On October 8, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced new secondary sanctions against Iran’s financial sector, sanctioning 18 Iranian banks. These newest prohibitions are part of the U.S.’s maximum pressure campaign against Iran, representing an additional prohibition on non-U.S. companies doing business in the Iranian financial sector. The identifying information for the newly sanctioned Iranian financial institutions is located here.
New Secondary Sanctions
While most of Iran’s financial sector has already been the subject of sanctions for some time now, OFAC’s announcement is significant because it targets one of the remaining areas of Iran’s economy that still had access to the global economy outside the U.S. Notably, many of Iran’s banking institutions were still able to access the global liquidity and foreign currency markets. As a result of the U.S.’s new sanctions, OFAC has the authority to sanction foreign financial institutions that knowingly conduct or facilitate “significant” transactions for or on behalf of these sanctioned Iranian banks. This could further cut off Iran’s banking industry from the global economy.
OFAC’s actions were taken pursuant to Executive Order 13902, which authorizes OFAC to identify and impose sanctions on key sectors of Iran’s economy. OFAC also sanctioned one bank pursuant to E.O. 13382, which authorizes sanctions against proliferators of weapons of mass destruction and their supporters.
Wind Down Period, General License L, and Humanitarian Aid
OFAC is providing for a 45-day period under which non-U.S. persons can wind down their non-humanitarian transactions with Iranian banking institutions that might otherwise be subject to sanctions under E.O. 13902. That 45-day wind down period concludes on November 22, 2020.
In addition, OFAC issued General License L, which authorizes transactions and activities involving Iranian financial institutions blocked under E.O. 13902 that might otherwise be permissible under the Iranian Transactions and Sanctions Regulations (ITSR). Thus, to the extent a transaction with an Iranian financial institution sanctioned under E.O. 13902 is permissible under the ITSR (since E.O. 13902 has not yet been incorporated into the ITSR), then GL L might cover that transaction.
Finally, OFAC noted in new Frequently Asked Questions (FAQ) and its press release that U.S. persons and non-U.S. persons are still allowed to engage in certain permissible transactions that fall within the various humanitarian exceptions.
In short, the U.S. continues its maximum pressure campaign with respect to Iran and these latest sanctions represent a serious escalation. Non-U.S. companies doing business in Iran should assess their exposure, including whether they transact with any of the aforementioned banks or other institutions in Iran that are the subject of U.S. sanctions.
We will continue to closely monitor developments in this space. If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533) or Andrew S. Jacobson (212-574-1477) at Seward & Kissel’s Sanctions Practice Group.