By Farhad Alavi, Akrivis Law Group, PLLC, Washington, DC
The sanctions that were lifted
(source: Islamic Republic News Agency)
Many questions have arisen following yesterday’s landmark announcement of implementation of the nuclear agreement reached last July between Iran and the P5+1 states (the United States, United Kingdom, France, Russia, China and Germany). This deal, known as the Joint Comprehensive Plan of Action (or JCPOA) has brought about much speculation about Iran’s emergence from roughly a decade of punishing sanctions and its reintegration into the international economic and political sphere. The JCPOA is memorialized in a lengthy, detailed document. Not surprisingly, there is much confusion as to how these transactions will affect most day-to-day transactions involving Iranian-Americans.
Many erroneously believe that the nuclear deal signals the end of requirements administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). This, however, could not be farther from the truth. It is critical to obtain a complete understanding of the JCPOA’s scope to prevent unintentional sanctions violations.
Will all sanctions against Iran be repealed?
Absolutely not. Most unilateral U.S. sanctions currently in place against Iran were implemented by President Clinton in 1995. Those laws continue to exist today in the form of the Iranian Transactions and Sanctions Regulations, 31 CFR Part 560 (the “ITSR”). The ITSR covers many day-to-day activities engaged in by “United States persons,” which the law defines to include U.S. citizens and permanent residents (wherever they are located, even in Iran), individuals physically in the United States (such as individuals on an employment, student, or tourist visa), and U.S. companies and their foreign subsidiaries.
The JCPOA is an agreement on Iran’s nuclear program and therefore largely unrelated to the ITSR. The ITSR are in place because of Iran’s alleged support of terrorism and human rights abuses. Therefore, the bulk of the ITSR remains intact, with only minor changes. Therefore, it can be seen that the JCPOA is not a final settlement of all of the United States’ grievances vis-a-vis Iran.
What changes have the JCPOA brought about then?
Will any changes will take place directly for U.S. persons?
Beyond the limited new authorizations applicable to U.S. persons, one area that will likely change is that already authorized transactions with Iran (such as the sale of certain humanitarian goods) will become somewhat easier to execute. For example, it may become logistically easier to send and receive lawful remittances from Iran or to sell authorized medical, food or information technology (IT) items to Iran. These are items that are to a generally authorized, subject to certain conditions. With less Iranian banks on the SDN list, and Iran’s reentry into the international SWIFT banking messaging system (the means by which banks can wire funds) the underlying financial transactions for these already-authorized transactions may become substantially easier. Shipping lawful items and insuring such shipments may, within the confines of applicable law, become easier too as more third country companies begin to offer such services with Iran.
Will individuals still need licenses for personal transactions?
Generally, yes. OFAC has over the years relaxed many of its requirements and issued a number of “general licenses,” which are general authorizations allowing certain transactions without requiring OFAC authorization, so long as you acted within the framework of the law. However, many transactions will continue to require specific OFAC licenses. These include the sale of many types of real property in Iran, the rental of property there, the sale of all other assets there (including businesses, shares of stock, etc.), the opening, maintaining, and closure of bank accounts in Iran, and engaging in many charitable and academic activities, even activities such as speaking at conferences.
U.S. persons will also notably continue to be prohibited from investing in Iran (irrespective of where the funds originate), most employment in Iran, opening bank accounts there, and buying property in Iran absent specific OFAC authorization.
Will OFAC take a softer approach towards sanctions violations?
Most probably not. Many view the JCPOA as a first step towards U.S.-Iran rapprochement. It remains to be seen whether that is the case. However, two points are exceptionally clear - (1) the United States and Iran have not reestablished relations; and (2) the Obama Administration by many measures faced a very uphill battle to get this deal through Congress. Many opposed to the JCPOA thought the deal was too accommodating towards the Iranian government. Given the negative opinion many have towards the deal, it is widely believed that the Administration will be more resolved to show that it is not appeasing the Iranian government and that it is resolutely enforcing the sanctions that remain in place. As such, it is very much possible that OFAC and the U.S. Department of Justice (which enforces the criminal component of the sanctions laws) will actually ratchet up their enforcement. In other words, civil enforcement in the form of Administrative Subpoenas (often the beginning of an OFAC investigation) and penalties, and criminal enforcement in the form of formal investigations and prosecutions. Therefore, the JCPOA should not be seen a softening of remaining U.S. economic sanctions against Iran.
Iran Sanctions (U.S. Department of the Treasury)
The JCPOA is a formidable step towards Iran’s economic reintegration with the rest of the world, but the sanctions are far from gone, particularly for U.S. persons. What is key that compliance should be at the forefront of the minds of not just businesses, but any individuals seeking to engage in transactions with or involving Iran. The euphoria surrounding the nuclear deal should not cloud one’s understanding of the sanctions regime in place against Iran. Accordingly, it is best to always seek the advice of those knowledgeable in this area rather than risk violating these very complicated laws and regulations.
Farhad R. Alavi is Managing Partner of Akrivis Law Group, PLLC, a boutique law firm in Washington, DC focusing on international business and global trade matters, including sanctions, export control, customs, and anti-corruption compliance, as well as white collar criminal defense (including for sanctions violations) and international tax matters. He appears frequently on international media such as BBC, Al Jazeera English, CCTV, and The New York Times on Iran sanctions and economic matters. Mr. Alavi is also Adjunct Professor at Georgetown University Law Center. He may be reached at email@example.com or (202)686-4859.
This Client Alert is intended solely for information purposes and should in no way be construed as legal advice. If you have any questions or are unclear on any of the subject matters addressed or discussed on this Client Alert, please consult a licensed legal professional.
© 2016. Akrivis Law Group, PLLC. All rights reserved.
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