Resource Center

1. What is OFAC and what does it do?

The Office of Foreign Assets Control administ​ers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. [09-10-02]

2. How long has OFAC been around?

The Treasury Department has a long history of dealing with sanctions. Dating back prior to the War of 1812, Secretary of the Treasury Gallatin administered sanctions imposed against Great Britain for the harassment of American sailors. During the Civil War, Congress approved a law which prohibited transactions with the Confederacy, called for the forfeiture of goods involved in such transactions, and provided a licensing regime under rules and regulations administered by Treasury.

OFAC is the successor to the Office of Foreign Funds Control (the "FFC''), which was established at the advent of World War II following the German invasion of Norway in 1940. The FFC program was administered by the Secretary of the Treasury throughout the war. The FFC's initial purpose was to prevent Nazi use of the occupied countries' holdings of foreign exchange and securities and to prevent forced repatriation of funds belonging to nationals of those countries. These controls were later extended to protect assets of other invaded countries. After the United States formally entered World War II, the FFC played a leading role in economic warfare against the Axis powers by blocking enemy assets and prohibiting foreign trade and financial transactions.

OFAC itself was formally created in December 1950, following the entry of China into the Korean War, when President Truman declared a national emergency and blocked all Chinese and North Korean assets subject to U.S. jurisdiction. [05-02-06]

3. What does one mean by the term "prohibited transactions" ?

Prohibited transactions are trade or financial transactions and other dealings in which

U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute. Because each program is based on different foreign policy and national security goals, prohibitions may vary between programs.[06-16-06]

4. Are there exceptions to the prohibitions?

Yes. OFAC regulations often provide general licenses authorizing the performance of certain categories of transactions. OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions. Guidance on how to request a specific license is found below and at 31 C.F.R. 501.801. [06-16-06]

5. How do I determine if I have a valid OFAC match?

Please take the following “due diligence” steps in determining a valid OFAC match.

If you are calling about a wire transfer or other “live” transaction:

Step 1. Is the “hit” or “match” against OFAC’s SDN list or targeted countries, or is it “hitting” for some other reason (i.e., “Control List” or “PEP,” “CIA,” “Non-Cooperative Countries and Territories,” “Canadian Consolidated List (OSFI),” “World Bank Debarred Parties,” “Blocked Officials File,” or “government official of a designated country”), or can you not tell what the “hit” is?

• If it’s hitting against OFAC’s SDN list or targeted countries, continue to 2 below.
  
• If it’s hitting for some other reason, you should contact the “keeper” of whichever other list the match is hitting against. For questions about:
  
• The Denied Persons List and the Entities List, please contact the Bureau of Industry and Security at the U.S. Department of Commerce at 202-482-4811.
  
• The FBI’s Most Wanted List or any other FBI-issued watch list, please contact the Federal Bureau of Investigation (http://www.fbi.gov/contact/fo/fo.htm).
  
• The Debarred Parties list, please contact the Office of Defense Trade Controls at the U.S. Department of State, 202-663-2700.
  
• The Bank Secrecy Act and the USA PATRIOT Act, please contact the Financial Crimes Enforcement Network (FinCEN), 1-800-949-2732.
  
• If you are unsure whom to contact, please contact your interdict software provider which told you there was a “hit.”
  
• If you can’t tell what the “hit” is, you should contact your interdict software provider which told you there was a “hit.”

Step 2. Now that you’ve established that the hit is against OFAC’s SDN list or targeted countries, you must evaluate the quality of the hit. Compare the name in your transactions with the name on the SDN list. Is the name in your transaction an individual while the name on the SDN list is a vessel, organization or company (or vice-versa)?

• If yes, you do not have a valid match.*
  
• If no, please continue to 3 below.

Step 3. How much of the SDN’s name is matching against the name in your transaction? Is just one of two or more names matching (i.e., just the last name)?

• If yes, you do not have a valid match.*
  
• If no, please continue to 4 below.

Step 4. Compare the complete SDN entry with all of the information you have on the matching name in your transaction. An SDN entry often will have, for example, a full name, address, nationality, passport, tax ID or cedula number, place of birth, date of birth, former names and aliases. Are you missing a lot of this information for the name in your transaction?

• If yes, go back and get more information and then compare your complete information against the SDN entry.
  
• If no, please continue to 5 below.

Step 5. Are there a number of similarities or exact matches?

• If yes, please call the hotline at 1-800-540-6322.
• If no, you do not have a valid match.*

If you are calling about an account:

Step 1. Is the “hit” or “match” against OFAC’s SDN list or targeted countries, or is it “hitting” for some other reason (i.e., “Control List” or “PEP,” “CIA,” “Non-Cooperative Countries and Territories,” “Canadian Consolidated List (OSFI),” “World Bank Debarred Parties,” or “government official of a designated country”), or can you not tell what the “hit” is?

• If it’s hitting against OFAC’s SDN list or targeted countries, continue to 2 below.
  
• If it’s hitting for some other reason, you should contact the “keeper” of whichever other list the match is hitting against. For questions about:
  
• The Denied Persons List and the Entities List, please contact the Bureau of Industry and Security at the U.S. Department of Commerce at 202-482-4811.
  
• The FBI’s Most Wanted List or any other FBI-issued watch list, please contact the Federal Bureau of Investigation (http://www.fbi.gov/contact/fo/fo.htm).
  
• The Debarred Parties list, please contact the Office of Defense Trade Controls at the U.S. Department of State, 202-663-2700.
  
• The Bank Secrecy Act and the USA PATRIOT Act, please contact the Financial Crimes Enforcement Network (FinCEN), 1-800-949-2732.
  
• If you are unsure whom to contact, you should contact your interdict software provider which told you there was a “hit.”
  
• If you can’t tell what the “hit” is, you should contact your interdict software provider which told you there was a “hit.”

Step 2. Now that you’ve established that the hit is against OFAC’s SDN list or targeted countries, you must evaluate the quality of the hit. Compare the name of your account holder with the name on the SDN list. Is the name of your account holder an individual while the name on the SDN list is a vessel, organization or company (or vice-versa)?

• If yes, you do not have a valid match.*
  
• If no, please continue to 3 below.

Step 3. How much of the SDN’s name is matching against the name of your account holder? Is just one of two or more names matching (i.e., just the last name)?

• If yes, you do not have a valid match.*
  
• If no, please continue to 4 below.

Step 4. Compare the complete SDN entry with all of the information you have on the matching name of your account holder An SDN entry often will have, for example, a full name, address, nationality, passport, tax ID or cedula number, place of birth, date of birth, former names and aliases. Are you missing a lot of this information for the name of your account holder?

• If yes, go back and get more information and then compare your complete information against the SDN entry.
  
• If no, please continue to 5 below.

Step 5. Are there a number of similarities or exact matches?

• If yes, please call the hotline at 1-800-540-6322.
  
• If no, you do not have a valid match.*

* If you have reason to know or believe that processing this transfer or operating this account would violate any of the Regulations, you must call the hotline and explain this knowledge or belief. [08-22-07]

6. Where can I find the specific details about the embargoes?

A summary description of each particular embargo or sanctions program may be found in the Sanctions Program and Country Summaries area and in the Regulations by Industry area on OFAC's website. The text of Legal documents may be found in the Legal Documents area of OFAC's website which contains the text of 31 C.F.R. Chapter V and appropriate amendments to that Chapter which have appeared in the Federal Register. [09-10-02]

7. Can I get permission from OFAC to transact or trade with an embargoed country?

OFAC usually has the authority by means of a specific license to permit a person or entity to engage in a transaction which otherwise would be prohibited. In some cases, however, legislation may restrict that authority. [09-10-02]

8. What must I do to get permission to trade with an embargoed country?

In some situations, authority to engage in certain transactions is provided by means of a general license. In instances where a general license does not exist, a written request for a specific license must be filed with OFAC. The request must conform to the procedures set out in the regulations pertaining to the particular sanctions program. Generally, application guidelines and requirements must be strictly followed, and all necessary information must be included in the application in order for OFAC to consider an application. For an explanation about the difference between a general and a specific license as well as answers to other licensing questions, see the licensing questions link. [09-10-02]

9. What do you mean by "blocking?"

Another word for it is "freezing." It is simply a way of controlling targeted property. Title to the blocked property remains with the target, but the exercise of powers and privileges normally associated with ownership is prohibited without authorization from OFAC. Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property. [09-10-02]

10. What countries do I need to worry about in terms of U.S. sanctions?

OFAC administers a number of U.S. economic sanctions and embargoes that target geographic regions and governments.  Comprehensive sanctions programs include Burma (Myanmar), Cuba, Iran, Sudan, and Syria.  Other non-comprehensive programs include the Western Balkans, Belarus, Cote d'Ivoire, Democratic Republic of the Congo, Iraq, Liberia (Former Regime of Charles Taylor), Persons Undermining the Sovereignty of Lebanon or Its Democratic Processes and Institutions, Libya, North Korea, Somalia and Zimbabwe as well as other programs targeting individuals and entities located around the world.  Those programs currently relate to foreign narcotics traffickers, foreign terrorists, transnational criminal organizations, and WMD proliferators.  It is important to note that in non-comprehensive programs, there are no broad prohibitions on dealings with countries, but only against specific named individuals and entities.  The names are incorporated into OFAC’s list of Specially Designated Nationals and Blocked Persons ("SDN list") which includes over 6,000 names of companies and individuals who are connected with the sanctions targets.  A number of the named individuals and entities are known to move from country to country and may end up in locations where they would be least expected.  U.S. persons are prohibited from dealing with SDNs wherever they are located and all SDN assets are blocked. Entities that a person on the SDN List owns (defined as a direct or indirect ownership interest of 50% or more) are also blocked, regardless of whether that entity is separately named on the SDN List.  Because OFAC's programs are dynamic and constantly changing, it is very important to check OFAC's website on a regular basis to ensure that your SDN list is current and you have complete information regarding current restrictions affecting countries and parties with which you plan to do business. [03-27-12]

11. Who must comply with OFAC regulations?

All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S. origin goods to comply. [09-10-02]

12. How much are the fines for violating these regulations?

The fines for violations can be substantial. Depending on the program, criminal penalties for willful violations can include fines ranging up to $20 million and imprisonment of up to 30 years. Civil penalties for violations of the Trading With the Enemy Act can range up to $65,000 for each violation. Civil penalties for violations of the International Emergency Economic Powers Act can range up to $250,000 or twice the amount of the underlying transaction for each violation. Civil penalties for violations of the Foreign Narcotics Kingpin Designation Act can range up to $1,075,000 for each violation. [10-08-13]

13. Is there a mechanism for a company to report its past undetected violations of OFAC regulations for completed transactions? Is any type of "amnesty" available for inadvertent failure to comply prior to the company becoming aware of the OFAC regulations?

Yes, a company can and is encouraged to voluntarily disclose a past violation. Self-disclosure is considered a mitigating factor by OFAC in Civil Penalty proceedings. A self-disclosure should be in the form of a detailed letter, with any supporting documentation, to Adam Szubin, Director, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Ave., N.W., Washington, DC 20220. OFAC does not have an "amnesty" program. The ramifications of non-compliance, inadvertent or otherwise, can jeopardize critical foreign policy and national security goals. OFAC does, however, review the totality of the circumstances surrounding any violation, including the quality of a company's OFAC compliance program. [11-16-07]

14. Can I regard previously issued and published opinion letters, regulatory interpretations, or other statements as guidance for my transactions?

Great care should be taken when placing reliance on such materials to ensure that the transactions in question fully conform to the letter and spirit of the published materials and that the materials have not been superseded. [09-10-02]

15. Can OFAC change its previously stated, non-published interpretation or opinion without first giving public notice?

Yes. OFAC, therefore, strongly encourages parties to exercise due diligence when their business activities may touch on an OFAC-administered program and to contact OFAC if they have any questions about their transactions. [09-10-02]

126. I tried to ship a package and it was returned to me "due to OFAC sanctions." Why?

There may have been one or more reasons the package was rejected. For example, was it destined for Iran, Sudan or Cuba and lacking a description of the contents? Was it an unlicensed commercial shipment destined for Iran, Sudan or Cuba? Was it a personal gift destined for an individual in Iran or Sudan, with a stated value exceeding $100? These are legitimate reasons for shipping companies to refuse to process such packages. Not only could you be liable for attempting to send such packages, but the shipping companies also could be liable for their role in processing them. See OFAC’s country brochures for more information on the restrictions on shipping goods to Iran, Sudan and Cuba:

Overview of Iran sanctions

Overview of Sudan sanctions

Overview of Cuba sanctions

[02-07-2011]

127. I tried to ship a package and it was "blocked" by the shipping company "due to OFAC sanctions." Why? And how can I get the package unblocked?

