OFAC and Executive Order Clamping Down on Iran

On Monday, President Obama signed a new Executive Order blocking the property, and interests in property, of the Government of Iran, including the Central Bank of Iran and Iranian financial institutions. As a result of this executive order, all U.S. persons are required to block all property, and interests in property, of the Government of Iran and all Iranian financial institutions. With this move, the U.S. is further tightening the sanctions against Iran because of their pursuit of a nuclear program.

This executive order builds upon the embargoes in the Iranian Transactions Regulations (ITR). Prior to this executive order, financial institutions and U.S. persons were prohibited from engaging in any business transactions with the Government of Iran. Under those rules, U.S. financial institutions were required to reject transactions as opposed to blocking, as they are required now. Although the executive order alters the Iranian Transactions Regulations, all U.S. persons and financial institutions are still expected to comply with the ITR.

According to the U.S. Treasury Department’s Office of Foreign Assets Control, OFAC, “transactions involving entities bearing the [IRAN] tag on OFAC’s List of Specially Designated Nationals and Blocked Persons will now need to be blocked unless exempt or authorized by OFAC. Going forward, the [IRAN] tag will connote that a person or entity meets the definition of the term Government of Iran or Iranian Financial Institution.”

All financial institutions and other U.S. companies  are expected to determine their risk and conduct enhanced due diligence to ensure they are not engaging in transactions in which the Government of Iran has interests. According to OFAC guidelines, even if an entity does not appear on the SDN list, the property, and interest in property, of that entity are blocked if the entity is owned, directly or indirectly by 50% or more by a person who is blocked pursuant to regulations administered by OFAC.

There has been a steady increase in sanctions activity as the U.S. government continues to tighten economic sanctions against Iran.  Is your business or financial institution up to date on OFAC compliance?