The United States first imposed sanctions against Iran in 1979, and established the current Iran sanctions framework in the mid-1990s with the passage of the Iran and Libya Sanctions Act of 1996 (ISA) and the promulgation of the Iranian Transactions Regulations (ITR). The ISA/ITR framework, administered by the US Treasury Department's Office of Foreign Assets Control (OFAC), largely governed the Iran sanctions landscape until Congress passed the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISADA).
CISADA, and the torrent of legislation and regulations that followed, greatly expanded both the scope and restrictiveness of US economic sanctions against Iran. Furthermore, beginning in 2010, numerous other countries joined the United States in severely restricting commerce with Iran. Most notably, a complete EU oil embargo took effect in 2012, including prohibitions on imports, technology exports, purchases, transportation, financing and insurance.
This review focuses on the key developments in US laws and regulations, which significantly expanded the scope of outright restrictions and potentially sanctionable activities in relation to Iran. Part II summarizes the basic features of the pre-CISADA sanctions regime and highlights the major changes that occurred in 2010 and 2011. Part III outlines the primary developments in 2012, and highlights rules warranting careful attention by compliance practitioners. Many of Steptoe's more fulsome advisories on these topics are hyperlinked below.
A. Pre-2010 Iran Sanctions Regime
1. The Iranian Transactions Regulations: A Total Embargo for US Persons
Prior to 2010, the principal restrictions on dealings with Iran were contained in the ITR. The ITR primarily applied to "US persons", meaning US citizens, lawful permanent residents, US companies (including their foreign branches), and any person located in the United States.
Through transactional restrictions on such "US persons" and US-origin goods, services, and technology, the ITR cut off a substantial amount of the economic contact between the United States and Iran, excluding certain non-commercial and humanitarian activities. For example, the ITR prohibited exports to Iran from the United States or by a US person anywhere in the world; prohibited US persons from exporting goods, services, or technology to a third country with reason to know of a future reexport to Iran (with some extremely narrow exceptions); barred US persons from importing, even indirectly from a third country, goods or services of Iranian origin, and from engaging in any other transactions involving Iranian-origin goods or services, such as buying, selling, transporting and financing; prohibited new investment by US persons in Iran; and prohibited US persons from "facilitating" or "evading" any of the above activities.
Foreign companies and foreign subsidiaries of US companies were not covered directly by the main prohibitions of the ITR, however. Accordingly, during the 1990s and 2000s foreign companies and foreign subsidiaries of US companies could conduct business with Iran largely free of US regulatory scrutiny. (Nevertheless, there was enforcement during this period against non-US company activity based on concepts such as "causing" a violation by a US person.)
2. The Iran Sanctions Act
The ISA was the only major exception to the "US persons" limitation in the pre-2010 Iran sanctions regime. The 1996 Act was designed to stymie the development of Iran's petroleum industry. It required the President to sanction any company – US or foreign – if the President determined that such a company had made an investment of $40 million or more (which dropped to $20 million approximately a year later) that would contribute to Iran's ability to develop its petroleum resources. If the President made such a determination, the law required the President to impose at least two out of a list of six sanctions, which would restrict the company's access to certain aspects of the commercial US market. ISA sanctions were never applied against a foreign company during this period, however, so the impact of the law on Iran's petroleum industry was minimal. The ISA was modified in 2006 to add as a sanctionable act the provision to Iran of weapons of mass destruction (WMDs) or destabilizing quantities or types of conventional weapons.
B. The Turning Point: CISADA
President Obama signed CISADA into law on July 1, 2010, marking a watershed moment in the development of US sanctions against Iran. Like the ISA, CISADA provided for the direct imposition of sanctions on non-US companies, but CISADA also greatly expanded the scope of the ISA and its enforcement provisions. The law follows the ISA model described above (identification/determination of sanctionable conduct followed by the imposition of specific sanctions or the selection of certain sanctions from a menu of options). CISADA also codified most of the trade restrictions in the ITR, meaning that it now takes an act of Congress in order to resume most trade with Iran.