Shipping companies are required to “block” packages in which a Specially Designated National (“SDN”) or other blocked person has an interest. When a package is required to be “blocked,” the shipper must retain the package rather than reject and return it to the sender. Blocking is not required if a general or specific license from OFAC authorizes the shipper to reject or process the package, or if the transaction is otherwise exempt based on the type of contents. To request a license for the package’s release, send a letter with a detailed description of the package’s contents and an explanation of the parties involved in the transaction, along with a copy of the package’s air waybill or Customs Declaration and Dispatch form, to:

U.S. Department of the Treasury
Office of Foreign Assets Control
Licensing Division
1500 Pennsylvania Avenue, NW
Washington, DC 20220

[02-07-2011]

18. What is an SDN?

As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from dealing with them. [09-10-02]

19. How do I get a copy of this list?

The best way to get the list is from OFAC's website. The list is disseminated in a number of different formats, including fixed field/delimited files that can be integrated into databases. [09-10-02]

20. How often is the SDN list updated?

The SDN list is frequently updated. There is no predetermined timetable, but rather names are added or removed as necessary and appropriate. [09-10-02]

21. How do I know what specific changes have been made to OFAC's SDN list?

All changes for the current calendar year are cumulatively available in a .PDF file and in an ASCII version. Cumulative changes for prior years back to 1994 are also available in ASCII format by following this link. The same link will take you to a *.PDF version of the file for calendar year 2001. [11-16-07]

22. Does OFAC maintain or can it create a country-by-country list of SDNs?

OFAC has long maintained such a list. The file is available on OFAC's SDN Page under the link "SDN List Sorted by Country."  The file is also contained within the SDALL.ZIP archive and is called ctrylst.txt. It is important to understand that many SDN individuals and entities may operate in countries other than those in which they are based. The relevant regulations prohibit transactions with and/or block the property of SDNs wherever they are located. [04-14-14]

23. What do I do if I have a match to the SDN list?

If you have checked a name manually or by using software and find a match, you should do a little more research. Is it an exact name match, or very close? Is your customer located in the same general area as the SDN? If not, it may be a "false hit." If there are many similarities, contact OFAC's "hotline" at 1-800-540-6322 for verification. If your "hit" concerns an in-process wire transfer, you may prefer to e-mail your question to OFAC. Unless a transaction involves an exact match, it is recommended that you contact OFAC Compliance before actually blocking assets. [09-10-02]

24. What is the Control list? Who do I call about the Control list? What is the difference between the Control list and OFAC's SDN list?

The Control List was developed by the law enforcement community in response to the events of September 11. It is separate from the OFAC's SDN list and is not disseminated by OFAC. If you have received a copy of this list, you should follow the instructions received with it. [09-10-02]

122. What are weak aliases (AKAs)?

A “weak AKA” is a term for a relatively broad or generic alias that may generate a large volume of false hits.  Weak AKAs include nicknames, noms-de-guerre, and unusually common acronyms.  OFAC includes these AKAs because, based on information available to it, the sanctions targets refer to themselves, or are referred to, by these names.  As a result, these AKAs may be useful for identification purposes, particularly in confirming a possible “hit” or “match” triggered by other identifier information.  Realizing, however, the large number of false hits that these names may generate, OFAC qualitatively distinguishes them from other AKAs by designating them as weak.  OFAC has instituted procedures that attempt to make this qualitative review of aliases as objective as possible.  Before issuing this updated guidance, OFAC conducted a review of all aliases on the SDN list.  Each SDN alias was run through a computer program that evaluated the potential of an alias to produce false positives in an automated screening environment.  Names were evaluated using the following criteria:

1. Character length (shorter strings were assumed to be less effective in a screening environment than longer strings);
2. The presence of numbers in an alias (digits 0-9);
3. The presence of common words that are generally considered to constitute a nickname (example: Ahmed the Tall);
4. References in the alias to geographic locations (example: Ahmed the Sudanese);
5. The presence of very common prefixes in a name where the prefix was one of only two strings in a name (example: Mr. Smith).

Aliases that met one or more of the above criteria were flagged for human review.  OFAC subject matter experts then reviewed each of the automated recommendations and made final decisions on the flagging of each alias.

OFAC intends to use these procedures to evaluate all new aliases introduced to the SDN list.  [01-18-11]

123. Where can I find weak aliases (AKAs)?
 
Weak AKAs appear differently depending on which file format of the SDN List is utilized.
 
In the TXT and PDF versions of the SDN List, weak AKAs are encapsulated in double-quotes within the AKA listing:
 
ALLANE, Hacene (a.k.a. ABDELHAY, al-Sheikh; a.k.a. AHCENE, Cheib; a.k.a. "ABU AL-FOUTOUH"; a.k.a. "BOULAHIA"; a.k.a. "HASSAN THE OLD"); DOB 17 Jan 1941; POB El Menea, Algeria (individual) [SDGT]
 
This convention also is followed in the alphabetical listing published in Appendix A to Chapter V of Title 31 of the Code of Federal Regulations. 

In the DEL, FF, PIP, and CSV file formats, weak AKAs are listed in the
Remarks field (found at the end of the record) of the SDN file.  In
these formats, weak AKAs are bracketed by quotation marks. Please see  the data specification for these files for more information: 

http://www.treasury.gov/resource-center/sanctions/SDN-List/Documents/dat_spec.txt

8219 @"ALLANE, Hacene"@"individual"@"SDGT"@-0- @-0- @-0- @-0- @-0- @-0-
@-0- @"DOB 17 Jan 1941; POB El Menea, Algeria; a.k.a. 'ABU
AL-FOUTOUH'; a.k.a. 'BOULAHIA'; a.k.a. 'HASSAN THE OLD'."

In the XML version of the SDN List, there is a Type element for each
AKA.  The Type can either be 'weak' or 'strong' (see the XML SDN
Schema (XSD file) at:
http://www.treasury.gov/resource-center/sanctions/SDN-List/Documents/sdn.xsd for more information).  [01-18-11]

124. Am I required to screen for weak aliases (AKAs)?
 
OFAC’s regulations do not explicitly require any specific screening regime.  Financial institutions and others must make screening choices based on their circumstances and compliance approach.  As a general matter, though, OFAC does not expect that persons will screen for weak AKAs, but expects that such AKAs may be used to help determine whether a “hit” arising from other information is accurate.   [01-18-11]

125. Will I be penalized for processing an unauthorized transaction involving a weak alias (AKA)?

A person who processes an unauthorized transaction involving an SDN has violated U.S. law and may be subject to an enforcement action.  Generally speaking, however, if (i) the only sanctions reference in the transaction is a weak AKA, (ii) the person involved in the processing had no other reason to know that the transaction involved an SDN or was otherwise in violation of U.S. law, and (iii) the person maintains a rigorous risk-based compliance program, OFAC will not issue a civil penalty against an individual or entity for processing such a transaction.  [01-18-11]

55. Does OFAC have an exporter assistance phone line?

Yes. The number is 1-800-540-6322 (local: 202-622-2490). Staff includes individuals with extensive experience working at the Trade Information Center at Commerce headquarters in Washington, D.C., running workshops on international trade, and even assisting with articles in Export America magazine. [09-10-02]

56. What is the difference between the SDN List and the Commerce Department's List of Denied Parties? Why can't they be integrated into one list?

Specially Designated Nationals and Blocked Persons (SDNs) are individuals and entities located throughout the world that are blocked pursuant to the various sanctions programs administered by OFAC. SDNs can be front companies, parastatal entities, or individuals determined to be owned or controlled by, or acting for or on behalf of, targeted countries or groups. They also can be specially identified individuals such as terrorists or narcotics traffickers. U.S. persons are prohibited from engaging in any transactions with SDNs and must block any property in their possession or under their control in which an SDN has an interest. SDNs are designated primarily under the statutory authority of the Trading With the Enemy Act, the International Emergency Economic Powers Act, the Anti-Terrorism and Effective Death Penalty Act and the Foreign Narcotics Kingpin Designation Act. Implementing regulations can be found in Chapter V, Title 31 of the U.S. Code of Federal Regulations.

The Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce maintains separate lists for the purposes of the programs that it administers (including the Denied Persons List and the Entity List). The Denied Persons List consists of individuals and companies that have been denied export and reexport privileges by BIS. The Entity List consists of foreign end users who pose an unacceptable risk of diverting U.S. exports and the technology they contain to alternate destinations for the development of weapons of mass destruction. Accordingly, U.S. exports to those entities may require a license. Authority for the Denied Persons List and the Entity List can be found in Title 15, Part 764, Supplement No. 2 and Title 15, Part 744, Supplement No.4 of the U.S. Code of Federal Regulations, respectively.

The foreign policy objectives and legal requirements of the SDN list are significantly different from those of the BIS lists. The Commerce lists do not involve a full trade embargo of all goods and services nor do they require U.S. persons to block property. They are concerned with issues of export privileges and export licensing. The unique goals of the OFAC and BIS programs preclude the creation of a unified "master list." [09-10-02]

57. How do I get an NGO registration number?

Pursuant to 31 CFR §538.521 (Sudan) and 31 CFR §537.523 (Burma) registration numbers may be issued to nongovernmental organizations involved in humanitarian or religious activities in certain area of Sudan and Burma.  NGOs can provide assistance in the Specified Areas of Sudan without a specific license or registration number.  The Specified Areas of Sudan are identified as Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur and marginalized areas in and around Khartoum.  Marginalized areas include the following official camps for internally displaced persons:  Mayo, El Salaam, Wad El Bashir and Soba.  NGOs involved in humanitarian or religious activities in the non-Specified Areas of Sudan would need to apply for a specific license or registration number.  Specific guidelines for NGO registration can be found on OFAC's website on OFAC's Sudan page under "Guidance on Licensing Policies." This document outlines the necessary steps for becoming a registered NGO. These guidelines can also be found in 31 CFR §501.801(c). Providing all of the required information will help to expedite the registration process. [11-16-07]

58. What are the chances that my application will be approved?

Each application is reviewed on a case-by-case basis and often requires interagency consultation. Although we cannot predict how long this review might take, following existing application guidelines will help to expedite your determination. [09-10-02]

59. Do I need a registration number or license to donate goods?

Most OFAC sanctions programs provide exemptions to their prohibitions for certain donated goods, such as articles to relieve human suffering. This is not the case for all programs, however. If you wish to donate food to Sudan, for example, you must apply for a specific license. You should refer to the legal section of OFAC's website for the regulations applicable to the specific target or target country of your donation. [09-10-02]

61. State insurance statutes regulate an insurer's ability to withhold claim payments, cancel policies or to decline to enter into policies. In some cases, insurers must commit an ostensible violation of state insurance regulations to comply with OFAC regulations. Does OFAC have a position as to whether OFAC regulations preempt state insurance regulations in this context?

OFAC's regulations under the Trading with the Enemy Act and the International Emergency Economic Powers Act are based on Presidential declarations of national emergency and preempt state insurance regulations. OFAC regulations are not federal insurance regulations, they are regulations promulgated under the President's exercise of foreign-affairs and national emergency powers. [09-10-02]

62. At what point must an insurer check to determine whether an applicant for a policy is an SDN?

If you receive an application from an SDN for a policy, you are under an obligation not to issue the policy. Remember that when you are insuring someone, you are providing a service to that person. You are not allowed to provide any services to an SDN. If the SDN sends a deposit along with the application, you must block the payment. [09-10-02]

63. What should an insurer do if it discovers that a policyholder is or becomes an SDN--cancel the policy, void the policy ab initio, non-renew the policy, refuse to pay claims under the policy? Should the claim be paid under a policy issued to an SDN if the payment is to an innocent third-party (for example, the injured party in an automobile accident)?

The first thing an insurance company should do upon discovery of such a policy is to contact OFAC Compliance. OFAC will work with you on the specifics of the case. It is possible a license could be issued to allow the receipt of premium payments to keep the policy in force. Although it is unlikely that a payment would be licensed to an SDN, it is possible that a payment would be allowed to an innocent third party. The important thing to remember is that the policy itself is a blocked contract and all dealings with it must involve OFAC. [09-10-02]

64. A workers' compensation policy is with the employer, not the employee. Is it permissible for an insurer to maintain a workers compensation policy that would cover a person on the SDN List, since the insurer is not transacting business with the SDN, but only with his/her employer?

If an insurer knows that a person covered under the group policy is an SDN, that person’s coverage is blocked, and if he or she makes a claim under the policy, the claim cannot be paid. If an insurer does not know the names of those covered under a group policy, it would have no reason to know it needed to block anything unless and until an SDN files a claim under that policy. At that point its blocking requirement would kick in.
[03-12-03]

65. How frequently is an insurer expected to scrub its databases for OFAC compliance?

That is up to your firm and your regulator. Remember that a critical aspect of the designation of an SDN is that the SDN's assets must be frozen immediately, before they can be removed from U.S. jurisdiction. If a firm only scrubs its database quarterly, it could be 3 months too late in freezing targeted assets. The SDN list may be updated as frequently as a few times a week or as rarely as once in six months. [09-10-02]

66. Is it sufficient if my company screens life insurance policies only prior to policy issuance?

That’s up to your firm and your regulators. Conducting screening only before policy issuance is critical but would not likely achieve your desired level of compliance. After the policy issuance, the U.S. Government may designate an existing policyholder or a named beneficiary as a Specially Designated National or Blocked Person (“SDN”), or it may expand sanctions with respect to a particular country, or impose sanctions against a new country. If an existing policyholder or a named beneficiary became an SDN or otherwise subject to U.S. sanctions, the insurer may be required to “block” the policy, report such blocking to OFAC within 10 days of the SDN designation, place any future premiums into a blocked, interest-bearing account at a U.S. financial institution, and seek an OFAC license before making any payments under the policy. Consequently, routine screening of all policies in force against OFAC’s SDN list, as frequently updated, would enable the insurer to comply with the applicable OFAC regulatory requirements. It also is important to screen the policyholder and beneficiary prior to paying a claim. [05-01-03]

67. If my policyholder, who is a U.S. person, requests a change of beneficiaries and designates a cousin living in Cuba as a beneficiary under the life insurance policy, what shall I do?

