Although I practice within these regulations on a daily basis I have avoided blogging on Iran transactions because the current political situation is causing daily changes to the OFAC program. Following this recent trend, a new Executive Order (EO) and two general licenses, General License A and General License B, were released on Monday, February 6. Thankfully, it seems that OFAC understands there might be some confusion with the EO and released FAQs and a Fact Sheet: Implementation of National Defense Authorization Act Sanctions on Iran.
The new EO builds upon the Iranian Transaction Regulations (ITR) and existing sanctions while implementing Section 1245(c) of the National Defense Authorization Action Act for fiscal year 2012 (NDAA). It blocks property and interests in property of the Government of Iran (including the Central Bank of Iran) as well as any Iranian financial institutions. This includes anyone owned, controlled, or acting on behalf of either the Iranian government or Iranian financial institutions. In other words, anyone that meets the definition of “Government of Iran” or is an Iranian financial institution (both denoted by the [IRAN] tag when listed on the Specially Designated Nationals (SDN) list) is blocked.
How is this different from the previous ITR rules you ask? This is where the devil is in the details. If you’re thinking that U.S. persons were already prohibited from transacting with these same entities – you’re right! The difference is that now, rather than banks simply rejecting a transaction, the transactions are blocked, meaning they will be frozen where they are and neither party will have access to the money until the funds are released by OFAC.
There is comforting news. The two General Licenses mainly restate and confirm the existing authorized general licenses and TSRA authorizations.
General License A permits transactions that were previously authorized under the ITR general licenses (minus a couple of specific exceptions) and does not generally allow payments from blocked funds or debits to blocked accounts unless authorized by certain specific licenses. General License A also reauthorizes most transactions with an authorizing specific license including those under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). See General License A for more details on unauthorized ITR licenses.
General License B authorizes the transfer of non-commercial personal remittances to or from Iran for or on behalf of someone not defined at the Government of Iran that is ordinarily resident in Iran. Again, this is a reauthorization under the new EO of previously existing allowances. The transfer cannot be by, to, or through a blocked person except those only blocked by the new EO. Because U.S. banks are prohibited from operating correspondent accounts for Iranian banks, these transactions should go through intermediary third-country non-U.S. financial institutions. Conveniently, this license provides an example of an authorized transaction for added clarity. The example explains that personal remittance transfer from one family member in the U.S. to another in Iran would be allowed if the remittance is routed through a third-country bank to an Iranian bank that has not been blocked under any OFAC regulation or EO other than the new February 6 EO. See General License B for more detailed information. I know that some U.S. banks are still blocking authorized transactions when they receive the funds transfer. We are working on the best protections for U.S. parties to ensure U.S. banks will allow authorizes transfers.
BE CAREFUL what you read. There is now a lot of misinformation floating around out there as if the Iran sanctions are new. The real “new” problem is the inability to export legitimate funds from Iran within its banking system and the rial valuation against the dollar. Meanwhile, expect more changes to come from OFAC.