1. Sanctions on Foreign Financial Institutions
A key development under CISADA is the potential to impose significant limits on foreign financial institutions' (FFIs) access to the US financial system if an FFI engages in specific Iran-related activity. CISADA authorizes regulations prohibiting or imposing strict conditions on the opening or maintenance of "correspondent" or "payable through" accounts of FFIs that knowingly engage in certain sanctionable activities, thereby cutting off the foreign bank from any business denominated in US dollars. The sanctionable activities identified in CISADA include facilitating Iranian efforts to acquire weapons of mass destruction (WMDs) or support international terrorism, helping to launder money or facilitating the efforts of the Central Bank of Iran (CBI) or other Iranian financial institutions in support of these activities, dealing with Iranian entities that are under United Nations sanctions, or conducting significant business with Iran's Islamic Revolutionary Guard Corps (IRGC) or designated Iranian financial institutions.
CISADA also mandated that US financial institutions should be subject to penalties under the International Emergency Economic Powers Act (IEEPA) if their owned/controlled foreign subsidiaries knowingly engage in transactions benefiting the IRGC.
These CISADA provisions affecting FFIs are implemented in the Iranian Financial Sanctions Regulations (IFSR), which OFAC issued in August of 2010.
2. Expansion of Petroleum Sector Sanctions under the ISA
CISADA increased the scope of petroleum sector activities that could trigger ISA sanctions. The 1996 ISA covered only investments contributing to the enhancement of Iran's ability to develop petroleum resources. CISADA retained this as a sanctionable act, but also added an array of more comprehensive sanctions addressing Iran's access to refined petroleum products (including gasoline, among others). Taken together, the petroleum sector-related CISADA amendments to the ISA require the President to impose sanctions on any person worldwide determined to have knowingly (meaning knew or "should have known"): (1) made investments contributing to the enhancement of Iran's ability to develop petroleum resources; (2) provided goods, services, technology or other support to Iran to facilitate the maintenance or expansion of Iran's domestic production of refined petroleum products; (3) provided refined petroleum products to Iran; or (4) provided goods, services or technology or other support for Iran's ability to import refined petroleum products.
Each of these sanctionable acts is subject to a finding of certain transactional value thresholds applied over time. With respect to enforcement, CISADA expanded the list of ISA sanctions, and required that the President impose three of nine available sanctions, rather than two of the six that previously were available under the 1996 ISA.
CISADA significantly limited the discretion accorded to the President under the previous version of the ISA. CISADA provides that the President "shall initiate" an investigation upon receipt of information that a person has engaged in sanctionable conduct, as contrasted with the previous version of the ISA, which provided that the President "should initiate" such an investigation. CISADA also provides that the President may waive sanctions only if waiver is "necessary to the national interest," whereas the previous version of the ISA provided for waiver that was "important to the national interest."
To date, fourteen companies have been sanctioned under the ISA as amended by CISADA, as announced by the Department of State in notices dated October 13, 2010; April 5, 2011; September 14, 2011; January 27, 2012; and September 14, 2012. The companies are located in Belarus, China, Iran, Jersey, Liberia, Monaco, Singapore, Syria, the UAE, and Venezuela.
C. Iranian Financial Sanctions Regulations
On August 16, 2010, OFAC issued the IFSR, which implemented the CISADA sanctions on FFIs, as described above. The IFSR provide that once the Treasury Department determines that a FFI has engaged in a sanctionable activity under CISADA, then Treasury may impose one or more strict conditions on a US financial institution's opening or maintaining of a correspondent or payable-through account in the United States for such an FFI. Designated FFI's are found on OFAC's "561 List," which is an appendix to the IFSR. Strict conditions with respect to a designated FFI's correspondent or payable-through accounts include: (1) prohibiting or restricting any provision of trade finance; (2) restricting transactions processed through the accounts; (3) placing monetary or volume limits on the transactions processed through the accounts; (4) requiring pre-approval from the US financial institution for all transactions processed through the accounts; or, (5) prohibiting or restricting the processing of foreign exchange transactions through the account. Where "strict conditions" (as above) are not applied to designated FFIs, Treasury will prohibit the opening or maintenance of correspondent or payable-through accounts. The 561 List specifies the scope of restrictions that US financial institutions are required to apply to the designated FFIs.