In general, an insurance policy is considered “property” and a beneficiary’s interest in the policy is considered an “interest in property” that may require blocking under the applicable regulations. The Cuban Assets Control Regulations, however, contain a general license that deals with transactions involving blocked life insurance policies. 31 C.F.R. § 515.526. In this case, the only blocked interest is that of a beneficiary, so the general license would authorize the insurer to accept premium payments and interest on policy loans as well as to pay loans to the insured or process the insured’s request for a change of beneficiary. Also, the insurer would be authorized under the general license to deduct premiums from cash surrender value, if any, or accumulate dividends or otherwise increase cash surrender value on the books of the insurer, pursuant to the terms of the policy. However, the insurer usually cannot pay an entire claim (the face amount of the policy) to the beneficiary without a specific license from OFAC. Recent amendments to the Cuba regulations authorize by general license remittances to a Cuban beneficiary of up to $300 per quarter from a blocked account at a U.S. banking institution if the funds in that account were deposited there as a result of a payment from a life insurance policy triggered by the death of the policy holder. If you have a blocked policy, you should seek legal advice or contact OFAC for further guidance regarding the handling of that particular account. [05-01-03]

68. If my screening efforts uncover a policyholder who became an SDN after policy issuance, can I notify the policyholder that the policy is “blocked”?

Yes, the insurer may notify the policyholder that the policy is blocked, without obtaining a specific license from OFAC. [05-01-03]

69. In my letter to the policyholder whose policy is “blocked,” may I also instruct the policyholder not to send any more premium or that we will not accept additional premium under this account?

The insurer may instruct the policyholder as follows: “If you send any more premium, we are required under applicable U.S. laws and regulations to place such funds in a blocked account. If you have any questions, please contact the U.S. Department of Treasury’s Office of Foreign Assets Control.” [05-01-03]

102. How can an insurer participate in worldwide insurance markets through global insurance policies if, by definition, coverage extends to potential risks in sanctioned countries?

The best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions law.  For example, the following standard exclusion clause is often used in open marine cargo policies to avoid OFAC compliance problems:   “whenever coverage provided by this policy would be in violation of any U.S. economic or trade sanctions, such coverage shall be null and void.”  The legal effect of this exclusion is to prevent the extension of a prohibited service (insurance or risk assumption) to sanctioned countries, entities or individuals.  It essentially shifts the risk of loss for the underlying transaction back to the insured - the person more likely to have direct control over the economic activity giving rise to the contact with a sanctioned country, entity or individual. [11-16-07]

103. What if the commercial setting and/or market circumstances of a global insurance policy does not permit the use of an OFAC exclusion such as the one noted above?

OFAC recognizes that U.S. insurers often compete in international markets where non-U.S. insurers are willing and able to issue global insurance policies without a U.S. sanctions exclusion.  In cases where such an exclusion is not commercially feasible, the insurer should apply for a specific OFAC license for the global insurance policy.  In making a licensing determination, OFAC will review the facts and circumstances of each global insurance policy, including both risk frequency and risk severity, to assure that issuance of the policy will not undermine U.S. foreign policy goals.  A separate license would be required for the insurer to pay claims arising under any authorized global insurance policy. [11-16-07]

104. Can an insurer offer global travel insurance and worldwide travel assistance without violating U.S. sanctions?

The provision of all travel related services are authorized for all OFAC country sanctions programs (including Burma, Iran and Sudan) except Cuba. Travel related services may only be provided in Cuba pursuant to a valid general or specific OFAC license. If the traveler is a U.S. person traveling to Cuba pursuant to a valid OFAC license, travel insurance may be issued to the traveler by a U.S. insurer without a separate license. While there are some instances when U.S. persons travel to Cuba without a valid license (and thus pose sanctions problems for U.S. travel insurers), U.S. travel insurance providers most frequently face sanctions problems when they offer travel insurance products to third country nationals traveling to Cuba. In such cases the U.S. insurer must obtain a license to issue the travel insurance product. Additionally, insurers must also be sure to check OFAC’s list of Specially Designated Persons to ensure that no services of any kind are rendered to persons or entities on this list. [02-11-08]

70. What Is This OFAC Information On My Credit Report?

Credit bureaus and agencies in particular have adopted new measures to ensure compliance with OFAC regulations. Before issuing a credit report, they use special "interdiction" software developed by the private sector to determine if a credit applicant is on the SDN list. This software matches the credit applicant's name and other information to the individuals on the SDN list. If there is a potential match, the credit bureaus are placing a "red flag" or alert on the report. This does not necessarily mean that someone is illegally using your social security number or that you have bad credit. It is merely a reminder to the person checking your credit that he or she should verify whether you are the individual on the SDN list by comparing your information to the OFAC information. If you are not the individual on the SDN list, the person checking your credit should disregard the OFAC alert, and there is no need to contact OFAC. However, if the person checking your credit believes you are the person on the SDN list, then he or she should call the OFAC Hotline to verify and report it.

71. How Can I Get The OFAC Alert Off My Credit Report?

A consumer has the right under the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., to request the removal of incorrect information on his/her credit report. To accomplish this, consumers should contact the credit reporting agency or bureau that issued the credit report. For more information on consumers' rights under the FCRA, visit the Federal Trade Commission's website at http://www.ftc.gov/os/statutes/fcrajump.shtm

72. Can I send money to a sanctioned country using a third-country company’s website? Can I buy gifts for someone in a sanctioned country over the internet? The websites tell me that it’s ok because they themselves are not sanctioned parties.

You cannot do something indirectly that you would not be able to do directly. Therefore, these sites can be used to facilitate authorized transactions, but you cannot use them to perform a transaction which would be in violation of U.S. law. For example, the Cuban Assets Control Regulations authorize any U.S. person to send $300/quarter to any individual in Cuba. The U.S. remitter can use a third-country provider to send these funds to Cuba. If the person attempts to send more than $300/quarter to any one individual, however, he or she is in violation of U.S. law and subject to penalties. Another example is booking tourist travel to Cuba using an internet travel service provider in a third country. Spending money on tourism is prohibited by the CACR, regardless of how the travel is booked or how it is paid for. Ultimately some of these funds will end up in Cuba in violation of U.S. law. The fact that the trip was booked through a third-country company, either in person or over the internet, is irrelevant. [04-13-04]

73. My company provides money remittance and account services via the Internet. Does OFAC have any compliance guidance for this type of business?

Complying with United States sanctions policy presents unique challenges to institutions that operate exclusively on the Internet. The Internet has often been thought of as an “anonymous venue” in that e-commerce transactions can be conducted in relative privacy with little or no face-to-face contact among the parties in a transaction. This anonymity creates a significant challenge for Internet businesses that wish to satisfy their due diligence requirements.

In order to be compliant with OFAC-governed sanctions regulations, US jurisdiction entities must ensure that they are not:

A. Engaging in trade or transaction activities that violate the regulations behind OFAC’s country-based sanctions programs, and;

B. Engaging in trade or transaction activities with sanctions targets named on OFAC's list of Specially Designated Nationals and Blocked Persons (SDN's).

A number of Internet-based financial service companies already developed Internet Protocol (IP) address blocking procedures. These companies use publicly available data to maintain tables of IP addresses based on geographic region. Users attempting to initiate an online transaction or access an account from a sanctioned country are blocked based on their IP address. While this approach is effective, it does not fully address an Internet firm’s compliance risks. The fact that international distribution authorities can reassign IP blocks makes the geographic location of an IP potentially dynamic.

The anonymous character of Internet-based transactions often places obstacles in the path of rigorous compliance practices. Firms that facilitate or engage in e-commerce should do their best to know their customers directly. In order to minimize their liabilities, Internet remittance and account service firms should attempt to gather authentic identification information on their customers before a new account is opened or new transaction is initiated. This information will help confirm the customer’s identity and help the e-commerce firm ensure it is not conducting business with a sanctions target. Currently many Internet remittance companies use credit card authentication as the primary method of confirming a customer’s identity. While this method is technologically expedient, it does not meet the standards of due diligence normally found in the non-Internet-based financial community. A company cannot rely on another firm’s compliance program in order to mitigate risk.

It is recommended that e-commerce firms gather and record “purpose of payment” information on each transaction they process. In the non-Internet sector, financial institutions are able to stop in-process transactions and gather more information on them. Due to the level of automation found within the Internet financial sector, this type of in-process information gathering is not always possible. Collecting information on the purpose of payments up front will allow Internet firms to better screen outgoing and incoming transactions for potential violations. [04-13-04]

121. The US exporter has a valid OFAC TSRA license to export/reexport a medical device.  The US exporter has exported a medical device pursuant to this license. The medical device breaks during the validity period of the license.  Can the US exporter import the item back into the US pursuant to the original license?

The US exporter would have to submit a new application to OFAC for a specific license to import the medical device into the United States.  Such a license may be issued, depending on the facts and circumstances.  The license application should include 1) a copy of the original license application submitted to OFAC; 2) a copy of the original license under which the medical device was exported; 3) a statement regarding the circumstances under which the medical device broke; and 4) an explanation of what will be done to the medical device in the United States.

79. Does OFAC provide its SDN List in a format that can be easily imported into a database?

Yes. OFAC's SDN list is available in XML, fixed-field and delimited formats that can be imported into a variety of software programs. [12-19-07]

80. Does OFAC provide its SDN List in a spreadsheet format?

OFAC publishes the SDN data in a comma separated values format (CSV).  This format is recognized by Excel and other spreadsheet programs and can be imported into spreadsheet format by simply opening the file in your default spreadsheet application [06-14-07]

105. OFAC says it has updated its SDN list, but when I download the appropriate SDN files from the OFAC website, they appear to be out-of-date. Where can I get the latest SDN information?

OFAC has rigorous quality control procedures in place to ensure that all SDN data are current and accurate when they are released. All of the SDN information is downloaded and checked by OFAC personnel using the same interface that any member of the public might employ. A number of local issues can impact a user’s ability to download current information; many of these issues are associated with caching done by a user’s browser or by the firewall/security systems that protect a specific enterprise. OFAC can only offer technical support when it comes to OFAC provided data and OFAC managed systems (like the OFAC website or OFAC FTP servers). If you continue to have difficulty downloading the latest SDN information, OFAC recommends that you contact your internal IS/IT support and request their assistance in resolving a caching issue. Users having specific problems opening the PDF/Adobe Acrobat version of the SDN list may also review the information available here. [03-20-2008]

81. What is the delimiter in OFAC's delimited files?

The delimiter varies based upon the file type.  Files that end in .DEL have an @ (at) symbol as the delimiter.  Files that end in .CSV have a comma delimiter. Files that end in .FF have a fixed width delimiter. Files that end in .PIP use the | (pipe) symbol as a delimiter. [06-14-07]

83. How are OFAC's delimited files structured?

All of OFAC's delimited files are described in OFAC's SDN data file specification. [06-14-07] 

84. Does OFAC maintain its files in locations other than on its website?

Yes. OFAC maintains many of its critical files its sanctions list file on an FTP server. .

This server can be accessed at: ftp://ofacftp.treas.gov.

The server will accept an anonymous login. OFAC's data is stored in the directories listed below.

/fac_sdn - SDN human-readable lists and XML and delimited files in a zip archive.

/fac_bro - country and program brochures

/fac_delim - SDN data files in un archived format

/ssi_list - All Sectoral Sanctions List files including data files

/fse_list - All Foreign Sanctions Evaders List files including data files

/ns_plc - All Non-SDN Palestinial Legislative Council Lists files including data files

[08-06-14]

85. Is there a version of the SDN data file archive that works with UNIX, Linux or other command line operating systems?

Yes. The standard zip archive should work with most UNIX and Linux systems and is available on OFAC's website at http://www.treasury.gov/ofac/downloads/sdall.zip and its FTP site at ftp://ofacftp.treas.gov. in the folder /fac_sdn. 

[08-06-14]

86. Does OFAC have an email service that will notify me when there are updates to the SDN list?

Yes. OFAC has multiple e-mail subscription services available.  Please visit the following link to sign up for these services:

https://service.govdelivery.com/service/multi_subscribe.html?code=USTREAS

OFAC also maintains a Really Simple Syndication (RSS) feed.  This feed is updated whenever the OFAC site is updated. [11-18-10]

87. Your FTP site has gone offline. Who should I contact to remedy this problem?

The FTP site at ofacftp.treas.gov is run by OFAC. Contact OFAC's support hotline at 1-800-540-6322 for technical support.

 [08-06-14]

88. I am a systems administrator looking to design an automated process that will download the SDN list without human intervention. How can I do this given that changes to the SDN list can be sporadic?

While OFAC cannot give specific advice on how to design an automated system for SDN downloads, many institutions solve this problem by setting up a scheduled download of the SDN list. These firms conduct their own risk assessments and decide how often they need to download the list in order to comply with U.S. law. [09-10-02]

89. I am a database administrator at a financial institution and am responsible for keeping my company's SDN data current. Is the SDN list comprehensive or do I need to download some kind of supplement to the list every time there is an update?

