defense Authorization Act for Fiscal Year 2012 (“NDAA”) and in the Iran Sanctions Act (“ISA”). [07-31-2012]

216. What does E.O. 13622 “Authorizing Additional Sanctions With Respect to Iran” do?

Executive Order 13622 imposes new sanctions against the Iranian energy and petrochemical sectors.

E.O. 13622 authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated any significant financial transaction with the National Iranian Oil Company (“NIOC”) or Naftiran Intertade Company (“NICO”) (except for sales of refined petroleum products to NIOC or NICO that are below the dollar threshold that could trigger sanctions under ISA). It also provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petroleum or petroleum products from Iran through any channel, with the aim of deterring Iran or any other country or institution from establishing workaround payment mechanisms for the purchase of Iranian oil to circumvent the NDAA oil sanctions. The existing exception rules under the NDAA apply to these new sanctions. Thus, countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil will be excepted from this new measure as well.

In addition, E.O. 13622 provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petrochemical products from Iran.

Finally, E.O. 13622 provides authority for the Secretary of the Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of:

  • NIOC, NICO, or the Central Bank of Iran (“CBI”), or
  • the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

Additionally, E.O. 13622 grants the Secretary of State, in consultation with the Secretary of the Treasury and other cabinet officials, new powers to impose a range of sanctions on individuals or entities determined to knowingly engage in significant transactions for the purchase or acquisition of petroleum, petroleum products or petrochemical products from Iran. Individuals or entities determined to meet such criteria will be subject to the same sanctions that may be imposed under ISA. [07-31-2012]


217. Why was this authority needed?

E.O. 13622 further strengthens the Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not captured under the sanctions previously implemented against the CBI. The E.O. also addresses concerns that the Government of Iran is utilizing sales of petrochemical products to replace revenue lost as a result of previously enacted sanctions. In addition, the E.O. provides additional authority to combat and deter the use of non-bank intermediaries to conduct petroleum and petrochemical trade, provide support to or for the CBI, NIOC or NICO, or procure U.S. bank notes or precious metals for the Government of Iran. [07-31-2012]


218. What constitutes a “significant” financial transaction under the new E.O. 13622? Is there a certain dollar threshold?

Treasury expects to apply the same framework under section 1 of E.O. 13622 that it has applied under section 1245 of the NDAA and section 104 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). Under that framework, in determining whether transactions are significant, the Secretary of the Treasury may consider a number of factors related to the transaction or services, including, but not limited to: size, number, and frequency; type, complexity, and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern or practice or an isolated event; the ultimate economic benefit conferred upon the sanctions target; and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved. [07-31-2012]


219. Does E.O. 13622 mean that Iranian trade partners should no longer buy petroleum products from Iran? How will this affect exports of Iranian oil?

These new measures further strengthen the existing comprehensive Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not being captured under the sanctions previously implemented against the CBI. Iranian trade partners can continue to buy petroleum and petroleum products from Iran without risking sanctions under this E.O. if they have received a significant reduction exception under the NDAA. However, in jurisdictions that do not have a significant reduction exception, the purchase of petroleum or petroleum products and significant dealings with NIOC or NICO may be subject to sanctions under this E.O. [07-31-2012]


220. Does E.O. 13622 mean you are designating NIOC and NICO? Can countries that have been excepted from NDAA sanctions still purchase oil through these companies without facing sanctions?

All property and interests in property of NIOC and NICO subject to U.S. jurisdiction are already blocked pursuant to E.O. 13599 and U.S. persons are prohibited from all dealings with these entities. This new E.O. 13622 provides authority to sanction foreign financial institutions that knowingly conduct or facilitate any significant financial transaction with NIOC or NICO. Financial institutions in countries that have received a significant reduction exception are not subject to these sanctions for petroleum purchase transactions with NIOC and NICO while the exemption is in effect. [07-31-2012]


221. E.O. 13622 targets transactions between foreign financial institutions and NIOC or NICO. What about a NIOC or NICO subsidiary? Are transactions with those entities also sanctionable under this E.O.?

Yes. E.O. 13622 defines these terms to include any entity owned or controlled by, or operating for or on behalf, these entities. [07-31-2012]


222. Does E.O. 13622 make sanctionable activities related to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey, given that NICO reportedly has a 10 percent stake in the project?

No. The relevant provisions of E.O. 13622 do not apply to transactions involving the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [07-31-2012]


223. Are barter arrangements or other non-cash trade transactions involving petroleum, petroleum products, or petrochemical products originating from Iran sanctionable under the terms of the new E.O. 13622?

Yes. To the extent a financial institution is involved, that financial institution could be sanctioned under E.O. 13622 for a barter arrangement related to the purchase or acquisition of petroleum, petroleum products, or petrochemical products from Iran. In addition, barter transactions knowingly conducted with NIOC, NICO, or the CBI also could result in sanctions – regardless of whether a financial institution is involved – to the extent that those transactions constitute material support for, or services to, NIOC, NICO, or the CBI. [07-31-2012]


224. What are the definitions of “petroleum products” and “petrochemical products”?

The term “petroleum products” includes unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of: crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. The term does not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels.

The term “petrochemical products” includes any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea. [07-31-2012]


 

Determination Pursuant to Section 312 of the Iran Threat Reduction and Syria Human Rights Act

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Section 312 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA) requires the Secretary of the Treasury, no later than 45 days after the date of the enactment of ITRSHRA, to determine whether the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) is an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (IRGC), and to report to Congress on these determinations and the reasons for them. On September 24, 2012, the Department of the Treasury made a determination that NIOC is an agent or affiliate of the IRGC. Based on the information currently available, Treasury is not able to determine at this time whether NITC is an agent or affiliate of the IRGC.

233. Isn’t NIOC already subject to sanctions?

Yes. Executive Order 13622 provides for sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant financial transactions with NIOC (except for sales of refined petroleum products to NIOC that fall below the dollar threshold that could trigger sanctions under the Iran Sanctions Act). Executive Order 13622 also provides authority for the Secretary of the Treasury to block the property and interests in property of persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC (as well as other specified entities). Note, however, that these sanctions are not applicable to certain transactions related to the Shah Deniz pipeline project, in which NIOC has a minority stake, under Executive Order 13622. In addition, NIOC was already blocked as an entity of the Government of Iran under Executive Order 13599, which was issued pursuant to the International Emergency Economic Powers Act (IEEPA), as amended, among other authorities. Nevertheless, as described below, the determination that NIOC is an agent or affiliate of the IRGC carries consequences.


234. What is the effect of the NIOC determination? Are there CISADA implications?

As a result of this ITRSHRA section 312 determination, NIOC now is also a person described under section 104(c)(2)(E)(i) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) as an agent or affiliate of the IRGC whose property or interests in property are blocked pursuant to IEEPA. This means that foreign financial institutions determined to knowingly facilitate significant transactions or provide significant financial services for NIOC are exposed to CISADA sanctions, including prohibitions or the imposition of strict conditions on the opening or maintaining of correspondent or payable-through accounts in the United States.

In addition, section 302 of ITRSHRA requires sanctions on foreign persons determined to have knowingly provided certain material support to, or engaged in significant transactions with, the IRGC or its officials, agents, or affiliates whose property or interest in property are blocked. Consequently, foreign persons that knowingly engage in significant transactions with NIOC after the September 24, 2012 determination could be exposed to sanctions.

An “IRGC” identifier will be added to NIOC’s entry on the Specially Designated Nationals and Blocked Persons List available on OFAC’s website.

As noted below, the potential application of sanctions under section 104(c)(2)(E)(i) of CISADA and section 302 of ITRSHRA is affected by whether the country with primary jurisdiction has received a significant reduction exception from the Secretary of State.


235. What are the implications for petroleum purchase transactions involving NIOC by financial institutions and entities in countries that have received a significant reduction exception from the Secretary of State?

Significant transactions, financial services, or material support involving NIOC for the purchase of Iranian petroleum or petroleum products by a foreign financial institution or entity based in a country that has received a significant reduction exception from the Secretary of State do not carry potential sanctions consequences – under CISADA, sections 302 and 312 of ITRSHRA, section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), or sections 1 and 2 of Executive Order 13622. Sections 302 and 312 of ITRSHRA authorize the President not to impose sanctions for the purchase of petroleum or petroleum products from Iran if an exception under subsection 1245(d)(4)(D) of the NDAA applies to the country with primary jurisdiction over the foreign financial institution at the time of the transactions or the provision of services. Notwithstanding the foregoing, any significant transaction for other sanctioned entities (such as Iranian designated banks or other persons described in section 104(c)(2)(E) of CISADA) may result in sanctions, regardless of whether the transaction is for the purchase of petroleum or petroleum products and involves NIOC.


236. Does the determination regarding NITC mean that there is no affiliation between NITC and the IRGC?

This statement means only that, based on the currently available information, Treasury is not able to determine at this time that NITC is an agent or affiliate of the IRGC.


237. How does the effect of this determination compare to the effect of section 1(a) of Executive Order 13622 as to transactions with NIOC?

The effect of the determination is similar to the effect of Executive Order 13622 section 1(a), which provides for prohibitions on the opening of and prohibitions or strict conditions on maintaining correspondent accounts or payable-through accounts in the United States for foreign financial institutions determined by the Secretary of the Treasury, in consultation with the Secretary of State, to have knowingly conducted or facilitated significant financial transactions with NIOC. Executive Order 13622 likewise contains an exception that covers transactions with NIOC conducted or facilitated by foreign financial institutions based in NDAA-excepted jurisdictions. A significant difference between these authorities is that the NDAA exception in ITRSHRA section 312 is limited to transactions or financial services for the purchase of petroleum or petroleum products from Iran.