D. Key Executive Orders in 2010 and 2011
In addition to signing CISADA into law, the President issued Executive Order (EO) 13553 in 2010, blocking the property of those responsible for serious human rights abuses by the Government of Iran (GOI).
In 2011, the President issued EO 13590, expanding sanctions on the Iranian petroleum industry by identifying the following activities as sanctionable acts: the provision of any goods, services or technology above $1 million that could help Iran develop its petroleum resources (a far lower threshold than under ISA or CISADA), or above $250,000 for its production of petrochemical products (broadening the scope of products that are covered as sanctionable acts). EO 13590 also has a menu of sanctions that may be applied to persons engaging in sanctionable acts. Notably, these sanctions also authorize IEEPA-based blocking of assets of parties engaging in these activities. This potential blocking is especially significant because the sanctions also may be applied to any successor companies, parents and other affiliates under certain conditions. EO 13590 also designated the entire Iranian financial sector as a "primary money laundering concern" under the USA PATRIOT Act, thereby increasing the pressure on US financial institutions to sever their correspondent banking relationships with foreign banks doing business with Iran.
While CISADA and the Executive Orders enacted in 2010 and 2011 represented a sea-change in the breadth and severity of economic sanctions against Iran, the US government redoubled its lawmaking effort in 2012 to create an even more restrictive regime, as explained below.
III. 2012 YEAR IN REVIEW
A. National Defense Authorization Act for Fiscal Year 2012 (2012 NDAA)
1. Extraterritorial Provisions Affecting Foreign Banks
President Obama signed into law the Fiscal Year 2012 NDAA on December 31, 2011. Section 1245 greatly strengthened the effect of US economic sanctions against Iran by essentially forcing every country in the world to choose between significantly reducing purchases of Iranian oil or having its banks shut out of the international financial system.
The central provision of the 2012 NDAA prohibits the opening of and prohibits or imposes strict conditions on the maintenance of an FFI's correspondent or payable-through accounts in the United States if they knowingly conduct or facilitate any significant financial transaction with the CBI or with designated Iranian financial institutions. Foreign central banks and state-owned and state-controlled banks are included as well, but only for transactions involving the sale or purchase of petroleum products to or from Iran. Without access to correspondent or payable-through accounts, FFIs cannot process dollar-denominated transactions, effectively cutting them off from most international business.
2. Waiver Provisions Temporarily Forestalling Full Implementation
The 2012 NDAA contains several provisions that allow the President to soften the impact of Section 1245. First, in order for the FFI rule to apply at all, the President must determine every 180 days that there is a sufficient global supply of petroleum available for sale at a sufficiently low price to permit a significant reduction in purchases from Iran. Second, the 2012 NDAA allows the President to decline to apply this debilitating provision to a particular FFI if he determines that the country with primary jurisdiction over the FFI has significantly reduced its purchases of Iranian crude oil. The President has to report to Congress on these waivers every 180 days. Thus far, the President has granted waivers to most major purchasers of Iranian oil, including China, India, Japan and South Korea. Finally, the law authorizes the President to waive the imposition of sanctions for a renewable period of 120 days if he determines that doing so would be "in the national security interest" of the United States. As a result of these waiver provisions, the full potential effect of Section 1245 has not yet been realized. Many foreign banks continue to do business with Iran, in reliance on the above waiver provisions. The President's ability to withhold waivers, however, leaves an additional sanctions tool that yet may be applied.
3. Blocking Iranian Banks
In addition to the FFI provision, the 2012 NDAA requires the President, pursuant to the IEEPA, to block all property of Iranian financial institutions that falls within US jurisdiction. The effect of this provision is similar to listing all Iranian financial institutions as SDNs. Although US financial institutions were previously not allowed to conduct any transactions with Iranian banks, this provision goes even further by blocking their property.
The 2012 NDAA also designates the entire Iranian financial sector, including the CBI, as a "primary money laundering concern" under the USA PATRIOT Act, codifying that portion of EO 13590, discussed in Section II.D above.
4. 2012 Implementation in IFSR
On February 27, 2012, OFAC implemented the 2012 NDAA in the IFSR. This implementation follows the pattern of the implementation of the CISADA sanctions on FFIs in the IFSR. FFIs designated pursuant to the 2012 NDAA also now are designated on OFAC's 561 List.
B. Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA)
ITRA, signed into law on August 10, 2012, provides for further significant expansion of US sanctions against Iran.
1. Restriction of Activities of Foreign Subsidiaries of US Companies
ITRA's foreign subsidiary provision imposes civil penalties on a US parent company (and possibly on the foreign subsidiary itself) if its foreign subsidiary knowingly engages in any transaction with the GOI or any person subject to its jurisdiction that would be prohibited if engaged in by the US person or in the United States. The imposition of penalties does not require any knowledge or involvement by the US parent in the prohibited transaction. Liability attaches based solely on the conduct and scienter of the foreign subsidiary. This provision has a sweeping impact, effectively cutting off foreign subsidiaries of US companies from almost all transactions with Iran.
2. New SEC Reporting Requirement
ITRA also breaks new ground by imposing an SEC reporting requirement, thereby increasing the government's investigatory and enforcement power by shifting the burden onto companies. The new provision requires "issuers," those companies that must file reports under the Securities Exchange Act of 1934, to disclose if the issuer or any of its affiliates knowingly engaged in an activity that is sanctionable under the ISA or CISADA, or knowingly conducted any transaction or dealing with the GOI or with any party blocked by EO 13224 (terrorists and supporters) or EO 13382 (WMD proliferators and supporters). The disclosure, which is publicly available, must include a detailed description of the relevant activity, including the gross revenues and net profits gained. Moreover, the President must initiate an investigation based on the disclosure to determine whether to impose ISA sanctions in relation to the disclosed activity.
3. Further Expansion of the ISA Petroleum Sector Sanctions
Building on CISADA, ITRA further modifies the ISA framework by adding new sanctionable activities and by expanding the list of available sanctions. ITRA adds the following as potentially sanctionable acts under specific conditions: (1) participating in certain joint ventures that may benefit Iran's petroleum sector; (2) providing goods, services, technology or other support that could contribute to the maintenance and enhancement of Iran's ability to develop domestic petroleum resources, refined petroleum production, or petrochemical products production (with certain transaction value thresholds); (3) transporting crude oil from Iran to another country; (4) concealing the Iranian origin of crude oil or refined petroleum products transported on vessels. Certain exemptions apply to the provision of underwriting services, insurance and reinsurance where due diligence is exercise to ensure services are not provided for the above activities. Where the President determines a party has engaged in the sanctionable activities, he is now required to impose at least five of the twelve available sanctions, whereas CISADA required him to impose three out of nine and the ISA required two out of six. In addition to expanding the list of available sanctions, ITRA makes the ISA regime's waiver provision more difficult to invoke.
4. Expansion of WMD Sanctions: Blocking and ISA-Type Sanctions
ITRA expands the scope of WMD sanctions against Iran. First, it blocks the property of any person that knowingly provides a vessel, insurance or any other shipping service for the transportation to or from Iran of goods that could materially contribute to the GOI's WMD proliferation or support of terrorism. Second, it expands a preexisting provision imposing ISA sanctions on persons that provide goods, services, technology, and other items to Iran that contribute to its ability to acquire or develop WMDs or destabilizing numbers and types of advanced conventional weapons. Sanctions now are triggered by such transactions with any person, if the actor knew that the transaction likely would result in another person providing the item to Iran and that the item would contribute to weapons proliferation.
5. Expansion of FFI Sanctions and Other Extraterritorial Measures
ITRA expands CISADA's FFI sanctions to reach any FFI that facilitates, participates or assists in, attempts or conspires to facilitate or assist in, or is owned or controlled by a foreign financial institution that engages in a number of sanctionable activities described in section 104(c)(2) of CISADA. (CISADA applied initially to FFIs that simply "engaged" in the activities.) These activities include supporting Iran's efforts to acquire or develop weapons of mass destruction or efforts to support terrorist organizations. ITRA also authorizes, but does not require, the President to impose sanctions on global financial communications services providers that directly provide their services, or facilitate access to such services, to the CBI and other blocked Iranian financial institutions. On November 8, 2012, the IFSR were amended to account for this expansion.
