On February 3, 2017, the U.S. Office of Foreign Assets Control (OFAC) added 25 persons to its List of Specially Designated Nationals and Blocked Persons (the SDN List, and every person thereon, an SDN) as a result of their business activities with Iran. Thirteen individuals and twelve companies from a variety of countries including the United Arab Emirates, Lebanon, and China, not only were designated as SDNs, but also identified as persons to whom secondary sanctions may attach. Indeed, the 25 additions represent an approximately 8 percent increase in the number of persons identified pursuant to the Iranian Financial Sanctions Regulations, code tag [IFSR]. See here for the full list.
Under U.S. sanctions rules, the property and interests of property of SDNs that are in the United States, come into the United States, or are or come under the control or possession of U.S. Persons, must be blocked (i.e., frozen) immediately. In addition, entities in which SDNs own, individually or in the aggregate, a 50 percent or greater interest (SDN-owned entities), are themselves blocked, even if they do not appear on the SDN List. Therefore, U.S. Persons, for all practical purposes, are prohibited from having any dealings with SDNs or SDN-owned entities.
Furthermore, because these 25 persons also have been identified in connection with the [IFSR] tag, non-U.S. persons, including non-U.S. financial institutions, may face so-called secondary sanctions for dealings with them. In particular, the provision by U.S. financial institutions of correspondent or pay-through accounts may be restricted or even prohibited for non-U.S. financial institutions found to have assisted persons identified as [IFSR] designees in certain, enumerated activities. Thus, non-U.S. financial institutions may find their access to the U.S. financial institutions restricted or even cut off completely.
OFAC’s action is in response to Iran’s ballistic missile test on January 29, 2017, and each new person designated has been designated for providing support to the development of Iran’s ballistic missile program or to the Iranian Revolutionary Guard Corps’ Quds Force. According to White House Press Secretary Sean Spicer, the new designations, “mark yet another stop in our continued effort to aggressively target Iran’s ballistic missile program and terrorism-related activities.”
The designations do not, however, mark a legal shift in the structure of the current Iranian sanctions regime, nor do they represent an abandonment of the Iran nuclear deal, the Joint Comprehensive Plan of Action. OFAC routinely adds persons to the SDN List. Thus, if the designations are an indicator of anything, they indicate that OFAC may be more willing to designate persons in the future and therefore highlight, once again, the importance for non-U.S. Persons doing business in Iran to monitor the evolving landscape of U.S. Iran sanctions and of knowing who their Iranian counterparties are and to what end their services or products are being used.
