As many in the trade community already know, the beginning of 2016 saw the implementation of the Joint Comprehensive Plan of Action (JCPOA); an agreement ensuring Iran’s nuclear capabilities stay below a certain threshold in exchange for the easing of economic sanctions against Iran. As part of the implementation, the Department of Treasury’s Office of Foreign Assets Control (OFAC) published guidance related to the lifting of the Iranian sanctions and also published a list of Frequently Asked Questions (FAQs) which, among other things, provides further guidance regarding U.S. financial institutions transacting business with other financial institutions that deal with Iran. The FAQs stated that U.S. banks are allowed to deal with institutions that are non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships with Iranian financial institutions. This assumes that (1) those institutions are not on the SDN list and (2) any Iran-related financial transactions are not routed through a U.S. financial institution. Additionally, the FAQs provided clarity on Foreign Entities Owned or Controlled by U.S. Persons. Such foreign entity clarifications include the authorization of U.S. parent companies to allow a U.S. owned or controlled foreign entity to establish a physical presence inside Iran, the determination of whether an entity established or maintained outside the United States is a U.S. owned or controlled foreign entity, and the level of involvement U.S. parent company board members, senior management, and employees are allowed to have in the U.S. owned or controlled foreign entity’s day-to-day operations with non-sanctioned jurisdictions.
The importance of understanding the Iranian Sanctions can also be seen in one recent case study. Recently a settlement was reached between the Bureau of Industry and Security (BIS) and a Dutch company in the amount of $10.5 million after alleged violations of the Export Administration Regulations (EAR) that were committed over five years. Allegedly parts and components controlled for National Security (NS) or Missile Technology (MT) reasons were exported to Iran by the company which included parts that can be used in avionics and navigation systems as well as other aircraft system components such as engine and communication systems.
The company was also warned that if it fails to comply in full with the Settlement Agreement then it may result in the denial of their export privileges for a period of one year. Givens & Johnston has a strong history of assisting clients in navigating the Iranian Sanctions in order to prevent violations like those listed above.