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M. McNabb, Marsha
Z. Gerber, Stefan
Reisinger and Mary
On November 21, 2011, the United
States announced three measures designed to enhance sanctions on Iran. The
President issued an Executive Order authorizing the Secretary of State to
impose sanctions on foreign parties that provide goods, services, technology or
support of certain value to Iran's energy or petrochemical sectors; the
Secretary of the Treasury designated Iran as a jurisdiction of "primary money
laundering concern" under Section 311 of the U.S. Patriot Act; and
Treasury's Office of Foreign Assets Control added Iranian entities and
individuals involved in Iran's suspected nuclear weapons program to the
Specially Designated Nationals List.
In announcing these new measures the
United States joined the United Kingdom, Canada and the European Union, each of
which have implemented, or are planning to implement, additional sanctions on
entities in, or doing business with, Iran:
Authorization of Sanctions on Foreign Parties Engaging In Certain Transactions
Relating To Iran's Energy and Petrochemical Sectors
Pursuant to Executive Order
13590, President Obama authorized the imposition of sanctions on foreign
entities that provide goods, services, technology or support of certain value
to Iran's energy or petrochemical sectors. The Executive Order essentially
expands the reach of sanctions available under the Comprehensive Iran
Sanctions, Accountability, and Divestment Act ("CISADA"). More
specifically, the Secretary of State is now authorized to impose sanctions on
persons or entities that knowingly, on or after November 21, 2011:
The Executive Order also authorizes,
in certain circumstances, sanctions on successor entities as well as related
entities that are owned or controlled by, or own or control, a sanctioned
The Secretary of State, in
consultation with other agencies, has the authority to impose sanctions similar
to those available under CISADA, including prohibitions on: (1) foreign
exchange transactions; (2) banking transactions; (3) property transactions in
the United States; (4) U.S. Export-Import Bank financing; (5) U.S. export
licenses; (6) imports into the United States; (7) loans of more than $10
million from U.S. financial institutions; (8) U.S. government procurement
contracts; and (9) for financial institutions, designation as a primary dealer
or repository of U.S. government funds. The Secretary of State has
discretion to impose any or all of the available sanctions. The Executive
Order expresses the President's willingness to impose sanctions on parties when
not required by CISADA.
Designation of Iran as a "Primary Money Laundering Concern"
The Secretary of the Treasury
designated Iran's entire banking sector, including its Central Bank, as a
"primary money laundering concern" under Section 311 of the Patriot
Act. Section 311 authorizes the U.S. Secretary of Treasury to require
certain domestic financial institutions and financial agencies (defined as
"covered financial institutions") to take "special
measures" against the primary money laundering concern. Such special
measures are typically used to require covered financial institutions to gather
and provide the U.S. government with specific information regarding their
account holders' direct and indirect operations with the primary money
laundering concern. Examples of available special measures include
requiring: (1) recordkeeping and reporting of certain financial transactions;
(2) collection of information relating to beneficial ownership; (3) collection
of information relating to certain payable-through accounts; (4) collection of
information relating to certain correspondent accounts; and (5) a prohibition
or conditions on the opening or maintaining of correspondent or payable
Treasury's Financial Crimes
Enforcement Network ("FinCEN") issued a notice of proposed rulemaking
which proposes prohibiting covered financial institutions from opening or
maintaining correspondent accounts for, or on behalf of, Iranian banking
institutions. The proposed rule would also require covered financial
institutions to take specified additional due diligence steps to help ensure
that no such account is being used indirectly to provide services to an Iranian
banking institution. At a minimum, covered financial institutions would be
required to perform the following two expanded due diligence steps:
Because U.S. financial institutions
were already prohibited under existing U.S. sanctions from providing
correspondent account services for banking institutions in Iran, the impact of
these new measures on U.S. financial institutions may be limited.
However, foreign entities with correspondent accounts in the United States
should be aware that by designating Iran as a primary money laundering concern,
the U.S. has now declared it will be more aggressive in policing any of their
potential direct or indirect ties to Iran.
Addition of Iranian Entities and Individuals to OFAC's SDN List
The U.S. Department of Treasury,
Office of Foreign Assets Control ("OFAC") added eleven Iranian
entities and an Iranian individual involved in Iran's suspected nuclear weapons
program to the Specially Designated Nationals List ("SDN
List"). The assets of the identified SDN List individuals and
entities that are under U.S. jurisdiction are now frozen and U.S. persons are
banned from doing business with them.
The newly imposed U.S., U.K.,
Canadian and potential E.U. sanctions could have significant effects on foreign
companies and financial institutions that engage in transactions directly or
indirectly with Iran. Moreover, the United States has signaled that other
countries may impose similar measures against Iran in the near future and that
the U.S. will continue to "actively consider a range of increasingly
aggressive measures" against Iran. Companies and financial
institutions that engage in transactions that directly or indirectly involve
Iran or Iranian entities should analyze the potential impact that both the new
sanctions, and potential future sanctions, may have on their current or contemplated
activities and take appropriate steps to avoid potential risk to themselves or
their affiliated companies. Fulbright's International
Trade Practice Group will continue to monitor the situation and
provide additional updates as warranted.
This article was prepared by Stephen M.
McNabb (firstname.lastname@example.org or 202 662 4528), Marsha Z.
Gerber (email@example.com or 713 651 5296), Stefan
H. Reisinger (firstname.lastname@example.org or 202 662 4698) and Mary Beth
Balhoff (email@example.com or 713 651 5652) from
Fulbright's International Trade Practice Group. Stephen M.
McNabb is a partner in Fulbright's Washington D.C. office and is Head of
Fulbright's International Trade Practice Group. Marsha Z. Gerber is a partner
in Fulbright's Houston, Texas office and is a member of the International Trade
Practice Group. Stefan H. Reisinger and Mary Beth Balhoff are attorneys in the
International Trade Practice Group.
the Fulbright & Jaworski Publications page for more analysis of international
and foreign law issues.
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 CISADA requires that sanctions
be imposed on any person or entity "knowingly making an investment
of $20,000,000 or more, or making a combination of investments if each such
investment is of at least $5,000,000 and such investments equal or exceed
$20,000,000 in the aggregate and directly and significantly contribute to the
enhancement of Iran's ability to develop petroleum resources in
 CISADA requires that sanctions
be imposed on any person or entity "knowingly selling, leasing or
providing goods, services, technology, information or support to Iran with a
fair market value of $1 million or more, or with an aggregate fair market value
of $5 million or more during a 12-month period, that could directly and
significantly facilitate the maintenance or expansion of Iran's domestic
production of refined petroleum products.
 The additional names added to
the SDN list can be found at: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20111121.aspx