Iran Sanctions (U.S. Department of the Treasury)

The current economic and political instability in Iran is causing many Iranian-Americans to sell properties in Iran they did not sell before moving to the United States, be it offices, farmland, factories, or even former family homes.  A number of others are going through Iranian courts to reclaim properties that were seized by the government after the revolution.  What most Iranian-Americans unfortunately do not know is that U.S. laws require U.S. persons (as defined by the applicable regulations) to obtain a license from the Treasury Department to engage in transactions related to the sale of their personal property in Iran.  Many of them also do not know that they cannot invest in Iran, or that the definition for investment is broader than what they may think.  What's more, the rules do not stop there. 

U.S. sanctions against Iran are very strict and comprehensive.  Most day to day activities are subject to the regulation of the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), which is tasked with enforcing the Iranian Transactions Regulations (ITR), a body of regulations governing the trade in goods, services, and technology between the United States and Iran.  The ITR is very comprehensive - it addresses commercial, personal, charitable, and other activities.

The sanctions apply to generally all "U.S. Persons."  You are a U.S. person if you are a U.S. citizen or Permanent Resident (Green Card holder), even if you do not live in the United States.  You are also a U.S. person if you are merely physically in the United States.  Therefore, irrespective of your Iranian or possibly any third country citizenship (e.g., Canada), you are still a U.S. person if you meet the above definition. 

To illustrate the breadth of U.S. sanctions, let's first test your basic knowledge of U.S. sanctions on Iran.

1. Iranian-Americans do not need a license to sell properties or hire a lawyer to reclaim confiscated properties in Iran.

FALSE.  U.S. laws prohibit U.S. persons from engaging in certain transactions such as selling or brokering in Iran unless they are licensed.  As an example, a U.S. citizen traveling to Iran to sell his or her house should first obtain a license from OFAC.  Otherwise, he or she will violate U.S. laws not only by selling the home, but also by hiring a lawyer or realtor in Iran to help him or her in the sale of the property.  This is also applicable for the sale of household appliances and other property (e.g., cars, jewelry, home furnishings, etc.).  The same law also applies if one tries to reclaim property seized by the Iranian government.  Hiring a lawyer to pursue claims in Iranian courts requires a license, as one is effectively "importing" an Iranian service (the services of the lawyer).

2. Iranian-Americans are allowed to buy real estate in Iran for personal use.

MOST PROBABLY FALSE.  The law is a bit unclear on this.  What is clear is that U.S. sanctions on Iran prohibit new investment in Iran by U.S. persons.  Most "purchases" are also prohibited.  OFAC recently announced that it fined an individual $30,000 for investing in a family catering business in Iran.  The facts were not provided in detail, but it was noteworthy that OFAC fined a relatively high amount for behavior it considered "non-egregious!"  If the home is for personal use (e.g., a vacation home for you and your family), OFAC could potentially authorize such a transaction on the grounds that it may not be considered "investment," but it is absolutely imperative not to do anything until you have a written confirmation from OFAC (e.g., a license or a letter).  Buying investment property is certainly a violation of the ITR.

3. Iranian-Americans can deposit money in banks in Iran.

FALSE.  For the same reason as above, opening a bank account in Iran and depositing funds in it can constitute "new investment."  Therefore, as attractive as offers of high interest or foreign currency accounts in Iranian banks may be, making such an investment is completely against U.S. laws absent prior written authorization from OFAC, even if the money is deposited in a private Iranian bank!

4. "Havaleh" through individuals is a great way to transfer money between the United States and Iran.  

FALSE.  The U.S. government is increasingly cracking down on this way of informal money transfer, in part because it opens the door to money laundering and the financing of illicit activities.  OFAC encourages ordinary citizens sending personal funds to send such money from private, non-sanctioned banks in Iran to certain non-Iranian, non-U.S. banks in third countries that will send the funds on to the United States.  People have been criminally charged for acting as Havalehdars, and beneficiaries have been questioned as well.  Do not do it

1. What are the penalties?

OFAC has certain discretion in what actions it takes against parties violating its regulations on Iran.  The fines for violating these regulations can be hefty.  Broadly speaking, OFAC's civil penalties for violations of the ITR can reach up to the greater of $250,000 or twice the value of the transaction, depending on the facts.  Furthermore, some cases can be referred for criminal investigations, depending on a number of factors.

2. But I'm an Iranian Citizen.  What does U.S. law have to do with this?

Again, if you meet the ITR's definition of "U.S. Person," it is irrelevant whether you hold an Iranian or any other passport.  You are a U.S. person under the applicable regulations.

3. I need to sell my property in Iran or get a lawyer in Iran to reclaim my property.  What should I do?

Very simple - apply for an OFAC license.  After receiving the license, it will be advisable to submit an affidavit to your bank declaring the purpose of the transfer - the last thing you want is for the bank to mistakenly reject an incoming wire - your money will be returned to the sender and you may receive an Administrative Subpoena from OFAC.  You must also take certain precautions, including ensuring that the money does not pass through any sanctioned entities (e.g., Bank Saderat, Bank Melli, and others).  OFAC generally maintains a favorable licensing policy on these activities and it usually does not take much time to receive a license, so make sure you take the legal route.

4. OK, so it appears that I may have violated the law.  What now?

You should consult a lawyer who is experienced in this area.  He or she can determine if a violation has occurred.  If indeed a violation did take place, one can sometimes (depending on the circumstances) mitigate any penalties by making what is called a Voluntary Self-Disclosure.  OFAC will examine your Voluntary Self Disclosure and may ask for more information.  It will consequently make a determination as to the type of enforcement action it takes.

Please contact Farhad R. Alavi at +1 (202) 686-4859 or farhad.alavi@fralegal.com should you have any questions.

The Law Office of Farhad R. Alavi, PLLC
5335 Wisconsin Avenue, NW, Suite 440, Washington, DC 20015
Tel: +1 (202) 686-4859 / Fax: +1 (202) 686-2877 / www.fralegal.com

... Payvand News - 12/31/10 ... --