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New Iran Sanctions Executive Order and What it Means For OFAC License Holders
February 7, 2011 Yesterday, President Obama issued a new Executive Order which, in short, transformed the Iranian Transactions Regulations (ITR) into a blocking program. As such, the property or interests in property belonging to the Government of Iran, the Central Bank of Iran, and all Iranian financial institutions under U.S. jurisdiction or coming under U.S. jurisdiction is now blocked. In reality this is a huge deal for the financial sector to deal with, but the effects on typical OFAC license holders and/or those operating under general licenses are minimal. My reason for making this statement stems from OFAC's issuance of two General Licenses (General Licenses A and B) which make it clear that the licenses issued prior to the executive order are still valid and can be utilized to transact with Iran even if some of the financial institutions indicated in the license application are now blocked. Moreover, the general licenses in place in the ITR remain mostly unimpaired by this action. The real, tangible impact of this move by the President is that U.S. banks will now be required to block any funds transfers to or from Iranian financial institutions passing through the U.S. financial system that are not authorized pursuant to an OFAC license. Previously, the U.S. banks would have properly rejected these transfers, as opposed to blocking them, if they were sent from a non-blocked Iranian financial institution. Now every funds transfer from an Iranian financial institution coming under U.S. jurisdiction is subject to blocking if no OFAC license has been issued authorizing the transfer. At the risk of sounding promotional, what this means is that now, more than ever, if you are transacting with Iran you will need to operate under a valid OFAC specific or general license. The reason for this claim is that if you had violated the ITR prior to yesterday's executive order, and the violation was not egregious and/or willful, then you would possibly be facing a fine. Now, you are no longer facing just a potential fine, but are also at risk of having the funds frozen and being denied access to them. Any attorney who has handled their fair share of OFAC matters can tell you that unblocking a transaction is extremely difficult. Therefore, transacting with Iran without an OFAC license could lead you to being denied of the funds involved in the transaction until such time as the sanctions are removed, which from all indications does not look to be anytime soon. The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.