 

Section 4 of Executive Order "Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran"

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Executive Order 13628 of October 9, 2012, “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran,” (“E.O. 13628”) implements certain statutory requirements of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “TRA”), including amendments to the Iran Sanctions Act and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. Specifically, E.O. 13628 implements the requirements of Sections 204, 402, and 403 of the TRA. In addition, consistent with Section 218 of the TRA, Section 4 of E.O. 13628 prohibits foreign subsidiaries (defined below) of United States persons from knowingly violating the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of E.O. 13628, and provides for civil penalties on the U.S. parent company for any such violations.

238. What is the new prohibition on foreign subsidiaries of U.S. persons, and how does it work?

Section 4 of Executive Order 13628 prohibits an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “foreign subsidiary”) from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if that transaction would be prohibited by certain Executive orders prohibiting trade and other dealings with, and investment in, Iran and blocking the Government of Iran and Iranian financial institutions, or any regulation issued pursuant to the foregoing, if the transaction were engaged in by a United States person or in the United States. Civil penalties for the foreign subsidiary’s violation shall be applied to the U.S. parent company to the same extent that they would apply to a U.S. person for the same conduct. [10-9-2012]


239. Are foreign subsidiaries of U.S. companies covered under OFAC general licenses and/or permitted to apply for specific licenses from OFAC?

To the extent a transaction is exempt from the prohibitions of the Iranian Transactions Regulations, Executive Order (E.O.) 13599, section 5 of E.O. 13622, or Section 12 of E.O. 13628, or is authorized by a general license issued pursuant to these authorities if engaged in by a U.S. person, it would not be prohibited for a foreign subsidiary (as defined above) to engage in the transaction, provided that it satisfies all the conditions and requirements of the exemption or general license. Similarly, if the transaction is one for which a U.S. person might apply for a specific license — for example, the exportation of medical devices to Iran — a foreign subsidiary or its U.S. parent may apply for a specific license for the foreign subsidiary to engage in the transaction. Note: Whether a U.S. parent company’s specific license covers transactions by its foreign subsidiary that are otherwise prohibited by section 4 of E.O. 13628 will depend on the terms of that license and the scope of the authorized activities. [10-9-2012]


240. Is there a wind-down or safe harbor provision in Section 4 of Executive Order 13628?

Consistent with Section 218(d) of the Iran Threat Reduction and Syria Human Rights Act of 2012, Subsection 4(c) of Executive Order 13628 provides that civil penalties shall not apply if the U.S. person divests or terminates its business with the foreign subsidiary (as defined above) not later than February 6, 2013. [10-9-2012]


 

Iranian Transactions and Sanctions Regulations and the Statement of Licensing Procedure on Support Of Human Rights-, Humanitarian-, and Democracy-Related Activities With Respect to Iran

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The Office of Foreign Assets Control ("OFAC") issued a final rule in the Federal Register on October 22, 2012, changing the heading of the Iranian Transactions Regulations, 31 C.F.R. part 560 (the "ITR"), to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the "ITSR"), and amending the renamed ITSR to implement Executive Order ("E.O.") 13599 (other than section 11) and sections 1245(c) and (d)(1)(B) of the National Defense Authorization Act for Fiscal Year 2012 (the "NDAA"). These new regulations implement the blocking of the Government of Iran and all Iranian financial institutions pursuant to E.O. 13599 and the NDAA.

OFAC is adding numerous new sections to the ITSR, including prohibitions, definitions, interpretations, and licensing provisions. OFAC also is revising many existing sections of the ITSR in order to take account of the new government-wide blocking as well as the blocking of all Iranian financial institutions. Due to the extensive nature of these and other amendments described below, OFAC is reissuing the ITSR in their entirety.

In addition, OFAC is publishing on the Iran section of its Web site a Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran. The Statement of Licensing Procedure reflects procedures established pursuant to the Iran Threat Reduction and Syria Human Rights Act of 2012 (the "TRA"), which was signed into law by the President on August 10, 2012.

241. What are the major changes that the ITSR implement in superseding the ITR?

The ITSR block the property and interests in property of the Government of Iran and all Iranian financial institutions that come within the possession or control of any U.S. person, including any foreign branch, and prohibit all U.S. persons from dealing with any property interests whatsoever, present, future, or contingent, of persons identified as already blocked pursuant to E.O. 13599 and the NDAA.

OFAC is adding section 560.211 to the ITSR to implement the blocking prohibitions set forth in E.O. 13599 and the NDAA. New sections 560.212 through 560.214 are being added to set forth certain consequences and requirements that stem from the blocking prohibitions, including, inter alia, the requirement to hold blocked funds in interest-bearing accounts. New paragraphs (e) and (f) are being added to section 560.210 to incorporate two exemptions from the blocking prohibitions that are set forth in E.O. 13599. These exemptions concern the official business of the Federal Government and the property and interests in property of the Government of Iran that were blocked pursuant to Executive Order 12170 of November 14, 1979. [10-22-2012]


242. The ITSR includes revisions to the ITR pertaining to the transfer of funds to or from Iran. Accordingly, how may I transfer funds to or from Iran that arise from, and are ordinarily incident and necessary to give effect to, an underlying transaction that is authorized under the ITSR?

The ITSR authorize United States depository institutions to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account. See 31 CFR 560.516(a).

In addition, the ITSR authorize United States registered brokers or dealers in securities to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account. See 31 CFR 560.516(b).

The authorizations set forth in section 560.516 of the ITSR do not allow a U.S. person who is authorized to engage in the underlying transaction to deal directly with money service businesses (MSBs) or hawalas, wherever located. However, these authorizations do not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.516 of the ITSR. [10-22-2012]


243. How can I send personal remittances to or from Iran under the ITSR?

The ITSR authorize the transfer of funds that are noncommercial and personal in nature to or from Iran or for or on behalf of an individual ordinarily resident in Iran, other than an individual whose property and interests in property are blocked pursuant to § 560.211, subject to certain restrictions and limitations. See 31 CFR 560.550. Such transfers must be processed by a United States depository institution or a United States registered broker or dealer in securities and not by any other U.S. person. The personal remittances general license does not permit a U.S. person to deal directly with money service businesses (MSBs) or hawalas, wherever located. However, this general license does not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.550 of the ITSR.

The hand-carrying of certain noncommercial, personal remittances is also authorized, provided that the individual who is a U.S. person is hand-carrying the funds on his or her behalf, but not on behalf of another person. See 31 CFR 560.550. [10-22-2012]


244. What effect will the ITSR have on Iranian-Americans and the people of Iran?

The ITSR include several general licenses that newly authorize, or continue to authorize, activities that are otherwise prohibited by the regulations. Categories of activities affected by these changes include, among other things, visa-related transactions, journalistic activities in Iran, the sale of real property in Iran and the transfer of related proceeds to the United States, educational activities (including certain exchange programs), participation in conferences, and the exportation and reexportation of medicine and basic medical supplies to Iran. [10-22-2012]


245. What does the Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran do?

The Statement of Licensing Procedure reflects procedures established pursuant to section 413 of the TRA. These procedures stipulate that, as of the effective date of the TRA, license determinations for complete requests for authorization under this policy shall be made not later than 90 days after receipt by OFAC, with certain exceptions. The Statement of Licensing Policy applies to applications submitted by the following categories of U.S. persons seeking to engage in certain human rights-, humanitarian-, and democracy-related activities with respect to Iran: (1) entities receiving funds from the Department of State to engage in the proposed activity; (2) the Broadcasting Board of Governors; and (3) other appropriate agencies of the United States Government. The ITSR also include separate statements of licensing policy related to the sharing of information over the Internet in Iran and the support of democracy and human rights in Iran and academic and cultural exchange programs. [10-22-2012]


 

Implementation of Section 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012

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On August 10, 2012, the President signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, Public Law 112-158 (“TRA”). Section 504 of the TRA amends section 1245(d)(4)(D) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”), which the President signed into law on December 31, 2011. The section 504 amendments to the NDAA took effect February 6, 2013. Amendments to the Iranian Financial Sanctions Regulations, 31 C.F.R. part 561 (the “IFSR”) were published on March 15, 2013, to implement sections 503 and 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “TRA”) and certain provisions of Executive Order 13622 of July 30, 2012.

254. What does section 504 of the TRA do?

Pursuant to the restrictions already in place under the NDAA, foreign financial institutions (“FFIs”) face restrictions on, or loss of, correspondent and payable-through account access in the United States if they knowingly engage in significant financial transactions with the Central Bank of Iran (“CBI”) or a designated Iranian financial institution, unless an NDAA exception, such as the significant reduction exception, applies. The NDAA significant reduction exception applies if the Secretary of State, in consultation with the Secretary of the Treasury and other agencies, has determined that the country with primary jurisdiction over the FFI has significantly reduced its purchases of Iranian crude oil during a specified period of time.

Effective February 6, 2013, section 504 amends the NDAA in several ways. Most importantly, it narrows the NDAA’s significant reduction exception to (a) exempt from sanctions only transactions that conduct or facilitate bilateral trade in goods or services between the country granted the exception and Iran, and (b) require that funds owed to Iran as a result of the bilateral trade be credited to an account located in the country granted the exception and not be repatriated to Iran. In addition, it -

(i) eliminates the distinction between state-owned or -controlled FFIs (not including foreign central banks) and private FFIs, thereby expanding the scope of sanctionable transactions for state-owned or -controlled FFIs with the CBI or designated Iranian financial institutions; and

(ii) clarifies that countries that have reduced their Iranian crude oil purchases to zero may continue to receive the significant reduction exception.