6. Expansion of IRGC Sanctions
Under ITRA, restrictions on transactions with the IRGC are no longer limited to FFIs. ITRA requires the President to designate any foreign person that engages in significant transactions with IRGC entities or persons subject to United Nations sanctions. It also authorizes sanctions on foreign government agencies that knowingly and materially assist IRGC entities. Lastly, it excludes from the United States and blocks the property of all persons affiliated with the IRGC.
7. Other Important Provisions
ITRA codifies EO 13608 by prohibiting transactions with foreign persons that violate Iran sanctions laws or facilitate deceptive transactions for sanctioned entities. It also establishes a favorable licensing regime for certain human rights, humanitarian, and democratization activities related to Iran.
C. Iranian Transactions and Sanctions Regulations (ITSR)
On October 22, 2012, OFAC published a final rule renaming the ITR the "Iranian Transactions and Sanctions Regulations" (ITSR) and amending the renamed regulations to codify portions of EO 13599 and the 2012 NDAA. Accordingly, the primary US sanctions regulations are now known as the ITSR, but the substance of the old ITR largely remains in place. The ITSR add new prohibitions, definitions, interpretations, and licensing provisions, and remove a few general licenses from the ITR. The most important new provision involves the codification of EO 13599's requirement to block the assets of and prohibit transactions with the GOI, the CBI, or any Iranian financial institution. The ITSR also provide a new general license for exports of medicine and basic medical supplies to Iran, replacing the need to apply for some of the specific licenses that were previously authorized under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). Conversely, the ITSR no longer authorize transactions "ordinarily incident to" or "necessary for" an authorized transaction, or exports by a US person or from the United States to Iran for substantial transformation or incorporation into third-country products (which used to be authorized under specific conditions).
On December 26, 2012, OFAC issued amendments to the ITSR, implementing section 218 of ITRA and EO 13622. Pursuant to section 218 of ITRA, the amended ITSR prohibit foreign entities that are "owned or controlled" by US persons from engaging in transactions with the GOI or any person subject to the GOI's jurisdiction where a US person, or person in the United States, would be prohibited from engaging in such a transaction. This restriction on foreign-entity activity does not apply to transactions relating to the Shah Deniz natural gas field or related pipeline projects. OFAC also amended the ITSR to include a general license allowing a limited window (through March 8, 2013) for foreign entities to engage in transactions necessary to wind down Iran-related transactions, as long as the activities do not involve US persons and are not in the United States.
D. 2012 Executive Orders
1. Executive Order 13599: Blocking the Entire Iranian Government and Financial Sectors
EO 13599, issued on February 5, 2012, pursuant to the 2012 NDAA, blocks all property subject to US jurisdiction of Iranian financial institutions and the GOI, including its ministries, the CBI, and state-owned and state-controlled enterprises. As above, this EO has been implemented in the new ITSR.
2. Executive Order 13606 (GHRAVITY): Blocking Entities in the IT Sector Linked to Human Rights Abuses
EO 13606, issued on April 22, 2012, is known as the "GHRAVITY" EO because it targets those involved in the GOI's "Grave Human Rights Abuses via Information Technology." Specifically, EO 13606 blocks all property of persons who operated information technology that facilitated, or provided goods, services or technology likely to facilitate, computer disruption or monitoring that could enable serious human rights abuses by the GOI. The purpose of this Executive Order is to require all companies in the information technology arena to take measures to ensure that their products are not being used for nefarious purposes in Iran.
3. Executive Order 13608: Targeting Foreign Sanctions "Evaders"
EO 13608, issued on May 1, 2012, was designed to close any loopholes that sanctioned entities may have been able to use to circumvent prior restrictions under US sanctions laws and regulations. The order prohibits all transactions by US persons or within the United States involving sanctioned persons, effectively cutting them off from the US marketplace and financial system. US persons can no longer provide to or procure from sanctioned parties any goods, services, or technology without authorization from OFAC, unless the transaction is otherwise exempt under the applicable statutes and regulations (e.g., certain travel-related transactions).
