Worldwide: Financial And Economic Sanctions Update

Amendment to the Iran Sanctions

On 14 July 2015, the E3/EU+3 (China, France, Germany, Russia, UK, USA, EU) and Iran reached an agreement on a Joint Comprehensive Plan of Action (the "JCPOA"), the implementation of which is intended to ensure the peaceful nature of Iran's nuclear programme.

"Implementation Day" for the JCPOA occurred on 16 January 2016, when the International Atomic Energy Agency reported positively on the agreed measures taken by Iran under the JCPOA. Consequently, all provisions of previous UN Security Council resolutions on the Iranian nuclear programme were terminated and the EU simultaneously terminated (or in some cases suspended) nuclear related financial and economic sanctions against Iran.

Importantly, under EU law, EU persons can now engage again in activities and services in Iran or with Iranian persons much more freely. The key provisions of EU sanctions relief under the JCPOA include:

  1. 34 individuals and 298 entities no longer subject to the asset freeze;
  2. An end to restrictions on financial transfers to and from non-listed Iranian entities;
  3. No requirement for UK persons to seek prior authorisation for, or notify HM Treasury of, transfers of funds sent to or received from Iran;
  4. Banking activities (such as the establishment of new correspondent banking relationships with Iranian banks and the opening of branches, subsidiaries or representative office of Iranian banks) in EU states are now permitted;
  5. Provision of insurance and reinsurance to non-listed Iranian entities is now permitted;
  6. The supply of specialised financial messaging services is now permitted for non-listed Iranian financial institutions; and
  7. Transactions in public or public-guaranteed bonds with Iranian non-listed entities are also now permitted.

The Information Note from the EU, and the Notice by HM Treasury, both published on Implementation Day, provide further detail.

However, in the event of significant non-performance by Iran of its commitments under the JCPOA, there are "snapback" provisions for the reintroduction of the sanctions that have been lifted or suspended.

How does this affect the Cayman Islands and BVI sanctions regimes?

The amendments to Regulation (EU) No. 267/2012 as a result of Implementation Day mean that 34 individuals and 298 entities have been removed from the list of "Designated Persons", and are therefore no longer subject to asset freezes as a matter of Cayman Islands and BVI law.

The Iran (Restrictive Measures) (Overseas Territories) Order 2012 (the "Order"), which is the existing Order in Council extending EU sanctions on Iran's nuclear programme to the Cayman Islands and the BVI, has also been amended (and in some cases suspended) twice in late 2015. The authorisation thresholds in relation to the transfer of funds to and from Iran have been increased by a factor of ten, and an additional exemption provided for certain dealings with the Ministry of Petroleum. There is also a temporary suspension of prohibitions on the provision of insurance, reinsurance and transport of Iranian crude oil, on the import, purchase and transport of Iranian petrochemical products, and on the trade in gold and precious metals with Iran.

In addition, it is now possible to apply to the Governor for a licence authorising any otherwise prohibited activity where the Governor considers it relates to matters which the UN Sanctions Committee has determined to be consistent with the objectives of the UN Resolution endorsing the JCPOA (UN 2231(2015)). Such licence applications can, however, take some time to process (often between two and six months, depending upon the complexity of the application).

We expect that, in due course, the UK Government will pass a further Order in Council extending to the Cayman Islands and the BVI all of the other direct sanctions relief as has been provided under EU and UK law as a result of Implementation Day. Until that time, however, clients should be mindful that specific licences may need to be sought. In addition, the JCPOA does not seek to lift sanctions related to Iranian human rights abuses; as such the Cayman Islands and BVI sanctions regimes in relation to such abuses remain in place.

New Sanctions Regimes

Separately, the UK Government has recently extended to the Cayman Islands and the BVI three new sanctions regimes relating to Burundi, The Democratic Republic of the Congo and Yemen, respectively. Revised regimes relating to Liberia and Iraq have also come into force.

Each of The Burundi (Sanctions) (Overseas Territories) Order 2015, The Democratic Republic of the Congo (Sanctions) (Overseas Territories) Order 2015 and The Yemen (Sanctions) (Overseas Territories) Order 2015 imposes asset freezes and travel bans on designated persons in those territories.

Such Cayman Islands and BVI sanctions apply to anyone in those jurisdictions, British subjects ordinarily resident there, as well as to companies and partnerships established within them. Liability can result, on conviction, in fines and/or imprisonment.

In relation to financial services, the new sanctions orders primarily concern prohibitions on:

  1. Dealing with funds or economic resources belonging to, or owned, held or controlled by designated persons; and
  2. Making funds and economic resources available, directly or indirectly, to or for the benefit of designated persons.

There are now 27 jurisdictions in relation to which financial and economic sanctions have been effected in the Cayman Islands and the BVI. It is safe to say that sanctions are not going away anytime soon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Martin Livingston
Matthew Gilbert
Michael Gagie
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