The sale of agricultural commodities, food, medicine, or medical devices to Iran (the “Humanitarian Exception”) is not impacted by section 504 of the TRA.

The purchase or acquisition of petrochemicals from Iran remain sanctionable activities and are not subject to the significant reduction exception. [2-6-2013]


255. Do the section 504 modifications restrict any other dealings with Iran?

Yes, the section 504 modifications also narrow the scope of transactions excepted from certain sanctions available under E.O. 13622. Accordingly, FFIs in countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil pursuant to the NDAA, that knowingly conduct significant financial transactions with the National Iranian Oil Company (“NIOC”), the Naftiran Intertrade Company (“NICO”), or otherwise for the purchase of petroleum or petroleum products from Iran, are only eligible for the significant reduction exception if the FFIs adhere to the bilateral trade restrictions, credit the funds to an account in the country with primary jurisdiction over the FFI, and do not repatriate the funds to Iran.

Example 1: A FFI in a country which has received a significant reduction exception and with primary jurisdiction over the FFI may facilitate a transaction enabling an oil refinery in that country to purchase crude oil from Iran without having exposure to U.S. correspondent account sanctions, so long as the transaction meets section 504’s bilateral trade requirements, the funds are credited to an account in the FFI in the country with primary jurisdiction over the FFI, and the funds are not repatriated to Iran.

Example 2: If, however, a FFI in a country which has received a significant reduction exception facilitates a third country’s crude oil purchase – even a third country with a significant reduction exception – from Iran, the FFI would have exposure to sanctions because the transaction was not solely for the FFI host country’s purchase of crude oil from Iran. [2-6-2013]


256. What transactions are impacted by section 504 of the TRA?

Starting February 6, 2013, significant financial transactions* knowingly conducted or facilitated by a FFI –

(i) with the CBI or designated Iranian financial institutions;
(ii) with NIOC or NICO (irrespective of the FFI involved); or
(iii) for the purchase or acquisition of petroleum or petroleum products from Iran (irrespective of the FFI involved);

may be subject to NDAA and/or E.O. 13622 sanctions unless

(i) the country that has primary jurisdiction over the FFI conducting or facilitating such significant financial transactions has received a significant reduction exception; and
(ii) the significant financial transaction is for bilateral trade only, and any funds owed to Iran as a result of such trade are credited to an account at the FFI in the country that has primary jurisdiction over the FFI and are not repatriated to Iran.

Any FFI that knowingly facilitates significant transactions or provides significant financial services for Iranian-linked individuals or entities designated for activities related to terrorism or the proliferation of weapons of mass destruction pursuant to E.O.s 13224 and 13382 can be sanctioned under section 104(c) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and section 561.201 of the IFSR even if those transactions are not sanctionable under section 1245(d) of the NDAA and section 561.203 of the IFSR. [2-6-2013]

*These do not include sales relating to the Humanitarian Exception.


257. To which jurisdictions does the significant reduction exception apply?

As of February 6, 2013, 20 jurisdictions have been granted a 180-day significant reduction exception.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on September 14, 2012: Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and the United Kingdom.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on December 7, 2012: China, India, Malaysia, Republic of Korea, Singapore, South Africa, Sri Lanka, Taiwan, and Turkey. [2-6-2013]


258. What is meant by section 504’s requirement that bilateral trade consist of trade in goods and services between the country with primary jurisdiction over the FFI and Iran?

OFAC interprets bilateral trade between Iran and the country with primary jurisdiction over the FFI to mean trade in only those goods or services originating in (e.g., produced in or substantially transformed in) –

(i) the country with primary jurisdiction over the FFI conducting or facilitating the transaction, or
(ii) Iran (for purposes of the import of Iranian-origin goods or services by the country with primary jurisdiction over the FFI),

and the trade in services cannot include brokering transactions involving goods or services from or to third countries.

Furthermore, the goods or services must be exported and sold directly to either the country with primary jurisdiction over the FFI (in the case of Iranian-origin goods or services), or Iran (in the case of goods or services originating in the country with primary jurisdiction over the FFI).

The Humanitarian Exception is not impacted by section 504’s bilateral trade limitations (see FAQ 265). [2-6-2013]


259. What can a FFI do with the funds resulting from the import of Iranian-origin goods or services once the funds are credited to an account? Can funds be transferred to other accounts?

Section 504 of the TRA requires that, in order for a sanctionable transaction to fall within the bounds of the significant reduction exception, any funds owed to Iran as a result of the bilateral trade transaction must be credited to an “account located in the country with primary jurisdiction over the [FFI].” For purposes of implementing this requirement, OFAC interprets the “account located in the country with primary jurisdiction over the [FFI]” to be an account in the country with primary jurisdiction over the FFI, and at the same FFI that facilitated the transaction for the importation of goods or services from Iran.

Once the funds are deposited in the FFI, they can be -

(i) used to pay for a purchase by Iran of goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 1); or
(ii) transferred to a SPECIAL PURPOSE ACCOUNT (see FAQ 260) within that same FFI, in the country with primary jurisdiction over the FFI, where the funds may be later debited to purchase goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 2).

The funds may not be repatriated to Iran. [2-6-2013]

 


260. What is a SPECIAL PURPOSE ACCOUNT for purposes of the NDAA’s significant reduction exception?

A SPECIAL PURPOSE ACCOUNT is an account set up with conditions and safeguards that require the account to be used only for bilateral trade in goods or services between Iran and the country with primary jurisdiction over the FFI, and for sales made under the Humanitarian Exception (see FAQ 265). Funds paid as a result of bilateral trade under the NDAA’s significant reduction exception may be transferred to a SPECIAL PURPOSE ACCOUNT, so long as the account is at the same FFI that facilitated or conducted the original transaction, in the country with primary jurisdiction over the FFI. [2-6-2013]


261. Are there any circumstances in which funds can be transferred to third-country financial institutions?

Transfers on or after February 6, 2013, of funds deposited in the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT to third-country financial institutions are not covered by the NDAA’s significant reduction exception, and create exposure to sanctions for FFIs conducting or facilitating such transfers, unless the transfer is to pay a third-country exporter for sales made pursuant to the Humanitarian Exception (see FAQ 265). [2-6-2013]


262. Can funds be withdrawn from the RECIPIENT ACCOUNT or a SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, funds withdrawn from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT at the FFI may only be used to pay for bilateral trade or purchases relating to the Humanitarian Exception. Cash withdrawals from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT would be deemed to fall outside of the scope of bilateral trade and would expose the FFI to sanctions. Bank checks written on the account may be used only to pay for bilateral trade or purchases relating to the Humanitarian Exception, and are subject to further restrictions set out in FAQ 263 below. [2-6-2013]


263. Who can receive payments from funds credited to a RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, the person receiving payment (e.g., the manufacturer or service provider) for goods or services being exported to Iran must be

(i) a citizen, national, or permanent resident of the country with primary jurisdiction over the FFI maintaining the accounts containing the bilateral trade funds; or
(ii) an entity organized under the laws of the country with primary jurisdiction over the FFI maintaining such accounts.

Furthermore, the person receiving such payment may not be -

(i) the Government of Iran (as defined in 31 CFR Part 561.321) (“GOI”);* or
(ii) a financial institution that appears on the List of Foreign Financial Institutions Subject to Part 561, which is maintained on the Office of Foreign Assets Control’s Web site (www.treasury.gov/ofac). [2-6-2013]

*The term “Government of Iran” as defined in 31 CFR Part 561.321 includes: (a) The state and the Government of Iran, as well as any political subdivision, agency, or instrumentality thereof; (b) Any entity owned or controlled directly or indirectly by the foregoing; (c) Any person to the extent that such person is, or has been, or to the extent that there is reasonable cause to believe that such person is, or has been, acting or purporting to act directly or indirectly on behalf of any of the foregoing; and (d) Any person or entity identified by the Secretary of the Treasury to be the Government of Iran under 31 CFR Part 560.


264. Can funds be remitted to Iran or the GOI without exposure to sanctions?

No. If funds from the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT are remitted, directly or indirectly, to Iran, or paid to any person that is the GOI, the FFI would be exposed to sanctions. [2-6-2013]


265. Can the funds be used for sales made under the Humanitarian Exception?

The NDAA generally exempts from sanctions sales made under the Humanitarian Exception (i.e., the sale of agricultural commodities, food, medicine, or medical devices from third countries to Iran). Funds deposited in the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT can be used to pay for sales made pursuant to the Humanitarian Exception. [2-6-2013]


314. Can an exporter of agricultural commodities, food, medicine, or medical devices get paid out of a Central Bank of Iran (CBI) account at a foreign financial institution (FFI) in a country with a significant reduction exception, even though the exporter is located in a third-country? Can the third-country exporter’s bank handle this transaction?

Yes. So long as the transaction does not involve a designated individual or entity, banks on the Part 561 List located on OFAC’s website (http://www.treasury.gov/ofac/downloads/561list.pdf), or otherwise proscribed conduct, such transactions are not sanctionable under U.S. law. Furthermore, there is no requirement under U.S. law that agricultural commodities, food, medicine, or medical devices be routed through the country with the significant reduction exception.

