On June 8, 2016, the US further clarified the scope of the sanctions relief provided to Iran as of January 16, 2016 (known as "Implementation Day") under the Joint Comprehensive Plan of Action (JCPOA). The Department of the Treasury Office of Foreign Assets Control (OFAC) issued the guidance in the form of additional Frequently Asked Questions (FAQs) contained in OFAC's Frequently Asked Questions Relating to the Lifting of Certain US Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day.
OFAC provided guidance on the sanctions relief related to financial and banking measures with respect to transactions by US financial institutions with non-US financial institutions that engage in certain Iran-related transactions, as well as transactions by non-US entities with Iran-related business that have US persons as board members or senior managers. In addition, OFAC further clarified the scope of General License H: Authorizing Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person (General License H). We summarize the additional guidance in the new OFAC FAQs below.
As of January 16, 2016, certain financial and banking sanctions were relieved under the JCPOA for non-US persons. Secondary sanctions no longer apply to non-US persons who engage in financial and banking transactions with certain Iranian individuals and entities, including parties removed from OFAC's List of Specially Designated Nationals and Blocked Persons ("SDN List"). However, US primary sanctions largely remain in place, which means that US persons, including US financial institutions, continue to be broadly prohibited from engaging in transactions involving Iran.
Given the prohibitions that remain on Iran-related transactions for US persons, the two new FAQs related to financial and banking measures provide guidance for complying with the restrictions on US persons when non-US persons engage in Iran-related transactions.
OFAC provided the following guidance regarding the restrictions on Iran-related activities for US and non-US financial institutions:
In addition, OFAC also provided guidance related to US persons holding a board or senior management position with a non-US, non-Iranian entity engaged in Iran-related transactions:
Starting on Implementation Day, General License H authorized non-US entities that are owned or controlled by a US person ("US-owned or –controlled foreign entities") to engage in activities with Iran that are consistent with the JCPOA and US law. The new FAQs provide further guidance regarding the scope of relief provided under General License H.
For purposes of the ITSR and General License H an entity is "owned or controlled" by a United States person if the US person: (1) holds a 50 percent or greater equity interest by vote or value in the entity; (2) holds a majority of seats on the board of directors of the entity; or (3) otherwise controls the actions, policies, or personnel decisions of the entity.
OFAC clarified in the FAQs that for purposes of assessing ownership or control, with certain exceptions, it would consider ownership interests by multiple US persons on an aggregated basis. Consequently, as a general matter, an entity established or maintained outside the United States is considered owned or controlled by a US person if one US person holds, or, on an aggregated basis, multiple US persons hold a 50 percent or greater equity interest by vote or value in the entity, or if one US person holds, or, on an aggregated basis, multiple US persons hold a majority of board seats. OFAC stated that, a determination as to whether one or more US persons "otherwise control(s)" the actions, policies, or personnel decisions of a foreign entity is a fact-specific, case-by-case determination, but that it would consider the aggregated ownership interests held, and indicia of control exercised, by all relevant US persons.
If the foreign entity is publicly traded or the ownership interests are widely dispersed, OFAC would not regard the entity to be owned or controlled by a US person if US persons, on an aggregated basis, passively hold more than 50 percent of the shares of such entity, but no one US person holds a controlling share in the company. However, a foreign entity could be considered US-owned or controlled to the extent one or more of the other criteria for ownership or control are met.
OFAC also clarified in the FAQs that General License H authorizes or permits the following activities:
In addition, OFAC provided the following additional clarifications regarding General License H:
The new FAQs provide further guidance regarding compliance with the US sanctions that remain in place after Implementation Day. Companies looking to do business in Iran should monitor future developments closely, and exercise caution to ensure compliance with all applicable sanctions.
 - Please find our recent client alerts on Implementation Day EU and US Sanctions Relief here and here.
 - See Frequently Asked Questions Relating to the Lifting of Certain US Sanctions Under the JCPOA on Implementation Day (FAQs) here.
 - A US person is defined to include any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States, or any person in the United States.
 - The US maintains two categories of sanctions on Iran. The first type—often referred to as "primary" sanctions—covers the traditional sanctions generally applicable to transactions involving US persons, which restrict most activities involving US persons and Iran. The second type—often referred to as "secondary" sanctions—comprises measures the United States imposes against non-US persons for engaging in certain "sanctionable activity" involving Iran, primarily affecting non-US persons.