The SDN list is comprehensive. Database administrators can overwrite any old data in their systems with the latest versions of the delimited files, thus ensuring that their database is current. [09-10-02]

90. Do you offer a SDN changes file or "delta file" in a data format?

No. OFAC records changes to the SDN list in human-readable form in the recent actions section of its website and in its SDN changes files found on this page. Database administrators interested in refreshing their databases with new SDN data should use the comprehensive data files available on OFAC's website and completely refresh the list. [10-08-13]

91. I am looking for the terrorist list on your web site so I can bring my company in compliance with U.S. law. Where can I find this list?

OFAC's regulations are broader than the specific laws that deal with the terrorists and persons who support them. All individuals and entities that fall under U.S. jurisdiction should use OFAC's comprehensive list of Specially Designated Nationals. This list includes the designated terrorists and is available on OFAC's website. It is important to note that some OFAC sanctions, such as those pertaining to Iraq, Libya, Sudan, and Cuba, apply to persons acting on behalf of those targeted governments even if those persons do not appear on the SDN list. It is also important to note that OFAC's Cuba sanctions prohibit transactions with Cuban nationals, wherever located. U.S. persons are expected to exercise due diligence in determining whether any such persons are involved in a proposed transaction. [09-10-02]

92. I'm a subscriber to OFAC’s e-mail notification services. For some reason I have stopped receiving the broadcast messages when OFAC updates its website. Why is this?

You may have responded to one of these incoming messages. Responding to a broadcast message removes you from the subscription list. If you wish to provide feedback to OFAC without inadvertently removing yourself from the subscription list, you should write to us at our support e-mail address (O_F_A_C@treasury.gov). Also note that if you have an “out of the office” message that replies to all e-mails in your absence, this, too, will result in your being deleted from the subscription list. If you'd like to re subscribe, please do so here . [12-22-03]

93. I recently attempted to subscribe to one of OFAC’s e-mail list services and I have not yet received my confirmation e-mail. Why is this?

Failure to receive a confirmation e-mail is typically (though not always) the result of a configuration problem on the user’s end. The user should follow these steps to ensure that he or she is using the system properly.

1. Be patient. For a variety of reasons e-mail sometimes take a little longer than expected to reach a user. If you do not receive a confirmation e-mail within a day of subscribing, proceed to step 2.

2. Confirm that you have entered the correct e-mail address and address punctuation. A surprising number of errors have been the result of users accidentally using commas instead of periods.

3. Check to see if you have a SPAM filter in place. SPAM filters have a variety of configurations. Some of these filters have been known to erroneously block e-mails originating from OFAC’s list servers. OFAC cannot provide technical support for local configuration issues. If you believe a SPAM filter is preventing you from receiving OFAC e-mails, please discuss the matter with your IT department or network administrator. You will need to have your IT personnel allow e-mails from the following domain to come through the SPAM filter "subscriptions.treas.gov". Once this is done you may proceed to step 4. If you can confirm that you do not have a SPAM filter in place or any other local configuration problem, please skip step 4 and proceed to step 5.

4. If your network or e-mail client’s configuration is preventing you from receiving your subscription confirmation e-mail, it is likely that you will not be able to receive e-mail from OFAC’s list servers even if OFAC manually adds you to our listserv. These configuration issues must be resolved with your IT department or network administrator before you can proceed.

5. If, after you have exhausted all of the above options, you still fail to receive OFAC’s broadcast notifications, please call our support hotline at 1-800-540-6322. [12-19-07]

82. Does OFAC have a web-based SDN or FSE search engine?

Yes, OFAC does maintain its own web-based search service. It can be accessed at the following URL: https://sdnsearch.ofac.treas.gov/.  [06/09/2014]

246. How does Sanctions List Search work?

In addition to returning results that are exact matches (when the match threshold slider bar is set to 100%), Sanctions List Search can also provide a broader set of results using fuzzy logic. This logic uses character and string matching as well as phonetic matching. Only the name field of Sanctions List Search invokes fuzzy logic when the tool is run. The other fields on the tool use character matching logic.   Please click here for more information on what a true SDN or FSE match is.  [06/09/2014]

247. What does the Sanctions List Search Score mean?

The score field indicates the similarity between the name entered and resulting matches on the SDN and/or FSE Lists. It is calculated using two matching logic algorithms: one based upon phonetics, and a second based upon the similarity of the characters in the two strings. A score of 100 indicates an exact match, while lower scores indicate potential matches.  [06/09/2014]

248. How do I use the Minimum Name Score field and score slider bar?

The minimum name score field limits the number of names returned by the search. A value of 100 will return only names that exactly match the characters entered into the name field. A value of 50 will return all names that are deemed to be 50% similar based upon the matching logic of the search tool. By lowering the match threshold the system will return a broader result set. [02/05/2013]

249. How is the Score calculated?

Sanctions List Search uses two matching logic algorithms, and two matching logic techniques to calculate the score. The two algorithms are Jaro-Winkler, a string difference algorithm, and Soundex, a phonetic algorithm. The first technique involves using the Jaro-Winkler algorithm to compare the entire name string entered against full name strings of SDN and FSE entries. The second technique involves splitting the name string entered into multiple name parts (for example, John Doe would be split into two name parts). Each name part is then compared to name parts on the SDN and FSE lists using the Jaro-Winkler and Soundex algorithms. The search calculates a score for each name part entered, and a composite score for all name parts entered. Sanctions List Search uses both techniques each time the search is run, and returns the higher of the two scores in the Score column. [06/09/2014]

250. Does OFAC recommend a specific match threshold score?

OFAC cannot make such a recommendation because each search has its own unique set of facts surrounding it. Users of Sanctions List Search must make their own match threshold determinations based upon their own internal risk assessments and established compliance practices. [06/09/2014]

251. What fields influence the score?

Only the name field influences the score. [02/05/2013]

252. What fields use fuzzy logic?

Only the name field uses the fuzzy searching logic. [02/05/2013]

253. When conducting a search using the ID field, does Sanctions List Search account for variations in non-alphanumeric characters?

At present, Sanctions List Search’s ID field uses exact character matching to provide users with a result. In order to receive the broadest number of results, users should conduct ID field searches both with and without any non-alphanumeric characters. An upcoming update to Sanctions List Search will allow for searching of the ID field regardless of whether or not non-alphanumeric characters are included. [06/09/2014]

287. Who may use Sanctions List Search? Can we configure our automated system to utilize Sanctions List Search on a continual basis?

Sanctions List Search is a free tool provided by OFAC to assist the public in complying with sanctions programs. It is intended to be used by individual users that are looking for potential matches on the SDN and FSE list. It should not be utilized by automated systems that are configured to continually run searches through the tool. For a copy of files that can be easily interpreted by automated systems and software programs, please see the list of XML, CSV, PIP, DEL, and FF files on the SDN and FSE pages. [06/09/2014]

369. Does Sanctions List Search look for potential matches on all of the various sanctions lists that OFAC has published on its website?

Sanctions List Search will look for and return potential matches from the SDN and FSE Lists only. The user can look under the List column to see which list(s) a potential match is on. [06-09-14]

398. Does OFAC consider entities over which one or more blocked persons exercise control, but do not own 50 percent or more of, to be blocked pursuant to OFAC’s 50 Percent Rule?

No.  OFAC’s 50 Percent Rule speaks only to ownership and not to control.  An entity that is controlled (but not owned 50 percent or more) by one or more blocked persons is not considered automatically blocked pursuant to OFAC’s 50 Percent Rule.  OFAC may, however, designate the entity and add it to the SDN List pursuant to a statute or Executive order that provides the authority for OFAC to designate entities over which a blocked person exercises control.  OFAC urges caution when considering a transaction with an entity that is not a blocked person (a non-blocked entity)  in which  one or more blocked persons have a significant ownership interest that is less than 50 percent or which one or more blocked persons may control by means other than a majority ownership interest.  Such non-blocked entities may become the subject of future designations or enforcement actions by OFAC.  In addition, persons should be cautious in dealings with such a non-blocked entity to ensure that they are not, for example, dealing with a blocked person representing the non-blocked entity, such as entering into a contract that is signed by a blocked person.  Please also note that some sanctions programs (such as Cuba and Sudan) block persons without an OFAC designation; these blockings are based on criteria separate from OFAC’s 50 Percent Rule. [08-13-2014]

399. Does OFAC aggregate ownership stakes of all blocked persons when determining whether an entity is blocked pursuant to OFAC’s 50 Percent Rule?

Yes.  On August 13, 2014, OFAC indicated in its revised 50 Percent Rule guidance that OFAC’s 50 Percent Rule applies to entities owned 50 percent or more in the aggregate by one or more blocked persons.  Accordingly, if Blocked Person X owns 25 percent of Entity A, and Blocked Person Y owns another 25 percent of Entity A, Entity A is considered to be blocked.  This is so because Entity A is owned 50 percent or more in the aggregate by one or more blocked persons.  For the purpose of calculating aggregate ownership, the ownership interests of persons blocked under different OFAC sanctions programs are aggregated. [08-13-2014]

400. As explained in FAQ 398, OFAC’s 50 Percent Rule does not apply if one or more individuals who are blocked persons (blocked individuals) control, but do not own 50 percent or more of, an entity.  Can persons engage in negotiations, enter into contracts, or process transactions involving a blocked individual when that blocked individual is acting on behalf of the non-blocked entity that he or she controls (e.g., a blocked individual is an executive of a non-blocked entity and is signing a contract on behalf of the non-blocked entity)?

No.  OFAC sanctions generally prohibit transactions involving, directly or indirectly, a blocked person, absent authorization from OFAC, even if the blocked person is acting on behalf of a non-blocked entity.  Therefore, U.S. persons should be careful when conducting business with non-blocked entities in which blocked individuals are involved; U.S. persons may not, for example, enter into contracts that are signed by a blocked individual. [08-13-2014]

401. OFAC’s 50 Percent Rule states that the property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons are considered blocked.  How does OFAC interpret indirect ownership as it relates to certain complex ownership structures?

“Indirectly,” as used in OFAC’s 50 Percent Rule, refers to one or more blocked persons’ ownership of shares of an entity through another entity or entities that are 50 percent or more owned in the aggregate by the blocked person(s).  OFAC urges persons considering a potential transaction to conduct appropriate due diligence on entities that are party to or involved with the transaction or with which account relationships are maintained in order to determine relevant ownership stakes.  Please see FAQ 116 for additional guidance on due diligence standards for intermediary parties to wire transfers.  Please refer to the examples below for further guidance on determining whether an entity is blocked pursuant to OFAC’s 50 Percent Rule. 

Example 1: Blocked Person X owns 50 percent of Entity A, and Entity A owns 50 percent of Entity B.  Entity B is considered to be blocked.  This is so because Blocked Person X owns, indirectly, 50% of Entity B.  In addition, Blocked Person X’s 50 percent ownership of Entity A makes Entity A a blocked person.  Entity A’s 50 percent ownership of Entity B in turn makes Entity B a blocked person.

Example 2: Blocked Person X owns 50 percent of Entity A and 50 percent of Entity B.  Entities A and B each own 25 percent of Entity C.  Entity C is considered to be blocked.  This is so because, through its 50 percent ownership of Entity A, Blocked Person X is considered to indirectly own 25 percent of Entity C; and through its 50 percent ownership of Entity B, Blocked Person X is considered to indirectly own another 25 percent of Entity C.  When Blocked Person X’s indirect ownership of Entity C through Entity A and Entity B is totaled, it equals 50 percent.  Entity C is also considered to be blocked due to the 50 percent aggregate ownership by Entities A and B, which are themselves blocked entities due to Blocked Person X’s 50 percent ownership of each.

Example 3: Blocked Person X owns 50 percent of Entity A and 10 percent of Entity B.  Entity A also owns 40 percent of Entity B.  Entity B is considered to be blocked.  This is so because, through its 50 percent ownership of Entity A, Blocked Person X is considered to indirectly own 40 percent of Entity B.  When added to Blocked Person X’s direct 10 percent ownership of Entity B, Blocked Person X’s total ownership (direct and indirect) of Entity B is 50 percent.  Entity B is also blocked due to the 50 percent aggregate ownership by Blocked Person X and Entity A, which are themselves both blocked persons.

Example 4: Blocked Person X owns 50 percent of Entity A and 25 percent of Entity B.  Entities A and B each own 25 percent of Entity C.  Entity C is not considered to be blocked.  This is so because, even though Blocked Person X is considered to indirectly own 25 percent of Entity C through its 50 percent ownership of Entity A, Entity B is not 50 percent or more owned by Blocked Person X, and therefore Blocked Person X is not considered to indirectly own any of Entity C through its part ownership of Entity B.  Blocked Person X’s total ownership (direct and indirect) of Entity C therefore does not equal or exceed 50 percent.  Entity A is itself a blocked person, but its ownership of Entity C also does not equal or exceed 50 percent.