Such a payment mechanism is not the exclusive mechanism for the purchase of agricultural commodities, food, medicine, or medical devices under U.S. law. Other options include receiving payment from a third-country account of the CBI or a non-designated Iranian financial institution.

The Department of the Treasury Office of Foreign Assets Control regulations describe the exception for transactions relating to agricultural commodities, food, medicine, or medical devices in 31 CFR § 561.203(g) and Note 2 to 51 CFR § 561.203. Additional information and clarifying guidance about humanitarian assistance and related exports to the Iranian people can be found at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/hum_exp_iran.pdf. [6-2013]


266. Does the November 8, 2012 designation of NIOC under E.O. 13382 impact the scope of permissible transactions by FFIs in significantly reducing countries?

Yes. On September 24, 2012, NIOC was identified as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (“IRGC”) under section 312 of the TRA, and designated on November 8, 2012, under E.O. 13382 for providing services and support to the IRGC. Accordingly, CISADA applies to transactions with NIOC. As a result of these additional sanctions against NIOC, only transactions solely for the purchase of petroleum or petroleum products from NIOC will fall within the scope of the significant reduction exception. A FFI in a significantly reducing country that is found to knowingly conduct or facilitate other types of significant transactions with NIOC (i.e., transactions unrelated to the purchase of petroleum or petroleum products from Iran) would face exposure to CISADA sanctions.

Example 3: If a FFI in a country with a significant reduction exception facilitates a transaction enabling a company in that country to purchase drilling equipment from NIOC, the FFI risks restrictions on, or loss of, correspondent and payable-through account access in the United States, because the transaction was not solely for the purchase of petroleum or petroleum products from Iran. [2-6-2013]


267. What are definitions for the following NDAA terms: “significant financial transaction,” “knowingly,” “food, medicine, and medical devices,” “foreign financial institution,” and “country with primary jurisdiction over the FFI,”?

These definitions are set out in 31 CFR Part 561. [2-6-2013]


 

Issuance of the Executive Order “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran” and the Implementation of Certain Provisions of the Iran Freedom And Counter-Proliferation Act of 2012 (IFCA)

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On June 3, 2013, the President signed an Executive Order (E.O.) “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran.” The E.O. implements certain statutory provisions of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) and authorizes the imposition of additional sanctions with respect to Iran. Most of the IFCA provisions target conduct occurring on or after July 1, 2013. The E.O. becomes effective on July 1, 2013. [06-03-13]

 


General Questions (Print)

 

313. What is the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA)?

IFCA was signed into law on January 2, 2013, as a part of the National Defense Authorization Act for Fiscal Year 2013, and provides for several new sanctions related to Iran. IFCA authorizes broad sanctions on: certain activities related to Iran’s energy, shipping, and shipbuilding sectors; the sale, supply, or transfer to or from Iran of precious and certain other metals, graphite, coal, and industrial software; the provision of underwriting services, insurance, or reinsurance to activities and persons targeted by U.S. sanctions against Iran; financial transactions involving sanctioned Iranian individuals and entities; and persons involved in the diversion of goods intended for the Iranian people. Most of the IFCA provisions target conduct occurring on or after July 1, 2013.

The U.S. Department of the Treasury will be issuing regulations to implement certain provisions in IFCA. In addition, the U.S. Department of State expects to adopt an interpretation of IFCA similar to that set forth below. [06-03-13]


288. What is the purpose of the Executive Order of June 3, 2013 entitled “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran” (E.O.)?

The E.O. implements certain statutory provisions of IFCA. The E.O. also authorizes the imposition of additional sanctions with respect to Iran, targeting certain transactions and other activity related to the Iranian rial, Iran’s automotive sector, and persons that materially assist Iranian persons on the list of Specially Designated Nationals and Blocked Persons (SDN List) as well as certain persons whose property and interests in property are blocked under the E.O. or Executive Order 13599. The E.O. becomes effective at 12:01 a.m. eastern daylight time on July 1, 2013. Questions and Answers (Q&As) 306-312 below provide guidance regarding the E.O.

The Department of the Treasury will be issuing regulations to implement certain provisions in the E.O. In addition, the Department of State expects to adopt an interpretation of the E.O. similar to that set forth below [06-03-13]

 


Iran Freedom and Counter-Proliferation Act of 2012 (Print)

 

289. How will the following IFCA terms be interpreted: “Iran,” “knowingly,” “significant,” “transfer,” “Iranian person included on the SDN List ”?

As a general matter, we intend to rely, where applicable, on definitions of terms previously included in Treasury regulations.

“Iran”

The Iranian Financial Sanctions Regulations (31 CFR part 561) (IFSR) define “Iran” as the Government of Iran and the territory of Iran and any other territory or marine area, including the exclusive economic zone and continental shelf, over which the Government of Iran claims sovereignty, sovereign rights, or jurisdiction, provided that the Government of Iran exercises partial or total de facto control over the area or derives a benefit from economic activity in the area pursuant to international arrangements. (31 CFR § 561.329)

“Iranian person included on the SDN List”

OFAC anticipates publishing on its website a list to assist in identifying Iranian persons included on the SDN List for purposes of IFCA and the E.O.

“knowingly”

The IFSR define “knowingly” with respect to conduct, a circumstance, or a result, to mean that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result. (31 CFR § 561.314)

“significant”

As a general matter, in determining for purposes of IFCA and the E.O. whether transactions, financial transactions, or financial services are significant, the Department of the Treasury will rely on the interpretation set out in §561.404 of the IFSR. The IFSR provide a list of broad factors that can play a role in the determination whether transactions, financial services, and financial transactions are significant, including: (a) the size, number, and frequency of the transactions, financial services, or financial transactions; (b) the type, complexity, and commercial purpose of the transactions, financial services, or financial transactions; (c) the level of awareness of management and whether the transactions are part of a pattern of conduct; (d) the nexus of the transactions, financial services, and financial transactions and blocked persons; (e) the impact of the transactions, financial services, and financial transactions on statutory objectives; (f) whether the transactions, financial services, and financial transactions involve deceptive practices; (g) whether the transactions solely involve the passive holdings of Central Bank of Iran (CBI) reserves or repayment by the CBI of official development assistance or the transfer of funds required as a condition of Iran’s membership in an international financial institution; and (h) other relevant factors that the Secretary of the Treasury deems relevant. We anticipate adopting a similar approach to interpreting the term “significant” as it applies to goods or services.

“transfer”

“Transfer” includes import, transshipment, export, or reexport, whether direct or indirect. [06-03-13]


290. Are payments or deliveries that are made on or after July 1, 2013, for contracts that existed prior to July 1, 2013, exempted from IFCA provisions?

There is no general exception for payments, sales, deliveries, or transfers arising out of contracts entered into prior to July 1, 2013, on or after which date certain activities become sanctionable under IFCA. The assessment of whether such payments are “significant” or result in the transfer of “significant goods or services” or “significant financial support” will be done on a case-by-case basis in line with the criteria discussed above. [06-03-13]


291. How does the Executive Order relate to the IFCA provisions?

The E.O. implements and builds upon certain provisions of IFCA as set out in more detail in Q&As 306 and 312 below. [06-03-13]


292. What are the implications of IFCA on the provision of humanitarian goods to the people of Iran?

IFCA generally excepts from sanctions transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran, as set out in more detail in Q&As 297 and 304. (See Q&A 312 for a similar exception in the E.O.) [06-03-13]

 


Sanctions Relating to Iran’s Energy, Shipping, and Shipbuilding Sectors (Print)
IFCA provides for sanctions involving activities or transactions related to Iran’s energy, shipping, and shipbuilding sectors.

 

293. What will the “energy, shipping, and shipbuilding sectors of Iran” mean for the purposes of IFCA?

We anticipate that regulations to be promulgated will define “energy sector of Iran” to include activities involving the exploration, extraction, production, refinement, or liquefaction of petroleum, natural gas, or petroleum products in Iran. (See also discussion of activities involving natural gas in Q&A 297.)

We anticipate that regulations to be promulgated will define “shipping sector of Iran” to include activities involving the transportation of goods by seagoing vessels, including oil tankers and cargo vessels, flying the flag of the Islamic Republic of Iran, or owned, controlled, chartered, or operated directly or indirectly by the Government of Iran. Two entities previously identified or designated under Treasury authorities that are part of the shipping sector of Iran are the National Iranian Tanker Company and the Islamic Republic of Iran Shipping Lines.

We anticipate that regulations to be promulgated will define “shipbuilding sector of Iran” to include activities involving the construction of seagoing vessels, including oil tankers and cargo vessels, in Iran. [06-03-13]


294. How will I know if someone is part of Iran’s energy, shipping, or shipbuilding sectors or is a port operator in Iran?

Persons determined to be part of Iran’s energy, shipping, or shipbuilding sectors, or a port operator in Iran for purposes of section 1244(c) will be identified as such on the SDN List. Knowingly providing certain significant support to persons determined to be part of Iran’s energy, shipping, or shipbuilding sectors, or a port operator in Iran will have exposure to sanctions, unless the transaction is excepted (see also Q&A 297). [06-03-13]


295. What are goods or services used in connection with Iran’s energy, shipping, or shipbuilding sectors for purposes of section 1244(d)(3)?

