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OFAC Issues Updated JCPOA FAQ October 2016

On 7th October 2016 the US Treasury’s Office of Foreign Assets Control (“OFAC”) updated its Frequently Asked Questions Relating to the Lifting of Certain US Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day (the “FAQs”), providing additional guidance on the post-JCPOA Iranian sanctions position. The updated FAQs do not change the underlying legislation, although they do provide helpful clarification particularly relating to due diligence, and financial transactions involving Iran.

Of particular relevance, the FAQs provide:

C.7 – foreign financial institutions, including foreign-incorporated subsidiaries of US financial institutions, may process transactions denominated in US dollars involving Iran or persons ordinarily resident in Iran, including Iranian financial institutions, provided such transactions do not involve the US financial system, a US person, or an SDN. However, foreign financial institutions must ensure they do not process US dollar-denominated transactions involving Iran through the US financial system or otherwise involve US financial institutions (including their foreign branches) as US persons remain prohibited from exporting goods, services or technology to Iran (excepting exempt transactions or those authorized by licence), and remain prohibited from engaging in any transactions involving Iran, including in currencies other than the US dollar (excepting exempt transactions or those authorized by OFAC).

C.15 – US financial institutions can transact with non-US, non-Iranian financial institutions that maintain correspondent banking relationships or otherwise transact with Iranian financial institutions not on the SDN List. It remains prohibited, however, for non-US financial institutions to route transactions involving Iran to or through the US financial system, or involve US persons in such transactions, unless the transactions are exempt from regulation or authorized by OFAC.

M.10 – It is not necessarily sanctionable for a non-US person to engage in transactions with an entity not on the SDN List but that is minority owned, or controlled in whole or in part by an Iranian or Iran-related SDN. However, OFAC recommends exercising caution when engaging in transactions with such entities to ensure transactions do not involve Iranian or Iran-related SDNs. There is a risk that a transaction could nevertheless provide significant services or support to an Iranian or Iran-related SDN, which, if the non-U.S. person knows or ought to have known of this fact, could amount to a breach of US secondary sanctions.  Minority SDN ownership/ control should be seen as a warning flag, and further enquiries should be made in order to determine if the transaction benefits an SDN.

M.11 – simply checking the name of an entity against the OFAC SDN List is not necessarily sufficient to discharge due diligence obligations. Due diligence procedures should conform to robust internal risk-assessment and compliance policies, as well as meet the guidelines and expectations set down by regulators in the non-US person’s home jurisdiction.

The full text of the updated FAQs can be found at the link below.

pdf file type