Category Archives: Iran

February 14, 2017

The Imminent Foreign Terrorist Organization Designation of the IRGC

by Jeremy Paner

Recent press reports indicate that the Trump administration is considering designating the Islamic Revolutionary Guard Corps (IRGC) as a foreign terrorist organization (FTO) pursuant to Section 219 of the Immigration and Nationality Act. (8 U.S.C. §1189(a)).  This apparent deliberation follows recent House (H.R. 380) and Senate (S. 67) introductions of the IRGC Terrorist Designation Act, which directs the Secretary of State to submit to Congress a report on the designation of the IRGC as an FTO.  While this listing may seem redundant in light of the secondary sanctions and numerous designations listing the IRGC on the List of Specially Designated Nationals (SDN List) repeatedly pursuant to various authorities, an FTO designation will significantly alter the current sanctions against Iran.

FTO Designation Criteria

The Secretary of State may designate an entity determined to be (A) a foreign organization; (B) that “engages in terrorist activity or terrorism, or retains the capacity and intent to engage in terrorist activity or terrorism”; if (C) “the terrorist activity or terrorism of the organization threatens the security of United States nationals or the national security of the United States.” (8 U.S.C. §1189(a)(1)) Continue reading

May 4, 2016

Recent Court Decision Provides Insight Into Enforcement of OFAC Sanctions

by Jeremy Paner

gavel-3-1236445On March 7, the District Court for the District of Columbia issued a Memorandum Opinion granting the government’s Motion for Summary Judgment in the matter of Epsilon Electronics, Inc. v. United States Department of the Treasury, Office of Foreign Assets Control, et al., Civil Action No. 14-2220 (RBW), __ F.Supp.3d __ (D.D.C. 2016).  The case arises from a $4,073,000 civil penalty the Office of Foreign Assets Control (OFAC) assessed against Epsilon Electronics (the plaintiff)  in July 2014 for violations of the embargo on Iran.  According to the announcement of this penalty, the plaintiff violated the Iran Transactions and Sanctions Regulations by shipping car audio and video equipment that it knew or had reason to know would be reexported to Iran.  The opinion dismissing the challenge to this penalty serves as a cautionary tale of how OFAC may assess significant civil penalties with the aid of a few administrative subpoenas and circumstantial evidence provided by financial institutions and simple internet research.

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April 19, 2016

New Sanctions Regulations Threaten Foreign Financial Institutions with Severance from the U.S. Financial System

by Jeremy Paner

scissor-1568316Last Friday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published regulations that implement the Hizballah International Financing Prevention Act of 2015.  The listing criteria for these regulations echo those  in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010  (CISADA), which was largely responsible for economically isolating Iran.  Although frequently mischaracterized as extraterritorial in nature, the prohibitions of secondary sanctions are limited to domestic financial institutions.

The Hizballah Financial Sanctions Regulations, 31 CFR 566, prohibit U.S. financial institutions from opening or maintaining certain accounts for foreign financial institutions listed for knowingly providing significant transactions for Hizballah, or any person designated for acting for or on behalf of, or being owned or controlled by that terrorist organization.  OFAC identifies  Hizballah-related designated persons with the text [‘‘Subject to secondary sanctions pursuant to the Hizballah Financial Sanctions Regulations’’] in their respective List of Specially Designated Nationals (SDN List) entries. Continue reading

March 25, 2016

U.S. Treasury Sanctions UK Individuals and Businesses for Dealings with Iranian Commercial Airline

by Jeremy Paner

Yesterday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated UK-based individuals and businesses for their dealings with Mahan Air, a commercial Iranian airline. OFAC designated this airline in 2011 pursuant to its counterterrorism authority for providing support to the IRGC-Qods Force. U.S. individuals and businesses are now generally prohibited from any dealings with these UK designees.  Secondary sanctions also attach to terrorism-related listings.  Foreign financial institutions that knowingly facilitate or conduct significant financial transactions for these designees could be prohibited from maintaining correspondent accounts at U.S. banks.

OFAC has firmly established authority to derivatively designate businesses that provide support or services to designated Iranians, irrespective of the nationality or location of those businesses. The recent lifting of certain secondary sanctions does not limit this authority.  In fact, derivative designations against companies in Europe and Asia will likely increase in the near term.

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September 21, 2015

Iran Remains a Top Priority for Szubin

by Jeremy Paner

saudiLate last week, Acting Under Secretary for Terrorism and Financial Intelligence (TFI)[1] Adam Szubin appeared before the Senate Committee on Banking, Housing, And Urban Affairs. In his prepared statement to the Committee,  Mr. Szubin strongly implies that he will continue to focus on Iran.  This is a very significant statement of prioritization, as it comes from the highest ranking government official for both the enforcement of sanctions and money laundering controls. U.S. businesses with European partners that will re-enter the Iranian market should factor this continued enforcement focus into their risk-based approach to sanctions compliance.

iran-resistanceMr. Szubin’s statement and testimony follows the early September counterterrorism  designations of seven individuals and one entity for their links to Hamas, in addition to Samir Kuntar, a very prominent Hizballah member. (OFAC Recent Actions posting for the September 8, 2015 designations ; OFAC Press Release for the September 10, 2015 designations).  Interestingly, OFAC did not release a press release for the designation of Kuntar. As reported by the Jerusalem Post, upon release from Israeli authorities in 2008, Kuntar “thanked Teheran for its role in backing the Lebanese and Palestinian ‘resistance’ against Israel,” and stated that Iran “has played a crucial role in supporting the Lebanese and Palestinian resistance.”