We anticipate that regulations to be promulgated will define goods and services used in connection with Iran’s energy, shipping and shipbuilding sectors to include:

a. Energy Sector: In the case of Iran’s energy sector, goods or services that contribute to,

  • Iran’s ability to develop its domestic petroleum resources;
  • The maintenance or expansion of Iran’s domestic production of petroleum products; and
  • Iran’s ability to import or export petroleum or petroleum products.
b. Shipping Sector: In the case of Iran’s shipping sector,
  • The provision of crude and product tankers to Iran;
  • The provision of registry, flagging, or classification services of any kind;
  • The supervision of and participation in the repair of ships and their parts;
  • The inspection, testing, and certification of marine equipment materials and components;
  • The carrying out of surveys, inspections, audits and visits, and the issuance, renewal or endorsement of the relevant certificates and documents of compliance, as they relate to ships and shipping; and
  • Any other goods or services relating to the maintenance, supply, bunkering, and docking of vessels flying the flag of the Islamic Republic of Iran, or owned, controlled, chartered, or operated directly or indirectly by, or for or on behalf of the Government of Iran (GOI) or an Iranian person.
c. Shipbuilding Sector: In the case of Iran’s shipbuilding sector,
  • The building and refit of vessels;
  • The provision or refit of items such as (i) steam turbines and their parts for marine propulsions, (ii) marine propulsion engines and parts used solely or principally with them, (iii) other gas turbines for marine propulsion, (iv) ship or boat propellers and blades, and (v) direction finding compasses and other navigational instruments and appliances solely for the maritime industry;
  • Other goods used in connection with building and propulsion of vessels; and
  • Technical assistance and training relating to, and financing of, the building, maintenance or re-fitting of vessels.
Sections 1244(d)(1) and (2) of IFCA make sanctionable certain transactions for the sale, supply, or transfer to or from Iran of such goods and services if they are significant goods or services used in connection with Iran’s energy, shipping, or shipbuilding sectors. (See Q&A 289 above for an interpretation of “significant.”) The provision of goods or services identified above could be sanctionable regardless of whether any person involved in the transaction has been determined to be part of Iran’s energy, shipping, or shipbuilding sectors. [06-03-13]

 


296. Will payment for bunkering of third-country ships carrying non-sanctionable goods to or from Iran be subject to sanctions?

If a non-Iranian vessel is transporting non-sanctionable goods to or from Iran, bunkering in a third country will not be subject to sanctions provided that no other sanctionable activity is involved. [06-03-13]


297. Are there any exceptions to the sanctions provisions of section 1244 of IFCA?

The following transactions are excepted from the provisions of section 1244 of IFCA.

a. Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran or for the provision of humanitarian assistance to the people of Iran.

b. The export of petroleum or petroleum products from Iran to a country with a significant reduction exception under section 1245(d)(4)(D)(i) of the National Defense Authorization Act for Fiscal Year 2012.

c. A significant financial transaction conducted or facilitated by a foreign financial institution (FFI), provided that a significant reduction exception under 1245(d)(4)(D)(i) of the National Defense Authorization Act For Fiscal Year 2012 (NDAA) applies to the country with primary jurisdiction over the FFI and the financial transaction is for trade in goods or services (i) between Iran and the country with primary jurisdiction over the FFI and (ii) not otherwise subject to sanctions under the law of the United States, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR §561.203(j) and 31 CFR §561.203(k).

d. The sale, supply, or transfer of natural gas to or from Iran. Section 1244, however, does set out sanctions that may apply to FFIs that conduct or facilitate a transaction for the sale, supply, or transfer of natural gas to or from Iran unless the financial transaction is for trade in goods or services (i) between Iran and the country with primary jurisdiction over the FFI and (ii) not otherwise subject to sanctions under the law of the United States, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR §561.203(j) and 31 CFR §561.203(k).

e. Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [06-03-13]


315. Will routine payments or fees be subject to sanctions if they are made to a person determined to be a port operator in Iran and if the vessel is carrying non-sanctioned goods?

Any company involved in loading or unloading cargo in Iran should exercise great caution to avoid engaging in transactions with entities designated by the United States, including the Tidewater Middle East Co. and South Shipping Line Iran which were both designated for their involvement in Iran’s proliferation of weapons of mass destruction. However, to the extent that a shipping company transacts with port operators in Iran that have been identified as such under IFCA but not otherwise designated, and as long as such payments are limited strictly to routine fees including port dues, docking fees, or cargo handling fees, paid for the loading and unloading of non-sanctioned goods at Iranian ports, we anticipate that such transactions would not be considered significant transactions for the purposes of IFCA. Non-routine and/or large payments or fees that materially exceed standard industry rates could expose a person to sanctions. Furthermore, providing any port operator in Iran with any significant financial, material, technological, or other support could expose a person to sanctions. [07-01-13]

 


Sanctions Relating to the Sale, Supply, or Transfer of Certain Materials to or from Iran (Print)
IFCA provides for sanctions involving the sale, supply, or transfer of certain materials to or from Iran.

 

298. What materials are considered graphite, raw or semi-finished metals?

For purposes of IFCA, we anticipate that regulations to be promulgated will define graphite, raw or semi-finished metals described in section 1245(d) of IFCA to include steels; aluminum metal and its alloys; base metals of single or complex borides of titanium; beryllium metal and its alloys; boron metal and its alloys; cobalt metal and its alloys; copper infiltrated tungsten metal; copper-beryllium metal; germanium metal and its alloys; graphites; hastelloy; inconel; magnesium metal and its alloys; molybdenum metal and its alloys; neptunium-237 metal and its alloys; nickel metal and its alloys; nickel aluminide metals; niobium metal and its alloys; niobium-titanium filaments; plutonium metal and its alloys; porous nickel metal; silver infiltrated tungsten metal; tantalum metal and its alloys; tellurium metal and its alloys; titanium aluminide metals; titanium metal and its alloys; tungsten metal, tungsten carbide metal, and their alloys; uranium titanium alloy metals; and zirconium metal and its alloys and compounds. [06-03-13]


299. What are considered precious metals?

For purposes of IFCA, we anticipate that regulations to be promulgated will define the term “precious metals” to include silver (including silver plated with gold or platinum, unwrought or in semi-manufactured forms, or in powder form); gold (including gold plated with platinum, unwrought or in semi-manufactured forms, or in powder form); base metals or silver, clad with gold, not further worked than semi-manufactured; platinum, unwrought or in semi-manufactured forms, or in powder form; iridium; osmium; palladium; rhodium; ruthenium; base metals, silver or gold, clad with platinum, not further worked than semi-manufactured; waste and scrap of precious metal or of metal clad with precious metals, other waste and scrap containing precious metal or precious-metal compounds, of a kind used principally for the recovery of precious metal. [06-03-13]


300. For purposes of sanctions under section 1245, how will I know which sectors are controlled by Iran’s Islamic Revolutionary Guard Corps?

By July 1, 2013, a report will be published in the Federal Register with respect to which sectors of the Iranian economy are controlled directly or indirectly by Iran’s Islamic Revolutionary Guard Corps. [06-03-13]


301. How will the determination be made as to whether materials are used in a manner that would make them subject to sanctions under section 1245 of IFCA?

A FFI, prior to conducting or facilitating a significant financial transaction for the sale, supply, or transfer to or from Iran of the materials will need to undertake due diligence to ensure that the transaction does not involve the materials listed in section 1245(d) – as described in part in Q&A 298 – being sold, supplied, or transferred, directly or indirectly, to or from Iran for sanctionable uses under section 1245. [06-03-13]


302. Are there any exceptions to section 1245 of IFCA?

A person will not be subject to sanctions under section 1245 of IFCA if a determination is made by the Department of the Treasury or the Department of State, as appropriate, that the person has established and enforced official policies, procedures, and controls to ensure that the person does not sell, supply, or transfer to or from Iran, or facilitate or conduct a significant financial transaction to sell supply, or transfer to or from Iran, materials listed in section 1245 as sanctioned under section 1245. The Department of the Treasury or the Department of State, as appropriate, will make this determination on a case by case basis as part of an investigation or enforcement action by the relevant Department. [06-03-13]

 


Sanctions Relating to Insurance, Reinsurance, or Underwriting (Print)

 

303. Which insurance, reinsurance, or underwriting activities are potentially subject to sanctions under section 1246(a)(1)?

A number of insurance activities are subject to sanctions under IFCA, including providing insurance, reinsurance, or underwriting services to persons on the SDN List sanctioned for activities with respect to Iran. [06-03-13]


304. Are there exceptions to insuring, reinsuring, or underwriting sanctioned activities?

Yes. IFCA includes the following exceptions to insuring, reinsuring, or underwriting sanctioned activities.

a. Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran or for the provision of humanitarian assistance to the people of Iran can be insured, reinsured, or underwritten.
b. A person that provides insurance, reinsurance, or underwriting services to sanctioned activity, if a determination is made by the Department of the Treasury or the Department of State, as appropriate, that the person has established and enforced official policies, procedures, and controls to ensure that the person does not underwrite or enter into a contract to provide insurance or reinsurance for activities targeted under section 1246 of IFCA. The Department of the Treasury or the Department of State, as appropriate, will make this determination on a case by case basis as part of an investigation or enforcement action by the relevant Department. [06-03-13]

 


Sanctions Relating to FFIs that Facilitate Transactions with SDNs (Print)

 

305. Sanctions under section 1247 of IFCA apply to FFIs that facilitate financial transactions on behalf of an Iranian person on the SDN List. How does the Executive Order relate to section 1247?