402. How does OFAC’s 50 Percent Rule apply to situations in which one or more blocked persons owned 50 percent or more of an entity, but subsequent to their designations one or more blocked persons divest their ownership stakes in the entity in a transaction that occurs entirely outside of U.S. jurisdiction such that the resulting combined ownership of the entity by blocked persons is less than 50 percent?  How should a person treat property or interests in property of such an entity (1) in future transactions (post-divestment) and (2) that was properly blocked while the entity was owned 50 percent or more by one or more blocked persons?

According to OFAC’s 50 Percent Rule, entities are considered blocked if they are owned 50 percent or more (directly or indirectly) in the aggregate by one or more blocked persons.  If one or more blocked persons divest their ownership stake such that the resulting combined ownership by blocked persons is less than 50 percent, the entity is no longer considered automatically to be a blocked entity.  Any such divestment transactions must occur entirely outside of U.S. jurisdiction and must not involve U.S. persons, as any blocked property or interests in property that come into the possession or control of a U.S. person must be blocked and reported to OFAC, and OFAC does not recognize any subsequent unlicensed transfers, through changes in ownership or otherwise, of such property.

Entities in which the aggregate of one or more blocked persons’ ownership stakes has fallen below 50 percent are not considered blocked pursuant to OFAC’s 50 Percent Rule, and therefore property of such entities that comes into the United States or the possession or control of a U.S. person while the aggregate of one or more blocked persons’ ownership stakes is below 50 percent is not considered blocked by OFAC’s 50 Percent Rule.  OFAC urges caution when dealing with or processing transactions involving such entities, as those entities may become the subject of future designations or enforcement actions by OFAC.  Sufficient due diligence should be conducted to determine that any purported divestment in fact occurred and that the transfer of ownership interests was not merely a sham transaction.

When the property of an entity owned 50 percent or more by a single blocked person comes within the United States or within the possession or control of a U.S. person and is blocked, the property remains blocked unless and until (1) OFAC authorizes the unblocking of or other dealings in the property or (2) OFAC removes the blocked person from the SDN List.  The property remains blocked even if the blocked person’s ownership of the entity subsequently falls below 50 percent.  This is so because the blocked person is considered to have an interest in the blocked property, and OFAC does not recognize the unlicensed transfer of the blocked person’s interest after the property becomes blocked in the United States or in the possession or control of a U.S. person.  Persons holding such property may request authorization from OFAC’s Licensing Division to transfer or otherwise deal in that property (the electronic application can be found on OFAC’s website here), and OFAC will evaluate such requests on a case-by-case basis.

Similarly, when the property of an entity owned 50 percent or more in the aggregate by more than one blocked person comes within the United States or in the possession or control of a U.S. person and is blocked, the property remains blocked unless and until (1) OFAC authorizes the unblocking of or other dealings in the property or (2) OFAC removes from the SDN List one or more of the blocked persons such that the aggregate ownership by blocked persons falls below 50 percent.  If the aggregate ownership of the entity by blocked persons falls below 50 percent not due to SDN List removal actions by OFAC but instead due to actions by one or more of the blocked persons, including the entity itself, the property remains blocked.  This is so because the group of blocked persons is considered to have an interest in the blocked property, and OFAC does not recognize the unlicensed transfer of any of the blocked persons’ interests after the property becomes blocked in the United States or in the possession or control of a U.S. person.  Persons holding such property may request authorization from OFAC’s Licensing Division to transfer or otherwise deal in that property (the electronic application can be found on OFAC’s website here), and OFAC will evaluate such requests on a case-by-case basis.

129. Can I make a private donation to a charity that is delivering humanitarian assistance in Somalia?

Yes. Please visit USAID’s website for more information about how you can help.[08-04-11]

130. Can my organization provide humanitarian assistance in Somalia?

Yes, non-governmental organizations may provide humanitarian assistance in Somalia without the need for a license from OFAC. Organizations considering entering Somali territory to conduct assistance operations should be aware that areas of Somalia are extremely unstable and dangerous, and should review the State Department’s Travel Warning for Somalia. Among the most powerful armed groups operating in Somalia is al-Shabaab, a Specially Designated Global Terrorist and a Foreign Terrorist Organization under U.S. law. U.S. persons should exercise caution not to provide funds or material support to this organization or other designated groups. [08-04-11]

131. What if, in delivering humanitarian assistance, my organization unintentionally provides food or medicine to members of al-Shabaab?

Due to the dangerous and highly unstable environment combined with urgent humanitarian needs in south and central Somalia, some food and/or medicine delivered in these areas may end up in the hands of al-Shabaab members. Such incidental benefits are not a focus for OFAC sanctions enforcement. [08-04-11]

132. What if, in delivering humanitarian assistance, my organization unintentionally provides cash to members of al-Shabaab?

U.S. persons should be extremely cautious in making cash payments in areas under the control of al-Shabaab. Al-Shabaab has, in the past, demanded “taxes” and “access” payments from assistance organizations. To the extent that such a payment is made unintentionally by an organization in the conduct of its assistance activities, where the organization did not have reason to know that it was dealing with al-Shabaab, that activity would not be a focus for OFAC sanctions enforcement. To the extent that an organization is facing demands for large or repeated payments in al-Shabaab-controlled areas, it should consult with OFAC prior to proceeding with its operations. [08-04-11]

133. I have heard that certain U.S. humanitarian assistance organizations are exempted from the prohibition on making certain cash payments to al-Shabaab. Is that correct?

Under the current extreme circumstances on the ground, the Department of State and USAID and their contractors and grantees are authorized to engage in certain transactions in the conduct of their official assistance activities in Somalia, under rigorous controls aimed at preventing diversion of assistance or cash payments to designated parties.
Humanitarian assistance organizations that wish to apply for a contract or grant with the State Department or USAID should visit USAID’s website. [08-04-11]

134. I have family members or friends in Somalia and would like to send remittances to them. Can I do that without violating OFAC sanctions?

Yes, you can send remittances to Somalia, as long as the transactions do not involve parties listed on OFAC’s Specially Designated Nationals and Blocked Persons List.
For additional information on OFAC’s Somalia-related sanctions programs, visit here. To request additional information from OFAC, please call the OFAC hotline at (800) 540-6322 or (202) 622-2490. [08-04-11]

135. Are travel-related transactions permissible under the new Syria Executive order 13582?

Yes.  The new Syria Executive order, Executive Order 13582, does not prohibit U.S. persons from engaging in transactions ordinarily incident to travel to or from any country, including importation of accompanied baggage for personal use, maintenance within any country including payment of living expenses and acquisition of goods or services for personal use, and arrangement or facilitation or such travel including nonscheduled air, sea, or land voyages. [08-17-11]

136. What does the term "items" cover, and what is meant by items subject to the Export Administration Regulations?

For the purposes of OFAC Syria General License No. 4A, "items subject to the EAR" is defined at § 734.3 of the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730-774.The EAR are administered by the U.S. Department of Commerce, Bureau of Industry and Security ("BIS"). Note that BIS maintains authority to license exports and reexports to persons in Syria whose property and interests have been blocked pursuant to Executive Order 13606 (the “GHRAVITY E.O.”). For further guidance regarding the exportation or reexportation of items to Syria, please consult the EAR. You may also wish to review the BIS Syria Web page or contact BIS by phone at (202) 482-4252. [06-22-12]

137. Regarding OFAC Syria General License No. 4A, will I need a specific license from OFAC to export or reexport food or medicine to the Government of Syria?

The export or reexport of food or medicine that is subject to the EAR to the Government of Syria, other than medicine on the Commerce Control List that has not been licensed by BIS for export or reexport to Syria, does not require a specific license from OFAC.

As set forth in the EAR, which implements the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 ("SAA") and Executive Order 13338 of May 11, 2004, BIS does not require a license for the export or reexport of "EAR99" food and medicine; accordingly, EAR99 food and medicine can be exported or reexported to the Government of Syria on a "NLR" ("No License Required") basis, under the regulations administered by BIS.

Additionally, as set forth in the EAR, a BIS license is required for the export or reexport of medicine that is on the Commerce Control List ("CCL medicine"). If BIS has licensed the export or reexport of CCL medicine to the Government of Syria, no specific OFAC license is required. [06-22-12]

138. Does General License No. 4A authorize U.S. persons to export or reexport from a third country to Syria or the Government of Syria a foreign-made item with either no U.S. content or de minimis U.S. content?

General License No. 4A only applies to items that are subject to the EAR, as set forth in 15 C.F.R. § 734.3. If a foreign-made item located abroad is not subject to the EAR based on the regulations administered by BIS, the exportation or reexportation of such items by U.S. persons to the Government Syria and the reexportation of services incident to an exportation of such items to Syria are not authorized by General License No. 4A. Because Executive Order 13582 generally prohibits U.S. persons from engaging in transactions with the Government of Syria and separately prohibits the exportation, reexportation, sale, or supply, directly or indirectly, by a United States person, wherever located, of any services to Syria, such transactions remain prohibited. [06-22-12]

140. May I continue to send money to family or friends in Syria?

Yes. General License No. 6 authorizes U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters to process noncommercial, personal remittances to or from Syria, or for or on behalf of an individual ordinarily resident in Syria, provided the funds transfer is not by, to, or through the Government of Syria or any other person whose property and interests in property are blocked. [06-22-12]

141. May I send personal remittances through the Commercial Bank of Syria, the Syrian-Lebanese Commercial Bank, or the Syria International Islamic Bank (SIIB) to family or friends in Syria?

No. General License No. 6 does not authorize any transactions involving the Commercial Bank of Syria, the Syrian Lebanese Commercial Bank, or the SIIB. On August 10, 2011, pursuant to Executive Order 13382, the U.S. Department of the Treasury designated the Commercial Bank of Syria for its involvement in proliferation activities, and also designated its subsidiary, the Syrian-Lebanese Commercial Bank. On May 30, 2012, the Department of the Treasury also designated the SIIB pursuant to the same authority. Accordingly, the use of these financial institutions is not authorized by General License No. 6. [06-22-12]

205. Who is authorized to send money to support certain nongovernmental organizations’ activities?

U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters are authorized to process transfers of funds to or from Syria on behalf of U.S. and third-country nongovernmental organizations (NGOs), in support of the not-for-profit activities described in General License No. 11. These not-for-profit activities include: (1) activities to support humanitarian projects to meet basic human needs in Syria, including, but not limited to, drought relief, assistance to refugees, internally displaced persons, and conflict victims, food and medicine distribution, and the provision of health services; (2) activities to support democracy building in Syria, including, but not limited to, rule of law, citizen participation, government accountability, and civil society development projects; (3) activities to support education in Syria, including, but not limited to, combating illiteracy, increasing access to education, and assisting education reform projects; and (4) activities to support non-commercial development projects directly benefiting the Syrian people, including, but not limited to, preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance. Except for limited transactions with the Government of Syria, General License No. 11 does not authorize the transfer of funds to the Government of Syria or other blocked persons. [06-22-12]

206. As an individual, may I transfer funds directly to Syria in support of authorized NGO activities under General License No. 11?

No. Only U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters are authorized to process such transfers of funds, and only on behalf of U.S or third-country NGOs. Although individuals may not transfer funds directly to Syria in support of authorized NGO activities under General License No. 11, please note that, pursuant to General License No. 6, individuals may send noncommercial, personal remittances to individuals in Syria provided that, among other things, the Government of Syria is not involved. However, General License No. 6 provides that “noncommercial, personal remittances” do not include charitable donations of funds to or for the benefit of any entity or funds transfers for use in supporting or operating a business. Please see General License No. 6 for further details.

If you wish to donate funds in support of humanitarian work in Syria, you may do so by transferring funds to an NGO to support its work in Syria. If you wish to send a charitable donation directly to Syria, you must apply for specific authorization to transmit such funds. [06-22-12]

143. Can I export equipment for use in South Sudan’s oil sector?

Yes. Such exports, if prohibited by the SSR, are authorized by the new GL for activities relating to the Republic of South Sudan’s petroleum or petrochemical industries. That GL authorizes exports to the oil sector in the Republic of South Sudan that otherwise would be prohibited, whether because they relate to the petroleum or petrochemical industries in Sudan or involve dealing in Government of Sudan (GOS) property or are transshipped through Sudan. Certain types of equipment, such as dual use items, are also subject to Commerce Department licensing requirements. For more information about those requirements, contact the Foreign Policy Division of the Bureau of Industry and Security (BIS) at 202-482-4252, or visit www.bis.doc.gov. [12-08-11]

144. Can I transship equipment through Sudan to use in South Sudan?

Yes. The transshipment of equipment, whether oil-related or not, through Sudan to or from South Sudan is now authorized. [12-08-11]

145. Do I need any additional authorization from OFAC to engage in particular activities related to South Sudan’s oil sector, such as paying pipeline or port fees?

No. To the extent that they are prohibited by the Sudanese Sanctions Regulations, all activities and transactions relating to the petroleum and petrochemical industries in the Republic of South Sudan are authorized, including but not limited to the transshipment of goods, technology, and services to or from the Republic of South Sudan through Sudan; exploration; development; production; field auditing services; oilfield services; activities related to oil and gas pipelines; investment; payment to the Government of Sudan or to entities owned or controlled by the Government of Sudan  of pipeline, port, and other fees; and downstream activities such as refining, sale, and transport of petroleum from the Republic of South Sudan, except for the refining in Sudan of petroleum from the Republic of South Sudan. [12-08-11]

146. Can I participate in the refining of Southern Sudanese crude oil in refineries located in Sudan?

No. Refining in Sudan of petroleum from the Republic of South Sudan continues to be prohibited. [12-08-11]

147. Does this mean I can do business in Sudan’s oil sector now?

No. All activities and transactions relating to the petroleum and petrochemical industries in Sudan continue to be prohibited, unless otherwise authorized. [12-08-11]

148. Can I use a bank that is owned by the Government of Sudan to facilitate a payment for oil-related activities in South Sudan?

