Iran sanctions update: Guidance for financial institutions

EU sanctions relief effected by amendments to Council Decision 2010/413/CFSP and Regulation (EU) No 267/2012 includes the following areas of particular relevant to financial institutions:

• Precious metals and currency: transactions relating to gold, other precious metals and diamonds; supplies of newly-printed or unissued Iranian-denominated banknotes and minted coinage.
• Financial transfers and banking activities: financial transfers to and from non-listed Iranian entities; the establishment of relationships with Iranian banks and branches, offices or subsidiaries in Iran; the opening of branches, subsidiaries or representative offices of non-listed Iranian banks in EU Member States.
• Financial services: the provision of insurance and reinsurance to non-listed Iranian entities; the supply of specialised financial messaging services for non-listed Iranian financial institutions; transactions in public or public-guaranteed bonds with Iranian non-listed entities.

US sanctions relief includes the following areas of particular relevance to financial institutions:

• Financial and banking measures: Financial and banking transactions related to Iran, including: (i) transactions with individuals and entities set out in Attachment 3 to Annex II of the JCPoA, including, with certain exceptions, opening or maintaining correspondent accounts for the specified Iranian financial institutions; (ii) transactions and other activity involving the Iranian rial; (iii) the provision of US bank notes to the Government of Iran, including providing material support for such transactions; (iv) the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt, including governmental bonds; (v) the provision of specialized financial messaging services to certain Iranian banks and financial institutions removed from the SDN List on Implementation Day; and (vi) the provision of associated services for each of these categories. The US commitments also include the lifting of bilateral trade limitations on Iranian revenues held abroad, including limitations on their transfer. US persons continue to be generally prohibited under the ITSR from involvement in these activities. In addition, transactions related to these activities are prohibited from transiting the US financial system.
• Insurance measures: Underwriting services, insurance, or reinsurance in connection with activities consistent with the JCPoA, including activities by non-US persons with individuals and entities set forth in Attachment 3 to Annex II of the JCPoA. The US commitments also include underwriting services, insurance, or reinsurance in connection with activities in the energy, shipping, and shipbuilding sectors of Iran; for certain specified Iranian entities; or for vessels that transport crude oil, natural gas, liquefied natural gas, petroleum, and petrochemical products to or from Iran.
• Gold and other precious metals: Trade in gold and other precious metals, and the provision of associated services.

Other listed activities relate to sectors such as petrochemical, shipping and automotives.

Certain US sanctions still apply after Implementation Day. In particular, focusing again on those applicable to financial institutions:

• Primary US sanctions on Iran remain in place. Other than certain limited exceptions provided for in the JCPoA, the US trade embargo on Iran broadly remains in place. US persons continue to be prohibited generally from engaging in transactions or dealings with Iran or its government or with SDNs. In addition, the Government of Iran and Iranian financial institutions remain persons whose property and interests in property are blocked. Absent an exemption or other OFAC authorization, US persons continue to have an obligation to block the property and interests in property of all individuals and entities that meet the definition of the Government of Iran or an Iranian financial institution, regardless of whether or not the individual or entity has been designated by OFAC. Non-US persons also continue to be subject to the US primary sanctions with respect to any action that takes place in the United States (such as US dollar clearing transactions), and there is potential liability for non-US persons engaging in transactions prohibited under primary sanctions if those transactions involve US individuals or entities. US export controls pertaining to Iran also continue to apply to US-origin goods, services and technology, including reexportation by non-US Persons from non-US countries to Iran.
• Non-US subsidiaries still may face limitations in engaging in Iran-related activities. US-owned or controlled foreign subsidiaries can, with certain limitations, engage in Iran-related business. US persons, however, can have no involvement in the business, except that US persons can be involved in the alteration or establishment of operating policies and procedures of the parent or the foreign entity to the extent necessary to allow the foreign entity to engage in Iran-related transactions and also can engage in activities to make available certain automated and globally integrated systems owned or controlled by the parent. Importantly, General License H does not authorize payment to, from, or through US depositary institutions. Any such payments would need to be blocked by the financial institution. This places an important practical limitation on the ability of foreign subsidiaries to engage in Iran business.

Other limitations include continuing US export controls, sanctions targeting Iran’s support for terrorism, regional destabilization, human rights abuses and missiles, and secondary sanctions targeting non-US person dealings with Iran-related persons on the SDN List or trade in certain materials involving Iran.