The E.O. tightens the financial sanctions applicable to FFIs under section 1247 of IFCA. (See Q&A 312 below for a discussion of the applicable financial sanctions and exceptions.) [06-03-13]

 


Executive Order (Print)

 

306. How does the Executive Order relate to the IFCA provisions?

The E.O. provides additional tools related to the IFCA provisions by:

a. Authorizing prohibitions or restrictions on the importation of goods; and
b. Implementing the statutory requirements of section 105C of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as added by section 1249 of IFCA, by blocking the property and interests in property and suspending the entry into the United States of persons determined to have engaged, on or after January 2, 2013, in corruption or other activities relating to the diversion of goods intended for the Iranian people or the misappropriation of proceeds from the sale or resale of such goods. [06-03-13]


307. In addition to implementing certain IFCA provisions, what else does the Executive Order do?

In addition to implementing IFCA, the E.O. authorizes both new sanctions with respect to Iran and the broadening of existing sanctions.

The new sanctions under the E.O. target significant transactions related to (1) the purchase or sale of Iranian rials and derivative, swap, future, forward, or other similar contracts whose value is based on the exchange rate of the Iranian rial, as well as the maintenance of significant funds and accounts outside the territory of Iran denominated in the Iranian rial (see Q&A 309 below), and (2) Iran’s automotive sector (see Q&As 310 and 311 below).

The broadened sanctions under the E.O. allow for the imposition of sanctions on:

a. Persons that materially assist certain Iranian persons on the SDN List (see Q&A 308 below);
b. Persons that materially assist certain other persons whose property and interests in property are blocked under Executive Order 13599 and the E.O. (see Q&A 308 below); and
c. FFIs that knowingly conduct or facilitate a significant financial transaction on behalf of an Iranian person included on SDN List, and certain other persons whose property and interests in property are blocked under Executive Order 13599 or the E.O. (see Q&A 312 below). [06-03-13]

 


Sanctions Relating to the Provision of Material Assistance to Certain Persons (Print)

 

308. What are the implications of the material assistance provision of the Executive Order?

Subsection 2(a)(i) of the E.O. authorizes the Department of the Treasury to block the property and interests in property of persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, (i) Iranian persons included on the SDN List as well as other persons included on the SDN List whose property and interests in property are blocked pursuant to Executive Order 13599, in both cases other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599, and (ii) persons whose property and interests in property are blocked pursuant to subsection 2(a)(i) of the E.O. Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey are excepted from the material support provision of the E.O.

In implementing this provision, the United States Government will take appropriate steps to avoid, among other things, undue impacts on the access of the people of Iran to humanitarian items, telecommunications, and other basic services. [06-03-13]

 


Sanctions Relating to Certain Transactions Involving the Iranian Rial (Print)

 

309. What transactions involving the Iranian rial will be subject to sanctions?

FFIs risk correspondent and payable-through account and blocking sanctions for (i) knowingly conducting or facilitating, on or after July 1, 2013, significant transactions related to the purchase or sale of Iranian rials or a derivative, swap, future, forward, or other similar contract whose value is based on the exchange rate of the Iranian rial, or (ii) maintaining, on or after July 1, 2013, significant funds or accounts outside the territory of Iran denominated in the Iranian rial. [06-03-13]

 


Sanctions Relating to Iran’s Automotive Sector (Print)

 

310. What is considered Iran’s automotive sector for purposes of the Executive Order?

The E.O. authorizes the imposition of correspondent and payable-through account and Iran Sanctions Act-style sanctions for certain transactions, on or after July 1, 2013, for the sale, supply, or transfer to Iran of significant goods or services used in connection with Iran’s automotive sector. The E.O. defines the automotive sector of Iran as the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles, as well as original equipment manufacturing and after-market parts manufacturing relating to such vehicles. [06-03-13]


311. What are goods or services used in connection with Iran’s automotive sector for purposes of the E.O.?

We anticipate that regulations to be promulgated will define goods or services used in connection with Iran’s automotive sector to include goods or services that contribute to (i) Iran’s ability to research, develop, manufacture, and assemble light and heavy vehicles, and (ii) the manufacturing or assembling of original equipment and after-market parts used in Iran’s automotive industry.

The E.O. makes sanctionable certain transactions for the sale, supply, or transfer to Iran of “significant” goods or services used in connection with the automotive sector of Iran. (See Q&A 289 above for an interpretation of “significant.”) [06-03-13]


316. Is the sale, supply, or transfer of finished vehicles or “auto kits” to Iran sanctionable under the E.O.?

The E.O. does not make sanctionable the export of finished vehicles to Iran if no further assembly or manufacturing is required. As such, exporting fully assembled and finished vehicles to Iran for sale by a non-sanctioned Iranian dealer or distribution network would not be sanctionable.

In contrast, “auto kits” (or “knock-down kits”) exported to Iran for assembly in Iran would be considered goods or services used in connection with the automotive sector of Iran and the export of such kits to Iran would be sanctionable if the transaction is “significant.” (See Q&A 289 above for an interpretation of “significant.”) [07-01-13]


317. Is the sale, supply, or transfer of goods or services for the maintenance of finished vehicles sanctionable under the E.O.?

Goods or services for the maintenance of finished vehicles exported to Iran would generally not be considered “significant goods or services used in connection with the automotive sector of Iran,” for the purposes of the E.O., and the provision of such goods or services would generally not be sanctionable. However, the export, sale, or distribution of goods (e.g., auto parts and accessories) or services that would contribute to Iran’s ability to manufacture or assemble vehicles, or manufacture original equipment and after-market parts in Iran could create exposure to sanctions. Persons exporting parts and services to Iran for the maintenance or upkeep of finished automobiles, and foreign financial institutions facilitating such exports, should exercise caution to ensure that the parts or services are not diverted for the manufacturing or assembly of vehicles in Iran or the manufacturing of original equipment or after-market parts in Iran, and are used only for maintenance and upkeep. [07-01-13]

 


Financial Sanctions Relating to Financial Transactions on Behalf of Certain Persons (Print)

 

312. How does the Executive Order tighten the financial sanctions applicable to FFIs under section 1247 of IFCA?

Section 3 of the E.O. tightens the financial sanctions applicable to FFIs under section 1247 of IFCA and provides for correspondent and payable-through account sanctions on FFIs that knowingly conduct or facilitate a significant financial transaction on behalf of an Iranian person included on the SDN List (other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599) or any other person included on the SDN List whose property and interests in property are blocked pursuant to Executive Order 13599 (other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599) or subsection 2(a)(i) of the E.O.

The following transactions would not be subject to sanctions under this section of the E.O.:

a. Transactions for the provision of agricultural commodities, food, medicine, or medical devices to Iran.
b. A significant financial transaction conducted or facilitated by a FFI for the purchase of petroleum or petroleum products from Iran if a significant reduction exception under section 1245(d)(4)(D) of the NDAA applies to the country with primary jurisdiction over such FFI and the financial transaction is for trade between Iran and the country with primary jurisdiction over the FFI, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR § 561.203(j) and 31 CFR § 561.203(k).
c. A significant financial transaction conducted or facilitated by a FFI for the sale, supply, or transfer of natural gas to or from Iran only if the financial transaction is solely for trade between the country with primary jurisdiction over the FFI and Iran, and any funds owed to Iran as a result of such trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR § 561.203(j) and 31 CFR § 561.203(k).
d. Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [06-03-13]


 

General Licenses (GL) for Agricultural Commodities, Medicine, and Medical Devices in the Iranian Transactions and Sanctions Regulations

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318. Does the GL for basic medical supplies authorize the export of all medical devices?

No. The GL for basic medical supplies appearing at section 560.530(a)(3)(i) of the Iranian Transactions and Sanctions Regulations (“ITSR”) authorizes the export or reexport to Iran of items defined in section 560.530(a)(3)(ii) of the ITSR and included on the List of Basic Medical Supplies (the “List”), which is maintained on OFAC’s Web site. Any changes to the List will be published in the Federal Register. Over 200 categories of medical supplies are included on the List. Basic medical supplies, as defined in 31 CFR 560.530(a)(3)(ii), also include EAR99-classified components, accessories and optional equipment that are designed for and are for use with an EAR99-classified medical device included on the list, but does not include replacements parts for such devices. [01-20-14]


319. Does the GL for basic medical supplies authorize the export of these items to all entities in Iran?

No. While the GL under section 560.530(a)(3)(i) of the ITSR authorizes exports or reexports to most entities in Iran, it does not authorize exports or reexports to military or law enforcement entities, nor does it authorize exports or reexports to persons whose property and interests in property are blocked under counter-proliferation, counter-terrorism, counter-narcotics, or other authorities administered by OFAC, including such persons identified on OFAC’s Specially Designated Nationals and Blocked Persons List. When engaging in activities pursuant to this GL, exporters and reexporters are expected to undertake due diligence regarding all parties to the transactions, just as they would when acting pursuant to a specific license issued by OFAC. [01-20-14]


361. What items and persons are excluded from the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations?

The specified items excluded from the scope of the agricultural commodities general license are: castor beans, castor bean seeds, certified pathogen-free eggs (unfertilized or fertilized), dried egg albumin, live animals (excluding live cattle), embryos (excluding cattle embryos), Rosary/Jequirity peas, non-food-grade gelatin powder, peptones and their derivatives, super absorbent polymers, western red cedar, and all fertilizers.

The persons excluded from the scope of the agricultural commodities general license are Iranian military or law enforcement purchasers or importers. In addition, the agricultural commodities general license does not authorize any transaction or dealing with any person whose property and interests in property are blocked, or who is designated or otherwise subject to any sanction, under the terrorism, proliferation of weapons of mass destruction, or narcotics trafficking programs administered by OFAC, among others.

