New OFAC Regulations Implement Iranian Sanctions

by Morgan Lewis
Contact

Grace period through March 8 provided to foreign subsidiaries to wind down Iranian transactions.

On December 26, 2012, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) amended the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. pt. 560, to implement section 218 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the Act), 112 P.L. 158. Section 218 of the Act caused OFAC to add a new section to the ITSR to prohibit certain transactions by non-U.S. entities owned or controlled by a U.S. person and established or maintained outside the United States. OFAC also added a second new ITSR section to provide a grace period for the winding down of these prohibited transactions. The ITSR amendments follow an earlier October 9, 2012, Executive Order, which was also promulgated to implement portions of the Act.[1]

Prohibited Transactions

The first new ITSR section, 31 C.F.R. § 560.215, prohibits a non-U.S. entity that is owned or controlled by a U.S. person and established or maintained outside the United States from knowingly engaging in any transaction, directly or indirectly, with the government of Iran or any person or entity subject to the jurisdiction of the government of Iran that would be prohibited by the ITSR if engaged in by a U.S. person or in the United States.

A non-U.S. entity is "owned or controlled" by a U.S. person if the U.S. person (i) holds a 50% or greater equity interest by vote or value in the entity; (ii) holds a majority of seats on the board of directors of the entity; or (iii) otherwise controls the actions, policies, or personnel decisions of the entity.

The term "knowingly" means that an entity engages in a transaction with actual knowledge or reason to know of prohibitions on the transaction. The term "subject to the jurisdiction of the government of Iran" means that a person or entity is organized under the laws of Iran or any jurisdiction within Iran, is ordinarily resident in Iran or located in Iran, or is owned or controlled by any of the foregoing.

If a transaction engaged in by a U.S. person is exempt from the prohibitions of the ITSR, generally it would not be prohibited for an entity that is owned or controlled by a U.S. person and established or maintained outside the United States (a "U.S.-owned or -controlled foreign entity") to engage in the transaction as well. Concomitantly, if a transaction prohibited by the new ITSR section 560.215 is one for which a U.S. person might apply for an OFAC-specific license—for example, the exportation of medical devices to Iran—a U.S.-owned or -controlled foreign entity may also apply for a specific license to engage in such a transaction.

Grace Period

The second new ITSR section, 31 C.F.R. § 560.555, in and of itself, retroactively authorizes from October 9, 2012, and up until March 8, 2013, all transactions ordinarily incident and necessary to the winding down of transactions prohibited by section 560.215, provided that those ordinarily incident and necessary transactions do not involve a U.S. person or occur in the United States. Transactions involving Iranian financial institutions are authorized pursuant to section 560.555 only if the property and interests in the property of the Iranian financial institution are blocked solely pursuant to the ITSR and not blocked by another set of regulations or another act of Congress.

The bolded terms above are not defined by OFAC in section 560.555, but OFAC traditionally has construed these terms reasonably, provided that the end goal of compliance is being pursued.


[1]. For more information on the executive order, see our October 12, 2012, LawFlash, "Iranian Sanctions Extended by Executive Order," available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis
Contact
more
less

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.