EO 13608 also authorizes the imposition of sanctions on foreign persons who facilitate deceptive transactions for sanctioned persons. The order deﬁnes a "deceptive transaction" to include any transaction in which the identity of a sanctioned person is withheld or obscured from other participants in the transaction or relevant regulatory authorities. This provision has a very broad potential reach and would, for instance, allow OFAC to require (assuming jurisdictional requirements are met) a foreign bank, in a transaction conducted entirely outside the US by non-US persons, to divulge the identity of sanctioned persons. Another important feature of this provision is that the disclosure it requires should help US persons avoid transacting with sanctioned entities unknowingly. (This provision was driven, at least in part, by the so-called "wire stripping cases," in which the United States imposed unprecedented penalties on foreign banks for failing to identify sanctioned parties in transactions that were processed by US banks.)
4. Executive Order 13622: Targeting NIOC, NICO, and the CBI
EO 13622, issued on July 30, 2012, has four main parts. First, it authorizes the imposition of sanctions on FFIs that have knowingly conducted or facilitated any significant financial transaction with the National Iranian Oil Company (NIOC) or Naftiran Intertade Company (NICO), excluding sales of refined petroleum products below the ISA's dollar threshold. Second, the order authorizes the imposition of sanctions on any person that knowingly engages in a significant transaction for the purchase or acquisition of petroleum or petrochemical products from Iran. These measures were designed to complement the 2012 NDAA's FFI provision, and the 2012 NDAA oil supply adequacy prerequisites apply, as well as the 2012 NDAA's waiver for the country of primary jurisdiction over the FFI and the humanitarian exception.
The third part of EO 13622 blocks the property of any person that provides material assistance to NIOC, NICO or the CBI. The final section blocks the property of any person that provides material assistance to the GOI for the purchase or acquisition of US bank notes or precious metals. These measures were designed to prevent Iran and its remaining trading partners from establishing workaround payment mechanisms for the purchase of Iranian oil in circumvention of the 2012 NDAA sanctions.
5. Executive Order 13628: Initial Implementation of ITRA Foreign Subsidiary Rule
Issued on October 9, 2012, EO 13628 was the initial implementation of the ITRA rule applying the then-ITR to foreign entities owned or controlled by a US parent. The rule also provided a safe harbor if a US parent company divests its interest in its foreign subsidiary by February 5, 2013. As discussed above, under the ITSR, OFAC promulgated a broader general license, authorizing foreign entities to engage in "all transactions ordinarily incident and necessary to the winding-down" of Iran-related transactions covered by section 560.215, provided that the transactions do not involve US persons or occur in the United States. The general license authorizes such transactions from October 9, 2012 through March 8, 2013.
E. Iran Freedom and Counter-Proliferation Act of 2012
On January 3, 2013, the National Defense Authorization Act for Fiscal Year 2013 (2013 NDAA) was signed into law. Title XII, Subtitle D of the 2013 NDAA, called the "Iran Freedom and Counter-Proliferation Act of 2012" (IFCPA), imposes additional sanctions against Iran.
1. Expansion of Energy and Shipping Sector Restrictions
The IFCPA requires blocking of property of (1) entities in Iran's energy, shipping and shipbuilding sectors (including NIOC, NITC, the Islamic Republic of Iran Shipping Lines (IRISL) and their affiliates); and (2) entities that operate ports in Iran, and any persons who knowingly support such entities (or any other Iranian SDNs, except for Iranian financial institutions that have not been designated because of involvement in Iran's weapons proliferation or terrorism activities or Iran's abuses of human rights). The IFCPA also requires the imposition of ISA sanctions for any party engaged in the knowing transfer to or from Iran of significant goods or services used in the energy, shipping and shipbuilding sectors, subject to certain exceptions.
2. New Restrictions Related to Precious Metals and Certain Other Materials
The IFCPA mandates ISA sanctions for the knowing transfer to or from Iran of precious metals or certain other materials, including aluminum, steel, coal, and software for integrating industrial processes, if such materials are (1) being used by Iran as a medium for barter, swap or other exchange, or listed as an asset of the GOI for purposes of the national balance sheet of Iran; (2) to be used in connection with Iran's energy, shipping or shipbuilding sectors or any sectors determined to be controlled by the IRGC; (3) sold, supplied or transferred to or from an Iranian SDN (other than an Iranian financial institution that has not been designated as a result of its involvement in Iran's weapons proliferation or terrorism activities or Iran's abuses of human rights); or, (4) determined to be used in connection with Iran's weapons proliferation programs.