Exports or reexports involving the specified items or excluded persons discussed above continue to require the level of review afforded by specific licensing and therefore are not authorized by the agricultural commodities general license. [4-7-2014]


362. Is the export or reexport of non-U.S.-origin agricultural commodities, medicine, or medical devices to Iran authorized?

Yes. The definitions of the terms “agricultural commodities,” “medicine,” and “medical device” used in the relevant general licenses in the Iranian Transactions and Sanctions Regulations include, in the case of items subject to the Export Administration Regulations (EAR), items that are designated as EAR99 and, in the case of items not subject to the EAR, items that would be designated as EAR99 if they were located in the United States. For example, under the agricultural commodities general license, a company located in the United States would be authorized to arrange for the export from a third country to Iran of agricultural commodities produced in the third country if those commodities would be designated as EAR99 if they were located in the United States, provided that all conditions of the general license are otherwise satisfied. [4-7-2014]


363. Is the export or reexport by non-U.S. persons of agricultural commodities, medicine, or medical devices to Iran authorized?

Yes. A non-U.S. person may export or reexport agricultural commodities, medicine, or medical devices to Iran under the relevant general licenses in the Iranian Transactions and Sanctions Regulations, provided that the items are subject to the EAR and all conditions of the relevant general license are otherwise satisfied. For example, a non-U.S. person would be authorized under the medicine and medical supplies general license to arrange for the export or reexport to Iran of EAR99 medicines located in the United States or a third country.

In addition, an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “U.S.-owned or -controlled foreign entity”) may export or reexport agricultural commodities, medicine, and medical devices to Iran under the relevant general licenses in the Iranian Transactions and Sanctions Regulations (including both items subject to the EAR and items not subject to the EAR), provided that all conditions of the relevant general license are otherwise satisfied. For example, a U.S.-owned or -controlled foreign entity would be authorized under the medicine and medical supplies general license to arrange for the reexport to Iran of EAR99 medicines, as well as the export to Iran of medicines not subject to the EAR (e.g., medicines produced outside the U.S. by a non-U.S. person with no controlled U.S. content) that would be designated as EAR99 if they were located in the United States. [4-7-2014]


364. Who can apply for a specific license if an export or reexport to Iran is not authorized by general license?

If an export or reexport is not authorized by general license, any U.S. person, wherever located, or U.S.-owned or -controlled foreign entity may apply for a specific license. For example, a U.S.-owned or controlled foreign entity may apply for a specific license for the export or reexport to Iran of agricultural commodities excluded from the scope of the agricultural commodities general license, such as live animals. [4-7-2014]


365. What is authorized with respect to brokerage services related to exports or reexports of agricultural commodities, medicine, or medical devices to Iran?

U.S. persons continue to be authorized to provide brokerage services on behalf of U.S. persons for the sale and exportation or reexportation by U.S. persons of agricultural commodities, medicine, and medical devices to Iran, provided that the sale and exportation or reexportation itself is authorized by either general or specific license. [4-7-2014]


366. Do I still need to come in to OFAC for a license to export certain types of agricultural commodities to Iran?

OFAC will no longer be issuing specific licenses for exports or reexports that are covered by the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations.

However, a small number of specified agricultural commodities and certain persons are excluded from the agricultural commodities general license and continue to require the level of review afforded by specific licensing. As a result, persons seeking authorization for the exportation or reexportation to Iran of castor beans, castor bean seeds, certified pathogen-free eggs (unfertilized or fertilized), dried egg albumin, live animals (excluding live cattle), embryos (excluding cattle embryos), Rosary/Jequirity peas, non-food-grade gelatin powder, peptones and their derivatives, super absorbent polymers, western red cedar, or all fertilizers, or for the exportation or reexportation of any agricultural commodities to Iranian military or law enforcement purchasers or importers, must still obtain a specific license from OFAC.

The agricultural commodities general license in the Iranian Transactions and Sanctions Regulations also does not authorize any transaction or dealing with a person whose property and interests in property are blocked, or who is designated or otherwise subject to any sanction, under the terrorism, proliferation of weapons of mass destruction, or narcotics trafficking programs administered by OFAC, among others. [4-7-2014]


367. What is the definition of a “bioactive peptide”?

For purposes of the relevant exclusion from the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations, the term “bioactive peptide” means an item that must be less than 50 amino acids in length and bioactive (antioxidant, antiallergic, antimicrobial, antithrombotic, antiatherogenic, hypoglycaemic, anti-inflammatory, antitumor, cytostatic, immunosuppressive properties, or hepatoprotective properties.) [4-7-2014]

 


Licenses Authorizing Exports of Agricultural Commodities, Medicine, and Medical Devices

 

For information regarding specific licenses authorizing exports of agricultural commodities, medicine, and medical devices to Iran and Sudan pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), please see the following topic.


 

Iranian General License D-1

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On May 30, 2013, the Department of the Treasury, in consultation with the Departments of State and Commerce, issued General License D (“GL D”) authorizing the export and reexport to Iran of certain hardware, software, and services incident to personal communications. On February 7, 2014, the Department of the Treasury, in consultation with the Departments of State and Commerce, issued amended Iranian General License D-1 (“GL D-1”), which clarifies certain aspects of GL D and adds certain new authorizations. Effective February 7, 2014, GL D-1 replaces and supersedes in its entirety GL D.

 


General Questions (Print)

 

337. What are key changes made by amended General License D-1?

First, GL D-1 expands the authorization in GL D to permit the exportation, reexportation, or provision, directly or indirectly, to Iran of certain personal communications software, hardware, and related services subject to the Export Administration Regulations, 15 C.F.R. parts 730 through 774 (“EAR”) (rather than just the exportation or reexportation from the United States or by a U.S. person of such software, hardware, and services). See GL D-1, paragraphs (a)(2)(i) & (a)(3). For purposes of GL D-1, the term “provision” could include, for example, an in-country transfer of covered software or hardware. The general license now authorizes, for example, a non-U.S. person located outside the United States to export certain hardware and software subject to the EAR to Iran. See FAQ #341.

Second, GL D-1 adds new authorizations for the exportation, reexportation, or provision, directly or indirectly, by a U.S. person located outside the United States to Iran of certain software and hardware not subject to the EAR. See GL D-1, paragraphs (a)(2)(ii) & (a)(3). The general license now authorizes, for example, a U.S. company to export to Iran, from a location outside the United States, certain hardware or software that is not subject to the EAR (including foreign-origin hardware or software containing less than a de minimis amount of U.S. controlled content). See FAQ #342.

Third, a new Note has been added to paragraphs (a)(2) and (a)(3) clarifying that the authorization in those paragraphs includes the exportation, reexportation, or provision, directly or indirectly, of the authorized items by an individual leaving the United States for Iran. GL D-1 also adds a new authorization for the importation by an individual into the United States of certain hardware and software previously exported by the individual to Iran pursuant to other provisions of GL D-1 or 31 C.F.R. § 560.540. See GL D-1, paragraph (a)(5). The general license now authorizes, for example, an individual to carry a smartphone that falls within the scope of the GL D-1 authorization while traveling to and from Iran. See FAQ #343.

Finally, to further ensure that the sanctions on Iran do not have an unintended chilling effect on the willingness of companies to make available certain publicly available, no cost personal communications tools to persons in that country, GL D-1 adds a new authorization related to the potential recipients of certain publicly available, no cost services and software. See GL D-1, paragraph (a)(6).

Notwithstanding these changes, nothing in this general license relieves an exporter from compliance with the export license requirements of another Federal agency. [02-07-2014]


338. With respect to the authorizations in paragraphs (a)(1) and (a)(2), what services and software are covered?

Qualifying services or software must be “incident to the exchange of personal communications over the Internet.” In addition, qualifying software under paragraph (a)(2) must meet the stated export control-related criteria. Both paragraphs provide an illustrative but not exhaustive list of the types of services that are authorized: “instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging.” See FAQ #344 and OFAC’s Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran (March 20, 2012), available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/internet_freedom.pdf.

Qualifying services or software need not be specifically listed in the Annex in order to be authorized by paragraphs (a)(1) or (a)(2), provided that they otherwise meet the requirements of paragraphs (a)(1) or (a)(2). [02-07-2014]


339. With respect to the authorization in paragraph (a)(3), do exporters need to make a determination as to whether an export of an item or service listed in the Annex to GL D-1 is “incident to personal communications”?

No. The Annex lists software, hardware, and related services determined to be “incident to personal communications” for purposes of the authorization in paragraph (a)(3) of GL D-1. [02-07-2014]


340. What should I do if I am unsure whether an item or service is covered by GL D-1?

If you require assistance interpreting the authorizations contained in GL D-1 and how they apply to your situation, please contact OFAC’s Licensing Division online at http://www.treasury.gov/resource-center/sanctions/Pages/licensing.aspx, by phone at 202-622-2480, or by email at ofac_feedback@do.treas.gov. [02-07-2014]


341. May a non-U.S. person export, reexport, or provide to Iran hardware and software that is subject to the EAR pursuant to GL D-1?

Yes, for purposes of the authorities administered by OFAC, amendments made by GL D-1 authorize the exportation, reexportation, or provision of certain hardware and software subject to the EAR by non-U.S. persons outside the United States. See GL D-1, paragraphs (a)(2)(i) & (a)(3). For example, a non-U.S. person manufacturer of smartphones that are (a) subject to the EAR because they contain more than a de minimis amount of U.S. controlled content and (b) within the scope of the GL D-1 authorization may export the smartphones from its third-country manufacturing facility directly or indirectly to Iran. See FAQ #337. [02-07-2014]


342. Does GL D-1 authorize U.S. persons located outside the United States to export or reexport to Iran certain specified hardware or software that is not subject to the EAR?

