[authors: Scott Maberry and Matthew Riemer]
As we reported last month, the Obama administration continues to display a commitment to increasingly tough sanctions against Iran and its trading partners. Over the past few weeks, the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) has published new regulations implementing certain sections of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) and various Executive Orders.
On October 22, 2012, OFAC published a final rule in the Federal Register changing the name of the Iranian Transaction Regulations, 31 C.F.R. part 560, to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the “ITSR”), and amending the renamed ITSR to implement Executive Order 13599 and certain sections of the National Defense Authorization Act for Fiscal Year 2012. These new regulations add numerous prohibitions, definitions, interpretations, and licensing provisions. Additionally, a host of general licenses that had been included in the Iranian Transactions Regulations have been removed.
The new prohibitions implemented by the October 22 regulations block property of the Government of Iran and any Iranian financial institutions. Specifically, “all property and interests in property of the Government of Iran …[,] of any Iranian financial institution …[, and of] any person determined by the Secretary of 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person whose property and interests in property are blocked … are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in.” ITSR § 560.211 (a)-(c). Further, the regulations nullify the “assertion or recognition of any interest in or right, remedy, power, or privilege with respect to” transfers of blocked property. ITSR § 560.212. The definitions of “Iranian financial institution” and “property; property interest” added in the new regulations are expansive.
Partly because of how broad the new prohibitions are, the regulations also create new general authorizations and specific licenses for certain permitted activities. Individuals who are U.S. persons and own real property in Iran, for example, are authorized “to engage in transactions necessary and ordinarily incident to the sale of real property in Iran and to transfer the proceeds to the United States, provided that such real property was either acquired before the individual became a U.S. person, or inherited from persons in Iran.” ITSR § 560.543. With certain exceptions, accredited U.S. educational institutions with undergraduate educational or exchange programs in other countries are authorized, among other things, to employ Iranian faculty members, educate Iranian students, and enter exchange agreements with Iranian universities. ITSR § 560.544.
In addition, nongovernmental organizations and other entities organized under U.S. law can obtain specific licenses to engage in certain projects or activities “designed to directly benefit the Iranian people.” ITSR § 560.545. Licensable activities may include the following:
projects to support human rights, democratic freedoms, and democratic institutions and to meet basic human needs;
provision of donated professional medical services; and
projects…to improve the flow of public information through independent media available to the Iranian public.” Id.
Similarly, specific licenses may be issued to establish and operate news bureaus in the United States by “Iranian organizations whose primary purpose is the gathering and dissemination of news to the general public.” ITSR § 560.549.
OFAC published a Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran, as well as a list of frequently asked questions pertaining to the ITSR and the statement of licensing procedure. OFAC also published a list of the basic medical supplies that are eligible for exportation or reexportation to Iran, with certain restrictions, under a new general license set forth in ITSR § 560.530.
Separately, on November 8, 2012, the Federal Register published a final Office of Foreign Assets Control rule amending the Iranian Financial Sanctions Regulations, 31 C.F.R. part 561, to implement sections 214 through 216 of the ITRA. These changes add additional categories of activities for which foreign financial institutions may be denied permission to establish correspondent account relationships with United States financial institutions. Among other things, the regulations expand the scope of sanctionable activities to include the facilitation of efforts by Iranian financial institutions to support Iran’s acquisition or development of nuclear weapons. ITSR § 561.201 (a)(4). Further, the new regulations, in keeping with the legislative expansion of sanctionable entities, apply not only to those foreign financial institutions that engage in sanctionable activities but also to subsidiaries of those foreign financial institutions. ITSR § 561.201.
As we have noted, the pace of Iran sanctions has accelerated over the past few months and will continue to do for the foreseeable future. As new developments arise, we will continue to provide our analysis here.