All financial transactions ordinarily incident to the activities authorized by both the oil and the transshipment general licenses also are authorized, including but not limited to financial transactions with a depository institution owned or controlled by the Government of Sudan (GOS) or located in Sudan, provided that any transaction between a U.S. depository institution and a depository institution owned or controlled by the GOS must first transit through a depository institution that is not owned or controlled by the GOS. [12-08-11]

368. Are humanitarian aid groups prohibited from making payments to or otherwise transacting with non-designated individuals or entities in South Sudan, including militias and armed groups under the command or control of a designated individual?

An entity in South Sudan that is commanded or controlled by an individual designated under Executive Order 13664 is not considered blocked by operation of law. Payments, including “taxes” or “access payments,” made to non-designated individuals or entities under the command or control of an individual designated under E.O. 13664 do not, in and of themselves, constitute prohibited activity. U.S. persons should employ due diligence, however, to ensure that an SDN is not, for example, profiting from such transactions. [06-02-14]

149. What activities by foreign financial institutions can subject them to CISADA sanctions?

As described in the Iranian Financial Sanctions Regulations, the sanctionable activities of a foreign financial institution are:
• Facilitating the efforts of the Government of Iran (GOI) to acquire or develop Weapons of Mass Destruction (WMD) or delivery systems for WMD or to provide support for terrorist organizations or acts of international terrorism;
• Facilitating the activities of a person subject to financial sanctions pursuant to UNSCRs 1737, 1747, 1803, or 1929, or any other Security Council resolution that imposes sanctions with respect to Iran;
• Engaging in money laundering, or facilitating efforts by the Central Bank of Iran or any other Iranian financial institution, to carry out either of the facilitating activities described above; or
• Facilitating a significant transaction or transactions or providing significant financial services for: (i) the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to the International Emergency Economic Powers Act (IEEPA), or (ii) a financial institution whose property and interests in property are blocked pursuant to IEEPA in connection with Iran’s proliferation of WMD, Iran’s proliferation of delivery systems for WMD, or Iran’s support for international terrorism.

150. Where can I find a list of Islamic Revolutionary Guard Corps (IRGC) affiliates and Iran-linked financial institutions “blocked pursuant to IEEPA”?

The list of blocked IRGC affiliates and blocked Iran-linked financial institutions is dynamic and is based on the identity of “designated” persons, which refers both to natural persons (i.e., individuals) and legal persons (such as corporations and other entities). The most recent list of designated persons – which includes most, but not all, blocked entities* – can be found at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/ default.aspx. The listings of designated IRGC entities will be followed by the tag [IRGC]; those of designated Iran-linked financial institutions will have the tag [IFSR].

*Under Department of the Treasury regulations, designated persons are those that are named on the list. All interests in property of such persons are blocked, and such persons are considered to have an interest in all property and entities in which they own, directly or indirectly, a 50 percent or greater interest. As a result, such property and entities are also blocked, even if they do not themselves appear on the list.

151. How do the IFSR define “U.S. financial institutions”?

The Iranian Financial Sanctions Regulations define “U.S. financial institutions” to include: depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of these entities. Covered institutions include those branches, offices, and agencies of foreign financial institutions that are located in the United States.

152. How do the Iranian Financial Sanctions Regulations define “foreign financial institutions”?

The Iranian Financial Sanctions Regulations define “foreign financial institutions” to include foreign depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of these entities.

153. How do the Iranian Financial Sanctions Regulations (IFSR) define the term “knowingly”?

The term “knowingly” as used in the IFSR means that a person has actual knowledge or should have known of specific conduct, a circumstance, or a result. In other words, the IFSR could be implicated if the Treasury Department finds that a foreign financial institution knew or should have known that it engaged in one or more of the sanctionable activities.

154. How does the Treasury Department determine whether a transaction or financial service is “significant” for purposes of the Iranian Financial Sanctions Regulations?

As set out in the Iranian Financial Sanctions Regulations, in determining whether a transaction or financial service is “significant,” the Treasury Department may consider: (1) the size, number, frequency, and nature of the transaction(s); (2) the level of awareness of management of the transaction(s) and whether or not the transaction(s) are a part of a pattern of conduct; (3) the nexus between the foreign financial institution involved in the transaction(s) and a blocked Islamic Revolutionary Guard Corps individual or entity or blocked Iran-linked financial institution; (4) the impact of the transaction(s) on the goals of CISADA; (5) whether the transaction(s) involved any deceptive practices; and (6) other factors the Treasury Department deems relevant on a case-by-case basis.

155. When are the prohibitions and strict conditions on foreign financial institutions’ correspondent accounts or payable-through accounts in the United States effective?

A finding by the Treasury Department that a foreign financial institution knowingly engages in one or more of the sanctionable activities is necessary before the Treasury Department can prohibit or impose strict conditions on the opening or maintaining in the United States of correspondent accounts or payable-through accounts for that foreign financial institution.

156. How will U.S. and foreign financial institutions know that the Treasury Department has made such a finding?

As a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding. If the Treasury Department decides to impose strict condition(s), the Treasury Department will issue an order or a regulation that sets out the strict condition(s) to be imposed on the U.S. correspondent accounts or U.S. payable-through accounts of the relevant foreign financial institution and publish the order or regulation in the Federal Register. The Federal Register is available at www.gpo.gov/fdsys/. If the Treasury Department decides to prohibit the opening or maintaining of U.S. correspondent accounts or U.S. payable-through accounts for a foreign financial institution, the Treasury Department will add the name of the foreign financial institution to the Appendix to the Iranian Financial Sanctions Regulations and publish it in the Federal Register.

157. How will the Treasury Department enforce the Iranian Financial Sanctions Regulations (IFSR) with respect to U.S. entities?

Any U.S. person who violates the correspondent account provisions of the IFSR may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, and criminal penalties for willful violations of up to $1 million and 20 years in prison. A U.S. financial institution may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, if any person that it owns or controls violates the IFSR prohibition on engaging in any transaction with or benefitting the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to IEEPA, and if the U.S. financial institution knew or should have known that the person violated the Iranian Financial Sanctions Regulations.

158. Can the application of any part(s) of the Iranian Financial Sanctions Regulations be waived by the Department of the Treasury?

CISADA provides for a waiver of the sanctions under the Iranian Financial Sanctions Regulations if the Secretary of the Treasury determines that a waiver is necessary to the national interest of the United States.

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Executive Order 13599 (Blocking Property of the Government of Iran and Iranian Financial Institutions)

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On February 5, 2012, the President signed Executive Order 13599 to implement section 1245(c) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”) and to take additional steps with respect to Iran.  Effective as of 12:01 a.m. eastern standard time on February 6, 2012, the order blocks all property and interests in property of the Government of Iran (including the Central Bank of Iran), all Iranian financial institutions, and all persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to the order. [02-06-2012]

160. Section 1 of E.O. 13599 blocks all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, that are in the United States, that come within the United States, or that come within the possession or control of U.S. persons (including overseas branches).  Can you provide further clarification about this provision of E.O. 13599?

E.O. 13599 requires U.S. persons to block (i.e., freeze) all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, which also includes the Central Bank of Iran.  This means that all individuals and entities that meet the definition of “Government of Iran” (“GOI”) as defined by section 7(d) of the new E.O. as well as all Iranian financial institutions (whether or not they meet the definition of the GOI) are now blocked.  Previously, under the Iranian Transactions Regulations, 31 C.F.R. part 560 (the “ITR”), financial institutions and other U.S. persons were prohibited from engaging in transactions with the GOI.  Under those prior rules, U.S. financial institutions receiving instructions to execute transactions involving these entities were not required to block the transactions, but were instead required to reject those instructions rather than carry them out, unless the transactions were exempt, authorized, or not prohibited by OFAC.  The Executive Order defines an “Iranian financial institution” as a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the aforementioned entities. 

As a result, transactions involving entities bearing the [IRAN] tag on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) 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 “GOI” or “Iranian Financial Institution”.  OFAC will continue to update the SDN List and may add, delete, or edit entries as appropriate. 

E.O. 13599 blocks the property and interests in property of any individual or entity that comes within its definition of the term “Government of Iran” regardless of whether it is listed on the SDN List, and similarly it blocks the property and interests in property of all Iranian financial institutions as defined in the order regardless of whether the Iranian financial institution is listed on the SDN List.

E.O. 13599 builds upon the prohibitions in the ITR, which remain in effect.

Please note, pursuant to OFAC guidance, even when an entity does not itself appear on the SDN List or otherwise meet the definition of the GOI or an Iranian financial institution, the property and interests in property of that entity are blocked if the entity is owned, directly or indirectly, 50% or more by a person whose property and interests in property are blocked pursuant to an Executive Order or regulations administered by OFAC. [02-06-2012]

161. If all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions are blocked, can I conduct transactions involving the Government of Iran that have been previously authorized by OFAC?

Generally yes.  Under new General License A, almost all transactions that are authorized under existing general licenses issued pursuant to the ITR or under existing OFAC specific licenses will continue to be authorized under the authority of E.O. 13599.  However, transactions previously authorized under one existing ITR general license are not authorized pursuant to E.O. 13599.  Specifically, the closing of accounts of the Government of Iran or an Iranian financial institution and the lump sum transfer of the balances to an account outside of the United States, which is authorized by sections 560.517(a)(3) & (b)(2) of the ITR, is not authorized by General License A, and, therefore, those transactions are prohibited by E.O. 13599 and the accounts must be blocked.  In addition, General License A does not authorize any payments from blocked funds or debits to blocked accounts, with a limited exception for payments from funds or debits to accounts blocked under the Iranian Assets Control Regulations (the hostage crisis blocking program that began in 1979) that are authorized by specific licenses issued by OFAC.

New General License B authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances, to or from Iran, or for or on behalf of individuals ordinarily resident in Iran who are not included in the term “Government of Iran”, provided that such funds transactions are not made by, to, or through a financial institution blocked pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. part 544 (the “WMDPSR”), or the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594 (the “GTSR”), or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599.

Transactions not previously authorized by OFAC that involve property or interests in property of the Government of Iran, including the Central Bank of Iran, or of Iranian financial institutions must be blocked. [02-06-2012]

162. Are U.S. persons still required to comply with the Iranian Transactions Regulations?

Yes.  E.O. 13599 builds upon the prohibitions of the ITR, and the prohibitions of the ITR remain in effect. [02-06-2012]

163. What are the differences and similarities between E.O. 13599 and the Iranian Transactions Regulations?

The ITR prohibit virtually all direct or indirect transactions involving Iran or the Government of Iran by U.S. persons or with a nexus to the United States, unless otherwise authorized by OFAC or exempted by statute, but they do not contain blocking provisions.  E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of Iranian financial institutions, which also includes the Central Bank of Iran, unless it relates to a transaction that is exempted by statute or authorized by OFAC.

To illustrate the difference between how a transaction would be treated under the ITR and the new E.O., imagine a commercial wire transfer being processed through the U.S. financial system by order of a third-country, non-U.S. company for credit to a third-country financial institution in favor of a correspondent account it maintains for an Iranian financial institution.  The transaction is not exempt or authorized by a general or specific license, and the Iranian bank is not blocked pursuant to the GTSR or the WMDPSR.  Previously, under the ITR, any U.S. financial institution handling the transaction would have needed to reject the payment because allowing it to be processed would constitute a prohibited exportation of services to Iran.  With the new E.O. in place, the U.S. financial institution would be required to block (“freeze”) that transaction. [02-06-2012]

164. The Iranian Transactions Regulations authorize U.S. depository institutions and U.S. registered brokers or dealers in securities to process transfers of funds to or from Iran if the transfer is a non-commercial, personal remittance.  Are U.S. depository institutions and U.S. registered brokers or dealers in securities still authorized to process such payments to or from a Government of Iran-owned bank that is not otherwise designated pursuant to another part of 31 C.F.R. Chapter V?

General License B under E.O. 13599 authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances to or from Iran provided that the payment is not made by, to, or through a financial institution designated by OFAC under the WMDPSR, or the GTSR, or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599.  Exempt or authorized transactions to or from Iran may also be processed subject to the above conditions. 

Such transactions must be processed through a third country, as U.S. banks are prohibited from operating correspondent accounts for Iranian banks.  The transactions may involve the use of blocked Iranian financial institutions as long as the Iranian financial institution is blocked solely pursuant to E.O. 13599 (and not pursuant to any other Executive order or part of 31 C.F.R. chapter V) and there is a third-country, non-U.S. financial institution as an intermediary between the U.S. financial institution and the Iranian financial institution. [02-06-2012]

165. To what extent are U.S. persons expected to conduct enhanced due diligence to determine if transactions contain a Government of Iran interest?

E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, unless otherwise exempt or authorized by OFAC. 