We will continue to follow OFAC designations and provide insight into enforcement priorities as new developments arise.


 

[1] TFI is an office within the United States Treasury Department, which consists of the Office of Foreign Assets Control (OFAC), the Office of Intelligence and Analysis (OIA), the Office of Terrorist Financing and Financial Crime (TFFC), the Financial Crimes Enforcement Network (FinCEN), and the Treasury Executive Office for Asset Forfeiture (TEOAF).

June 30, 2015

There Are No Sacred Dates

by Jeremy Paner

As former Israeli Prime Minister Yitzhak Rabin sagely explained during negotiations with the Palestine Liberation Organization (PLO) in the mid-90’s, “there are no sacred dates.”  Ironically, earlier this month an Iranian negotiator channeled the late Israeli leader in comments about the impending deadline of the Joint Plan of Action (JPOA): “if we need a few extra days it’s not important because there are no sacred dates.” Earlier today, the negotiations between the P5+1 (the five permanent members of the United Nations Security Council plus Germany) and Iran were given “a few extra days” to work towards potential finalization of a framework for an agreement that was set to expire today.

Following press reports last night that an agreement would not be reached in time, the U.S. Department of the Treasury and U.S. Department of State released a statement providing guidance on the extension of the JPOA through July 7. This brief statement provides guidance on the extension of the “JPOA Relief Period” and certain specific licenses related to the safety of Iranian civil aviation through July 7. Continue reading

June 22, 2015

OFAC Penalty for Iran Sanctions Violations Raises Questions Regarding Egregiousness Determination

by Jeremy Paner

Last Friday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with John Bean Technology Corporation (JBT) of apparent violations of sanctions imposed on the Islamic Republic of Iran Shipping Lines (IRISL). OFAC designated IRISL in September 2008 under its counter-proliferation authority for providing support to  Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL). Under the agreement, JBT will pay $391,950 for its sanctions violations.

The violations center around an April 2009 shipment of  $2,897,936 worth of goods from Spain to China by IRISL. An unnamed U.S. bank rejected the trade documents for this shipment after refusing to serve as the advising bank on the underlying letter of credit. After receiving a license from OFAC to do so, the U.S. bank returned the trade documents for this shipment. Following this rejection, JBT presented the trade documents to Banco Santander for payment. Later, JBT paid JBT AeroTech Spain $164,470 for payment it had made for IRISL and Banco Santander services.   Continue reading

June 18, 2015

The National Bank of Pakistan Settles Iranian Terrorism Sanctions Violations Involving Kyrgyzstani Airline

by Jeremy Paner

Today, OFAC announced a settlement of apparent violations of U.S. sanctions imposed on an Iranian terrorism support network. This enforcement action demonstrates the broad reach of terrorism sanctions placed on Iran. The U.S. Treasury Department has warned that these terrorism sanctions will remain in place against Iran regardless of any potential lifting of “nuclear-related sanctions.”  As the Acting Under Secretary of the Treasury explained to a Congressional Committee, “even if we are able to secure a nuclear deal with Iran, the United States will continue to counter Iran’s support for terrorism, its commission of human rights abuses, and its destabilizing activities throughout the Middle East, including through the active use of our financial tools.”

According to the OFAC announcement for this settlement, between June 6, 2013 and January 31, 2014, the New York branch of the National Bank of Pakistan processed seven funds transfers for which Kyrgyz Trans Avia was either the originator or beneficiary. The National Bank of Pakistan’s U.S. branch should have blocked these transfers and filed a report with OFAC. Continue reading

May 21, 2015

Treasury Targets Iran’s Support for Terrorism Through its Islamic Revolutionary Guard Corps-Qods Force

by Jeremy Paner

Today, OFAC designated the Iraq-based Al-Naser Airlines, Syrian Issam Shammout, and his Emirates-based Sky Blue Bird Aviation pursuant to its counterterrorism authority (Executive Order 13224) for providing support to Mahan Air, an entity previously designated for providing support to the terrorist group, the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). In its designations of this IRGC-QF terrorist support network, OFAC signaled that it will continue to expose Iran’s support for terrorism.

U.S. individuals and entities are generally prohibited from dealing with these designees, which now appear on OFAC’s Specially Designated Nationals (SDN) List. All property and interests in property held by these designees that is in the United States, or comes into the jurisdiction of the United States at a later date must be blocked. Failure to comply with these prohibitions will lead to civil and in the case of willful violations, criminal penalties.

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May 7, 2015

Clarification and Addition to Ukraine-Related Frequently Asked Questions

by Jeremy Paner

Following months of calls to the OFAC hotline and Compliance Division from frustrated financial institutions, OFAC provided revisions to FAQs 395 and 419 and issued a new FAQ regarding General License 6 under the Ukraine-related program. Although this guidance will undoubtedly be welcomed by banks around the world, I suspect OFAC will continue to issue further clarification on the debt and credit prohibitions accompanying Sector Sanctions Identification (SSI) listings.

Prohibitions on letters of credit

The revised FAQs reiterate the Directives 1, 2, and 3 prohibitions on the extension of credit to SSI List entities. U.S. entities can act as the advising or confirming bank, as the applicant, or even process transactions under a letter of credit in which an SSI entity is the beneficiary. None of these letter of credit services are a prohibited extension of credit to an SSI entity.

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