OFAC yesterday published its final rule regarding the amendments to the ITSR (Iranian Transactions and Sanctions Regulations) which were mandated by the passage of the TRA (Iran Threat Reduction and Syria Human Rights Act of 2012) and elements of Executive Orders 13622 and 13628.
These changes are, in really concise form:
- Transactions with the Iranian government or their agents, by entities owned or controlled by US persons, but established or maintained outside the US, are prohibited if such transactions would be prohibited for entities established or maintained in the US
- “Winding-down” transactions, if they don’t occur in the US or involve a US person, are now permitted. Such transactions involving Iranian financial institutions are only authorized if the assets involved are blocked only due to these specific transactions.
- Transactions involving entities owned or controlled by a US person and established or maintained outside the US are authorized if such transactions would be authorized (due to general licenses) for an entity established or maintained in the US
- A number of general licenses are being amended so that, if a transaction would normally be authorized under one of them, but would be blocked under other parts of the sanctions regulations, the transaction is not authorized
- There are new civil penalties for entities owned or controlled by US persons, but established or maintained outside the US, which engage in transactions intended to evade sanctions regulations, unless the US person terminates its relationship with the entity by February 6, 2013
OFAC also notes it is making a pair of “technical corrections” to ITSR subpart E, section 560.505.
Now, these changes refer to specific sections of the ITSR – rather than delve into these in detail, it’s better to consider the impact of these changes. The bottom line is that:
- Sanctions, licenses and civil penalties extend beyond the US shores as long as the entities involved are controlled or owned by US persons.
- You can’t pick and choose the parts of the regulations that are the most lenient – if there are more than one reason an item is blocked, each has to be lifted for an item to be authorized
- Not all of this is with immediate effect. Certain winding-down transactions are being permitted and offshore entities can evade OFAC’s reach if their US ties are cut
Fun reading for the New Year…