Please contact the OFAC Hotline at 202-622-2490 or 1-800-540-6322, or by email at OFAC_Feedback@treasury.gov, for guidance regarding entities that you suspect are owned or controlled by the Government of Iran that do not appear on the SDN List.  As a general matter, OFAC expects financial institutions to conduct due diligence on their own direct customers (including, for example, their ownership structure) to confirm that those customers are not persons whose property and interests in property are blocked.

With regard to other types of transactions where a financial institution is acting solely as an intermediary and fails to block transactions involving a sanctions target, OFAC will consider the totality of the circumstances surrounding the bank’s processing of the transaction to determine what, if any, regulatory response is appropriate. [02-06-2012]

166. OFAC’s SDN List contains a list of entities identified by OFAC as being the Government of Iran.  Should U.S. persons now block the property and interests in property of those entities? 

Yes, U.S. persons should now block the property and interests in property of the Government of Iran entities appearing on the SDN List, unless OFAC has authorized the underlying transaction or the transaction is exempt. [02-06-2012]

167. OFAC has granted my company a license under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) and the ITR.  Can I continue to conduct the licensed transaction? 

Under General License A issued pursuant to E.O. 13599, transactions authorized under existing specific licenses issued pursuant to TSRA and the ITR are authorized under E.O. 13599 until the specific license expires, per the terms of the license. [02-06-2012]

168. OFAC has issued me a (non-TSRA) specific license related to Iran, or the Government of Iran.  Can I continue to conduct the licensed transactions? 

Under General License A issued pursuant to E.O. 13599, transactions authorized by (non-TSRA) specific licenses issued prior to the issuance of E.O. 13599 and issued pursuant to any part of 31 C.F.R. chapter V are also authorized under E.O. 13599.  As set forth in General License A, in most cases these new authorizations under E.O. 13599 are in effect until theexpiration date of the individual specific license, or, if the specific license has no expiration date, until April 6, 2012. [02-06-2012]

Questions Related to the NDAA (Section 1245 of the National Defense Authorization Act for Fiscal Year 2012)

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On December 31, 2011, the President signed into law the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”).  Section 1245 of this statute requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the Central Bank of Iran (“CBI”).  It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI.  Although the sanctions on foreign financial institutions authorized by section 1245 are similar to the financial sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (22 U.S.C. 8513(c)) (“CISADA”) (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the two statutes. [02-14-2012]

169. What is the NDAA?

On December 31, 2011, the President signed into law the NDAA.  Section 1245 of the NDAA requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the CBI.  It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI. [02-14-2012]

170. What activities can trigger sanctions on a foreign financial institution under the NDAA?

For private financial institutions, the Act mandates that the President sanction those institutions that are found to knowingly conduct or facilitate any significant  transactions with a U.S.-designated Iranian financial institution or with the CBI – whether for the purchase of petroleum or otherwise – unless the transaction is for the sale of food, medicine, or medical devices to Iran.  For all transactions with the CBI other than petroleum purchases, this provision takes effect on February 29, 2012, i.e., 60 days after the enactment of the Act.  The timing of the petroleum purchase sanctions is discussed immediately below.   

Private financial institutions and all other foreign financial institutions – including central banks or foreign state-owned or -controlled banks – potentially face sanctions under the NDAA if they knowingly conduct or facilitate significant financial transactions for the purchase of Iranian petroleum or petroleum products with a U.S.-designated Iranian financial institution or with the CBI after the provision takes effect as early as June 28, 2012, i.e., 180 days after enactment.*  This NDAA provision may be held in abeyance beyond June 28, 2012, depending on the President’s determination on the availability and price of alternative supplies.  Foreign central and foreign state-owned or -controlled banks are also subject to these sanctions if the transactions are for the sale of petroleum or petroleum products to Iran and they occur after June 28, 2012. 

All foreign financial institutions, including private and state-owned institutions, remain subject to section 104(c) of CISADA, which calls for sanctions on foreign financial institutions that are found to have knowingly engaged in facilitating significant transactions for specific Iranian-linked individuals and entities.  (See CISADA: The New U.S. Sanctions on Iran, available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/CISADA_english.pdf.) [02-14-2012]

*Irrespective of the timeframes set forth in the NDAA, any foreign financial institution that knowingly facilitates significant transactions with any U.S.-designated Iranian financial institution would still be subject to CISADA.

171. Does the NDAA repeal or amend Section 104(c) of CISADA?

No.  Any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for a U.S.-designated, Iranian-linked financial institution can be sanctioned under section 104(c) of CISADA and section 561.201 of the Iranian Financial Sanctions Regulations (“IFSR”) even if those transactions are not sanctionable under section 1245(d) of the NDAA.  Though the NDAA imposes sanctions on foreign financial institutions similar to financial sanctions under CISADA and the IFSR (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the statutes. [02-14-2012]

172. How does Executive Order 13599, “Blocking Property of the Government of Iran and Iranian Financial Institutions,” and the blocking of all Iranian financial institutions affect the financial sanctions provisions in CISADA?  Do CISADA sanctions now apply to financial transactions with any Iranian financial institution?

CISADA applies to transactions with only those Iranian financial institutions that are designated in connection with Iran’s WMD or terrorism activities and are denoted on OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN list) with the [IFSR] tag.  While E.O. 13599 does block the property of all Iranian financial institutions, that action is not grounded in the authorities that relate to counterproliferation or counterterrorism, and therefore does not implicate CISADA. [02-14-2012]

173. Are there any exceptions to the sanctions provisions in the NDAA?

Yes.  The NDAA includes an exception that prohibits the President from imposing sanctions “with respect to any person for conducting or facilitating a transaction for the sale of food, medicine, or medical devices to Iran.”  [02-14-2012]

174. What are definitions for the following NDAA terms:  “significant financial transaction,” “knowingly,” “owned or controlled by the government of a foreign country,” “food, medicine, and medical devices,” “foreign financial institution,” “Iranian financial institution,” “significantly reduced,” and “whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”?

“significant financial transaction”

The IFSR, which implement section 104(c) of CISADA, identify factors to be used in determining what is significant (as it relates to transactions) in 31 C.F.R § 561.404, which allows the Secretary of the Treasury to consider the “totality of the facts and circumstances” while providing a list of seven broad factors that can play a role in the determination, including: (1) the size, number, and frequency of transactions; (2) the nature of the transaction(s); (3) the level of awareness of management and whether the transaction(s) are part of a pattern of conduct; (4) the nexus between the transaction(s) and a blocked person; (5) the impact of the transaction(s) on statutory objectives; (6) whether the transaction(s) involve deceptive practices; and (7) such other factors that the Secretary deems relevant on a case-by-case basis.  Treasury anticipates closely modeling the definition of “significant” for NDAA purposes on the IFSR. 

We anticipate utilizing a broad definition of “financial transaction” that encompasses “any transfer of value involving a financial institution.”  The term “transaction” includes, but is not limited to, the following:

The holding of nostro, vostro, or loro accounts for or with the Central Bank of Iran or designated banks, such as Bank Melli Iran and/or Bank Saderat Iran, including any of their branches or subsidiaries worldwide (collectively the “Listed Parties”);

The provision of trade finance and/or letter of credit services for or with Listed Parties;

The provision of guarantees or similar instruments for or with Listed Parties;

The provision of investment products or instruments for Listed Parties and/or the participation with Listed Parties in investments;

The receipt or origination of wire transfers on behalf of or involving Listed Parties;

The acceptance of commercial paper (both retail and wholesale) drawn on Listed Parties, and the clearance of such paper (including, but not limited to, checks and similar drafts);

The receipt or origination of ACH or ATM transactions with Listed Parties; and/or

Any other transactions for or on behalf of, directly or indirectly, Listed Parties and/or with Listed Parties serving as correspondents, respondents, or beneficiaries.  That would include transactions where the Listed Parties do not appear on the face of the transaction but where the transaction is undertaken with knowledge of the involvement of a Listed Party based on a relationship that exists through a third party such as a money exchange or trading house.     

“knowingly”

The IFSR defines “knowingly” with respect to conduct, a circumstance, or a result, to mean that an entity or individual had actual knowledge, or should have known, about the conduct, the circumstance, or the result.  31 C.F.R. § 561.314.  Treasury anticipates closely modeling the definition of this term on the IFSR.   

“owned or controlled by the government of a foreign country”

The Iranian Transactions Regulations (“ITR”) define “an entity owned or controlled by the Government of Iran” in section 560.313.  Borrowing from that definition, a financial institution “owned or controlled by the government of a foreign country” would be deemed to include a financial institution in which a foreign government owns a 50% or greater interest or which is otherwise controlled by a foreign government.  Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR definition.  

“food, medicine, and medical devices”

“Food”:  The October 2011 general license for the ITR and the Sudanese Sanctions Regulations (“SSR”) authorizing certain food exports to Iran and Sudan defines “food” as “items that are intended to be consumed by and provide nutrition to humans or animals in Iran – including vitamins and minerals, food additives and supplements, and bottled drinking water – and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals in Iran.”  The regulations also specify that food does not include alcoholic beverages, cigarettes, gum, or fertilizer.  Treasury anticipates closely modeling the definition of this term under the NDAA on this license definition.

“Medicine”:  ITR section 560.530(e)(2) states that:  “For the purposes of this part, the term medicine has the same meaning given the term ‘drug’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).”  Similarly, under the Trade Sanctions Reform and Export Act (“TSRA”), 22 U.S.C. 7201(5), “[t]he term ‘medicine’ has the meaning given the term "drug" in section 321 of title 21.” Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“Medical Devices”:  ITR section 560.530(e)(3) states that:  “For the purposes of this part, the term medical device has the meaning given the term ‘device’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).” Similarly, under TSRA, 22 U.S.C. 7201(4), “[t]he term "medical device" has the meaning given the term ‘device’ in section 321 of title 21.”  Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“foreign financial institution”

“Foreign financial institution” is defined in section 1245 of the NDAA with reference to section 104(i) of CISADA (22 U.S.C. § 8513(i)).  As further defined in the IFSR, a “foreign financial institution” is “any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.  It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing.”  31 C.F.R. § 561.308.  It does not include “the international financial institutions identified in 22 U.S.C. 262r(c)(2), the International Fund for Agricultural Development, or the North American Development Bank.”  31 C.F.R. § 561.308.  Treasury anticipates closely modeling the definition of this term under the NDAA on the IFSR.

“Iranian financial institution”

This term is defined in E.O. 13599 as: “a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the foregoing.”  Such financial institutions include, but are not limited to, any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, or commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.  It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing. 

“significantly reduced”

The Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of Energy, and the Director of National Intelligence, will make determinations as to whether any country has significantly reduced the volume of Iranian crude oil purchases.  Any determinations will be preceded by a process of rigorous due diligence.  The Secretary of State intends to consider relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran, including the quantity and percentage of the reduction in purchases of Iranian crude oil over the relevant period, termination of contracts for future delivery of Iranian crude oil, and other actions that demonstrate a commitment to substantially decrease such purchases.

“whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”

The President will make a determination, based on the reports required by subparagraph (A) of Section 1245(d)(4) of the NDAA, as to whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient to permit purchasers of petroleum and petroleum products from Iran to reduce significantly in volume their purchases from Iran. [02-14-2012]

175. What is the scope of “petroleum products” under the law? 

As defined by the U.S. Energy Information Administration (EIA), petroleum products include unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of crude oil (including lease condensate), natural gas, and other hydrocarbon compounds.  In keeping with the EIA’s standard definition, petroleum products do not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels. [02-14-2012]

176. If oil is being provided as payment for an outstanding debt, is such a transfer considered a “financial transaction”?  

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]

177. If the CBI is involved in providing settlement services for a transaction, or is otherwise acting solely as an intermediary in a transaction between a non-designated Iranian bank and a foreign financial institution, is the foreign financial institution deemed to be engaging in a transaction with the CBI?

Section 1245 targets any significant transactions “with” the CBI; a transaction involving the CBI in an intermediary role would likely be viewed as a transaction “with” the CBI. [02-14-2012]

178. Are barter trades involving the CBI considered “financial transactions” under Section 1245? 

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]

179. Does the definition of “significant financial transaction” exclude the passive holding of CBI reserves?  Is the U.S. willing to give assurances that this will not be a basis for sanctions?

This will be a case-by-case determination and will require specifics on what “passive holding” entails.  As a general matter, we would likely not view the holding of reserves as sanctionable in the following circumstances:  the accounts are frozen or restricted, under which the CBI would be allowed to maintain accounts that it had already opened as of December 31, 2011, but would otherwise be unable to direct the disposition of those funds, with ordinary commercial interest payments and routine roll-overs of time deposits under pre-existing instructions being the only new transactions. [02-14-2012]

180. Are payments made under contracts existing prior to the date of enactment of the NDAA statute (December 31, 2011) exempted from the definition of “significant transactions”?

No general exception will be provided for payments arising out of pre-existing contracts.  The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above. [02-14-2012]

181. Will the U.S. refrain from sanctioning foreign financial institutions that receive funds from the CBI to repay loans?  What if these loans were granted for projects that might be subject to the food, medicine, and medical device exemptions under the NDAA?