Yes. Amendments made by GL D-1 authorize the exportation, reexportation, or provision to Iran by U.S. persons located outside of the United States of certain specified hardware and software items that are not subject to the EAR. See GL D-1, paragraphs (a)(2)(ii) & (a)(3). GL D-1 also extends this authorization to an entity owned or controlled by a U.S. person and established or maintained outside the United States (“a U.S.-owned or -controlled foreign entity”), subject to the conditions set forth in 31 C.F.R. § 560.556. See GL D-1, Note 2 to paragraph (a). Under these amendments, for example, an overseas branch of a U.S. company or a U.S.-owned or -controlled foreign entity may export to Iran, from a location outside the United States, certain hardware or software that is not subject to the EAR (including foreign-origin hardware or software containing less than a de minimis amount of U.S. controlled content) if the hardware or software is within the scope of the GL D-1 authorization. These amendments also authorize the exportation, reexportation, or provision of certain fee-based software that is not subject to the EAR because it is described in section 734.3(b) of the EAR. See FAQ #337. Section 734.3(b) of the EAR describes “publicly available” software for purposes of those regulations. [02-07-2014]


343. Does GL D-1 authorize the exportation to Iran and importation into the United States of personal communication devices by persons travelling from the United States to Iran and back to the United States?

Yes. As amended, GL D-1 authorizes both the exportation, reexportation, or provision to Iran and the importation into the United States by an individual entering the United States directly or indirectly from Iran, of software authorized by 31 C.F.R. § 560.540 paragraph (a)(2) and software and hardware authorized by paragraphs (a)(2) and (a)(3) of GL D-1, provided that the items were previously exported, reexported, or provided by the individual to Iran. See GL D-1, paragraph (a)(5) and the Note to paragraphs (a)(2) and (a)(3). See FAQ #337. [02-07-2014]


344. How do the authorizations in paragraphs (a)(1), (a)(2), and (a)(6) of GL D-1 compare to the previously existing general license in 31 C.F.R. § 560.540 authorizing certain services and software incident to Internet-based communications?

The general license in § 560.540 authorizes the exportation from the United States or by U.S. persons, wherever located, to persons in Iran of no-cost services incident to the exchange of personal communications over the Internet and no-cost software necessary to enable such services. Please also see OFAC’s Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran (March 20, 2012). See http://www.treasury.gov/resource-center/sanctions/Programs/Documents/internet_freedom.pdf. Paragraphs (a)(1) and (a)(2) of GL D-1 go beyond § 560.540 by, among other things, authorizing fee-based services and software incident to the exchange of personal communications over the Internet.

In addition, to further ensure that the sanctions on Iran do not have an unintended chilling effect on the willingness of companies to make available certain publicly available, no cost personal communications tools to persons in Iran, pursuant to paragraph (a)(6) of GL D-1, the exportation, reexportation, or provision to the Government of Iran of certain publicly available, no-cost services and software described in § 560.540(a) or categories (6) through (11) of the Annex to GL D-1 is authorized. U.S. persons continue generally to be prohibited from exporting goods and services to persons whose property and interests in property are blocked pursuant to any part of 31 C.F.R. chapter V, other than Government of Iran end-users blocked solely pursuant to Executive Order 13599. See GL D-1 paragraph (b)(2). Prohibited end-users include Iranian persons whose property and interests in property are blocked pursuant to OFAC authorities relating to WMD proliferation, terrorism, and human rights abuses. In addition, GL D-1 does not authorize any action or activity involving any item (including information) subject to the EAR that is prohibited by, or otherwise requires a license under, part 744 of the EAR or participation in any transaction involving a person whose export privileges have been denied pursuant to part 764 or 766 of the EAR, without authorization from the Department of Commerce. [02-07-2014]


345. How can U.S. companies arrange for payment from Iran for exports authorized under GLD-1?

In general, the payment requirements under GL D-1 are the same as for all other general licenses under the Iranian Transactions and Sanctions Regulations (“ITSR”). Section 560.516 of the ITSR authorizes U.S. depository institutions to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to the ITSR and does not involve debiting or crediting an Iranian account. 31 C.F.R. § 560.516(a). [02-07-2014]


346. What kind of due diligence is required for the exportation of fee-based services, software, or hardware authorized by GL D-1?

Due diligence programs should be tailored to the particular risks encountered by exporters. As a general matter, companies selling fee-based services, software, or hardware authorized by GL D-1 should undertake reasonable, risk-based measures designed to ensure that they do not export their products to persons whose property and interests in property are blocked pursuant to any sanctions program administered by OFAC, regardless of whether the Government of Iran or other end-user appears on OFAC’s list of Specially Designated Nationals and Blocked Persons (or any of OFAC's other sanctions lists). [02-07-2014]


347. Are there any restrictions as to the use of the Farsi language in authorized advertising or software?

U.S. sanctions on Iran do not impose any restrictions as to the use of the Farsi language. [02-07-2014]


348. May U.S. persons employ agents in Iran to facilitate sales, create or fund a physical sales presence on the ground in Iran, or utilize Iranian commercial marketing services in furtherance of exports authorized under GL D-1?

No. GL D-1 does not authorize the employment of persons in Iran to facilitate sales, the maintenance of a physical sales presence in Iran, or the utilization of Iranian marketing services. However, certain copy-ready advertising materials are exempt from the prohibitions of the ITSR to the extent they qualify as information or informational materials pursuant to 31 C.F.R. § 560.210(c). [02-07-2014]

 


Specific Software, Hardware, and Services Covered by General License D-1 for Iran

 

For additional information regarding specific software, hardware, and services in Iran, please see the following topic.


 

Payments or the Facilitation of Payments to Iranian Civil Aviation Authorities for Overflights of Iran or Landing in Iran

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417. Are payments or the facilitation of payments not involving U.S. persons to Iranian civil aviation authorities for overflights of Iran or landing in Iran by aircraft that are owned by a non-U.S. person and registered outside the United States sanctionable under U.S. law?

No.  Provided that the relevant transactions do not involve the U.S. financial system or persons on the Specially Designated Nationals and Blocked Persons List (SDN List), payments of charges for services rendered by the Government of Iran in connection with the overflight of Iran or landing in Iran of aircraft owned by a non-U.S. person and registered outside the United States are not subject to sanctions under U.S. law.  The involvement of persons on the SDN List, including Iranian financial institutions or airlines designated pursuant to Executive Order 13224 or Executive Order 13382, would create sanctions exposure for participants to such transactions.

U.S. persons cannot participate in transactions related to the payment of overflight or landing fees to the Government of Iran, nor can such transactions transit the U.S. financial system, unless the transactions fall within the scope of 31 C.F.R. § 560.522 or a specific license issued by OFAC and the payments in connection with such authorized transactions are consistent with 31 C.F.R. § 560.516.  U.S.-owned or -controlled foreign entities are authorized to participate in transactions related to the payment of overflight or landing fees to the Government of Iran to the extent such transactions are consistent with the terms of General License H.  [04-27-2016]


 

Provision of Routine Goods and Services by non-U.S. persons to Diplomatic Missions of the Government of Iran

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455. Is the provision of routine goods and services by non-U.S. persons to diplomatic missions of the Government of Iran located outside the United States sanctionable under U.S. law?

The provision of goods and services for the conduct of the official business of the diplomatic missions of the Government of Iran located outside the United States or for the personal use of the employees of the missions, including financial services such as the opening of a bank account, by a non-U.S. person would not be sanctionable under U.S. law, provided that such goods and services do not involve persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (other than any political subdivision, agency, or instrumentality of the Government of Iran listed solely pursuant to Executive Order 13599 or any Iranian depository institution listed solely pursuant to Executory Order 13599) or other activities that would be sanctionable under U.S. law.

Further, the provision of goods and services to the diplomatic missions of the Government of Iran outside the United States cannot involve U.S. persons or U.S.-owned or -controlled foreign entities, or the provision to the Government of Iran of goods, technology, or services subject to the prohibitions of 31 C.F.R. §§ 560.204-205, nor can related transactions transit the U.S. financial system, unless the activities and/or transactions are authorized by OFAC. [10-22-2015]


 

Additional Iran-related Questions From Financial Institutions

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37. My bank operates accounts for individuals living in Iran. OFAC has told us that these accounts cannot be operated. Does this mean that the accounts are blocked?

No, the accounts are restricted. The Iranian sanctions prohibit the export of goods or services to Iran. By operating an account for an individual or company in Iran, the bank would be exporting services to that person or entity in violation of the Iranian Transactions Regulations. The accounts, however, are not blocked. The account holder can close the account and have the funds transferred to his or her account outside the United States. [09-10-02]


38. Are U-Turn payments for Iran still permitted?

No, as of November 10, 2008 U-Turn payments are no longer allowed. [11-10-08]


118. I have a client that is in Iran to visit a relative. Do I need to restrict the account?

No. As long as you are satisfied that the client is not ordinarily resident in IRAN, then the account does not need to be restricted. [07-28-09]


54. I have an account with a W-8 showing an address in Iran. Is the account automatically restricted?

In the absence of information proving to your satisfaction that the account holder is not in Iran, you should consider the account restricted based on the W-8 filing. [06-24-05]


 

Last Updated: 8/5/2016 5:45 PM