Under the IFCPA, the President may decline to impose sanctions if he determines that the party engaged in such a transaction has exercised due diligence in ensuring against transfers of these materials to or from Iran, and it also allows the President to waive sanctions for 180 days if vital to US national security.
3. Expansion of Insurance Restrictions
Subject to certain exceptions, the IFCPA requires that ISA sanctions be imposed on any persons that the President determines have knowingly provided underwriting or insurance services for (1) any sanctionable activity involving Iran; (2) any activity in the energy, shipping, or shipbuilding sectors; (3) transfers of the materials discussed in the prior section; (4) any person designated for sanctions pursuant to IEEPA for weapons proliferation or international terrorism reasons; or, (5) any Iranian SDN (other than an Iranian financial institution that has not been designated as a result of its involvement in Iran's weapons proliferation or terrorism activities or Iran's abuses of human rights).
4. Expansion of Restrictions on FFIs
The IFCPA also generally imposes sanctions on FFIs that conduct or facilitate a significant financial transaction in connection with the activities described above, subject to certain exceptions. Accordingly, the IFCPA requires that the President prohibit the opening of, or restrict or prohibit the maintenance of correspondent or payable-through accounts in the United States for a foreign financial institution that conducts or facilitates a significant financial transaction (i) for the sale, supply or transfer to or from Iran of significant goods or services used in connection with the energy, shipping or shipbuilding sectors of Iran; or, (ii) for the sale, supply or transfer to or from Iran of the commodities discussed in Section 2 above. The IFCPA also requires the same conditions for any FFI that conducts or facilitates a significant financial transaction (1) for the sale, supply or transfer of natural gas to or from Iran; or, (2) with an Iranian person on the SDN List (other than an Iranian financial institution that has not been designated as a result of its involvement in Iran's weapons proliferation or terrorism activities or Iran's abuses of human rights).
5. Imposition of CISADA Section 105(c) Sanctions on New Entities
The IFCPA requires the President to list as SDNs the Islamic Republic of Iran Broadcasting and its President, Ezzatollah Zargami, and further requires the President to impose sanctions described in Section 105(c) of CISADA against these parties (e.g., denying visas, blocking property, etc.). The IFCPA also amends CISADA to impose sanctions described in CISADA Section 105(c) on persons who are determined to have engaged in corruption or other activities relating to the diversion of goods, including agricultural commodities, food, medicine and medical devices intended for the people of Iran, or the misappropriation of proceeds from the sale or resale of such goods.
6. Other Important Provisions
The IFCPA amends the national security waiver in Section 1245 of the 2012 NDAA to require the President to certify that the country with primary jurisdiction over an FFI that would otherwise be subject to sanctions faced exceptional circumstances that prevented it from being able to significantly reduce its purchases of Iranian petroleum products.
The IFCPA extends the statute of limitations in 18 USC. § 2335 for civil actions regarding terrorist acts from four years from the date the cause of action accrued to ten years.
Finally, the IFCPA requires the President to report every 180 days on which sectors of the Iranian economy are controlled directly or indirectly by the IRGC. It also requires the President to submit annual reports to Congress through 2016 with a list of large or otherwise significant vessels that have entered seaports in Iran controlled by the Tidewater Middle East Company and the owners and operators of those vessels, along with a list of all airports at which aircraft owned or controlled by a sanctioned Iranian air carrier have landed.
IV. 2013 PREVIEW
The United States has established a highly restrictive sanctions regime with respect to Iran. US persons have been cut off from almost all transactions with Iran and many of these restrictions now apply to foreign entities that are owned or controlled by US companies. Moreover, the scope of extraterritorial measures (following the ISA model) that may now be applied to non-US companies is unprecedented. In 2013, the focus likely will be the implementation and enforcement of these new laws and regulations. Further, the President's ability to apply waivers or suspend their application (such as those under section 1245 of the 2012 NDAA) will be significant. US and non-US companies alike now will grapple with these extensive and overlapping measures.
We will continue to keep you apprised of developments relating to US sanctions against Iran.
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.