As noted, no general exception will be provided for payments arising out of pre-existing contracts.  The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above.  Regarding payments for food, medicine, and medical devices, the NDAA does not allow sanctions based on transactions for the sale of food, medicine, or medical devices to Iran.  Payments related to the export of broader humanitarian items would be dealt with in our analysis of what constitutes a “significant financial transaction” and would be considered on a case-by-case basis.[02-14-2012]

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Questions Related Executive Order 13606 (the GHRAVITY E.O.)

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On April 22, 2012, the President signed Executive Order 13606 Blocking The Property And Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (the “GHRAVITY E.O.”). Effective 12:01 a.m. eastern daylight time on April 23, 2012, the GHRAVITY E.O. blocks all property and interests in property of persons listed in its Annex, and all persons determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, to meet the criteria in the order. [04-23-2012]

183. Why did the President issue the GHRAVITY E.O.?

The GHRAVITY E.O. follows prior Executive orders issued by the President in response to the commission of human rights abuses by the Governments of Iran and Syria. With the GHRAVITY E.O., the President recognized that the commission of serious human rights abuses against the people of Iran and Syria by their governments, facilitated by computer and network disruption, monitoring, and tracking by those governments, threatens the national security and foreign policy of the United States. The GHRAVITY E.O. targets this activity in order to deter and disrupt such abuses.  [04-23-2012]

184. What does the GHRAVITY E.O. do?

The GHRAVITY E.O. blocks (i.e., freezes) the property and interests in property of, among others, any person determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, (1) to have operated, or to have directed the operation of, information and communications technology that facilitates computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria; or (2) to have sold, leased, or otherwise provided, directly or indirectly, goods, services, or technology to Iran or Syria likely to be used to facilitate such activities.

U.S. persons in possession of property or interests in property belonging to persons listed in the Annex to the GHRAVITY E.O., or designated in the future by Treasury under the E.O., are obligated to block the property and report the blocking to OFAC within 10 days of blocking. Entities that are 50% or more owned by persons blocked by the GHRAVITY E.O. are also blocked, regardless of whether such entities appear on the Annex or OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN list”). [04-23-2012]

185. What type of activities does the GHRAVITY E.O. target?

The GHRAVITY E.O. targets the provision and use of information and communications technology to facilitate computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria. It is not intended to block exports of technology that enable the Syrian and Iranian people to freely communicate among themselves and with the outside world.

“Information and communications technology” means any hardware, software, or other product or service primarily intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display, including via the Internet. [04-23-2012]

186. How do I know that a person has been designated under the GHRAVITY E.O.?

Persons designated under the GHRAVITY E.O. appear on the publicly available SDN list bearing the [HRIT] tag. U.S. persons are obligated to block property involving the persons bearing the tag [HRIT] on the SDN list, unless the transaction is exempt or otherwise authorized by OFAC. [04-23-2012]

187. Does the GHRAVITY E.O. prohibit me from exporting technology to companies that do business with Iran or Syria?

This E.O. does not generally prohibit transactions involving persons that do business with Iran or Syria, unless the person has been designated pursuant to this order. You should consult with the Department of Commerce’s Bureau of Industry and Security (BIS) regarding exports to companies that do business with Syria. [04-23-2012]

188. If I am a non-U.S. company that exports information and communications technology to Iran or Syria, will I be designated under the GHRAVITY E.O.?

The measures in this order are designed primarily to address the need to prevent entities located in whole or in part in Iran and Syria from facilitating or committing serious human rights abuses. These measures are not designed to prevent the provision of information and communications technology necessary to enable the Iranian and Syrian people to freely communicate with each other and the outside world. That said, those providing communications technology to Iran or Syria that has the potential to facilitate computer or network disruption, monitoring, or tracking should exercise great caution given Iran and Syria’s use of this technology to assist in the commission of serious human rights abuses. [04-23-2012]

189. Would I need authorization from OFAC or BIS if I wanted to export goods or technology to persons blocked under the GHRAVITY E.O.?

Yes. For more information regarding exports of goods or technology to persons blocked under the GHRAVITY E.O., please contact OFAC or BIS. [04-23-2012]

190. Are existing licenses issued by the U.S. Government involving persons designated under the GHRAVITY E.O. still valid?

U.S. persons who have been issued licenses involving persons designated under the GHRAVITY E.O. should check with the issuing agency regarding the validity of their licenses. [04-23-2012]

Questions Regarding Executive Order 13608 (Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria)

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191. What does Executive Order 13608 “Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria” do?

This Executive Order gives Treasury new authorities. First, it strengthens Treasury’s ability to address behavior by foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions on Syria or Iran. This E.O. also gives Treasury the authority to impose sanctions on foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions.

Transactions by U.S. persons or within the United States involving persons sanctioned under this authority are prohibited, effectively cutting the listed persons off from the U.S. marketplace and financial system. By cutting off access to the U.S. marketplace and financial system to such sanctions evaders, Executive Order 13608 provides Treasury with a powerful tool to prevent and deter such behavior and to hold such persons accountable and to convince them to change their behavior. Publicly identifying such persons will also allow U.S. persons to avoid unwittingly engaging in transactions with identified foreign persons that may expose U.S. persons to the risk of sanctions violations. [05-01-2012]

192. Why was this authority needed?

Executive Order 13608 expands Treasury’s ability to address the behavior of foreign persons determined to have violated or attempted to violate U.S. sanctions on Syria or Iran, or to have facilitated deceptive transactions on behalf of persons subject to those sanctions, where the foreign person had no physical, financial, or other presence in the United States and did not submit to U.S. administrative proceedings. Treasury may use this authority where it appears that a foreign person violated U.S. sanctions on Iran or Syria but may not meet criteria for designation under existing Executive Orders. Executive Order 13608 will provide a means through which Treasury can limit the risk to U.S. commercial and financial systems posed by foreign persons determined to have violated U.S. sanctions on Iran or Syria, or to have engaged in deceptive transactions for or on behalf of persons subject to U.S. sanctions on Iran or Syria.

Such a listing under Executive Order 13608 also provides Treasury with the capability to put the world on notice as to such foreign persons’ activity and the risk of similar future activity. Such identification will help prevent U.S. persons from unwittingly engaging in transactions with foreign persons that may pose a risk of sanctions violations. [05-01-2012]

193. What are the repercussions of an individual or entity being identified under Executive Order 13608?

If an individual or entity is made subject to sanctions under this authority, U.S. persons generally may no longer provide to or procure from such individual or entity any goods, services, or technology. From a practical standpoint, it means that the sanctioned individual or entity will be cut off from the U.S. commercial and financial systems. [05-01-2012]

194. Are U.S. persons required to block the property of individuals and entities identified under Executive Order 13608?

No. Identifications or listings under Executive Order 13608 do not block any assets. However, a U.S. person may not provide or procure goods or services, including financial services, or technology to or from a listed person without authorization from OFAC, unless the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act (e.g., certain travel-related transactions). [05-01-2012]

336. How do I know whether a person is identified under E.O. 13608?

Please refer to the Foreign Sanctions Evaders (FSE) List. [02-06-2014]

195. I am a financial institution. What do I do if I receive a wire transfer involving a listed party?

A U.S. financial institution must reject any wire transfer involving a listed person and file a report with OFAC within 10 days. [05-01-2012]

196. I am a financial institution and I hold an account for a listed person. What do I do with the funds?

The account is not blocked; however, it is restricted and you cannot allow it to be operated without authorization from OFAC. [05-01-2012]

197. What are U.S. persons obligated to do with property of a person listed under Executive Order 13608?

Property of a listed person is not blocked, but U.S. persons must have authorization from OFAC to provide or procure such property to or from a listed person, or to provide or procure services to or from a listed person in connection with such property. Additionally, wire transfers involving the assets of an Executive Order 13608-listed person must be rejected. [05-01-2012]

198. May a U.S. person deal with an Executive Order 13608-listed person so long as the dealing does not involve Iran or Syria?

No. U.S. persons are prohibited from all transactions or dealings described in Executive Order 13608 with persons listed under Executive Order 13608, unless authorized by OFAC or where the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]

199. How is an identification or listing under Executive Order 13608 different from a designation?

Like a designation, a U.S. person is prohibited, unless authorized by OFAC or if the underlying transaction is exempt from regulation under the International Emergency Economic Powers Act, from dealing with an identified or listed person. Unlike a blocking designation, the property and the interests in property of a person listed under Executive Order 13608 are not blocked. [05-01-2012]

Treasury’s authority under Executive Order 13608 has some similarities to Commerce’s authority under the Export Administration Regulations (“EAR”). Commerce may impose denial orders on persons (both foreign and U.S.) who have committed violations of the EAR or present an imminent risk of committing a violation. These individuals or organizations are listed on Commerce’s Denied Persons List. It is prohibited to deal with Denied Persons in any export transaction involving items (commodities, software, and technology) subject to the EAR. Treasury’s authority under Executive Order 13608 complements Commerce’s authority by addressing at least two types of sanctions violations that are outside the scope of the EAR. Specifically, Treasury may prohibit the provision of services (in addition to goods and technology) to or from identified or listed persons and Treasury may prohibit transactions or dealings involving goods and technology that are not subject to the EAR. However, unlike Commerce’s authority, Treasury’s authority to sanction or list an individual or entity under Executive Order 13608 may be implemented only with respect to foreign individuals or entities. [05-01-2012]

201. May a U.S. person deal with a person listed under Executive Order 13608 in a transaction that was previously licensed by OFAC?

No. U.S. persons cannot have any dealings with a person identified or listed under this Executive Order absent specific authorization from OFAC pursuant to the Executive Order 13608, unless the transaction is exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]

202. What if the transaction is already underway?

If a transaction is underway at the time of a listing, a U.S. person must cease dealing with the listed person and the U.S. person is prohibited from engaging in transactions or dealings in or related to any goods, services, or technology to or from the listed person, unless the transaction is exempt under the International Emergency Economic Powers Act, or until such time that OFAC authorizes the transactions pursuant to the Executive Order 13608. Additionally, if the transaction underway involves a wire transfer, a U.S. financial institution must reject it and file a report with OFAC within 10 days.

Like all of its programs, OFAC has the authority under Executive Order 13608 to license transactions that are consistent with U.S. foreign policy. [05-01-2012]

203. Can a U.S. person use a listed person to facilitate personal remittances to or from Iran or Syria?

No. Without specific authorization from OFAC, U.S. persons cannot use a listed person to process personal remittances. [05-01-2012]

204. Will Treasury pursue an enforcement action before identifying or listing a person pursuant to Executive Order 13608?

The authorities granted under this Executive Order are in addition to current authorities that Treasury has to pursue an enforcement action for violations of U.S. law, and Treasury is not required to pursue a civil enforcement action prior to identifying or listing a person pursuant to Executive Order 13608. [05-01-2012]

207. What were the criteria for this finding? How many other institutions were you looking at and why did you decide to take action against Bank of Kunlun?

Based on information made available to the Treasury Department, the Department has found that China’s Bank of Kunlun has knowingly facilitated significant transactions for various Iranian-linked banks designated by the United States under our WMD or terrorism authorities.

Upon finding that Bank of Kunlun was knowingly engaged in these activities that are sanctionable under CISADA, the Secretary of the Treasury has prohibited U.S. banks from opening or maintaining correspondent accounts or payable-through accounts in the United States for Bank of Kunlun – effectively cutting off Bank of Kunlun’s direct access to the U.S. financial system.

Since CISADA was signed into law in July 2010, Treasury has engaged with over 120 financial institutions and bank regulators in more than 60 countries all over the world to brief them on the financial provisions of CISADA, and, in cases where we had specific concerns, has shared information about those concerns.

This global engagement campaign has proven highly successful, as we have seen the overwhelming majority of financial institutions with which we have engaged change their business practices – even close any correspondent accounts with U.S. designated Iranian banks – to ensure that their access to the U.S. financial system is not put at risk.

The July 31, 2012 action against Bank of Kunlun was in response to its ongoing relationships with U.S.-designated Iranian banks.

Note: The Treasury Department had also made a CISADA finding against Iraq’s Elaf Islamic Bank on July 31, 2012. On May 17, 2013, Elaf Islamic Bank was delisted and its name was removed from the Part 561 List. [05-17-2013]

208. How are you defining “significant” transactions and financial services?

In determining whether transactions or financial services are significant, the Secretary of the Treasury may consider a number of factors related to the transactions or services, including, but not limited to: size, number, and frequency; type, complexity and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern of practice or is an isolated event; the ultimate economic benefit conferred upon the designated person(s); and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.

Bank of Kunlun

Bank of Kunlun has provided hundreds of millions of dollars’ worth of services to U.S. designated Iranian banks. These financial services include maintaining accounts, transferring payments, and serving as the paying bank for letters of credit opened by U.S. designated Iranian banks. The facilitation of hundreds of millions of U.S. dollars worth of transactions with U.S. designated Iranian banks over the past year is significant.

In 2012, after Treasury designated Bank Tejarat, Bank of Kunlun transferred hundreds of payments totaling approximately $100 million dollars for accounts it holds for Bank Tejarat and made a payment for an IRGC affiliate pursuant to a letter of credit opened by Bank Tejarat. [05-17-2013]

209. What happens to the correspondent and payable-through accounts held by Bank of Kunlun in the United States?

To our knowledge, Bank of Kunlun does not currently hold correspondent accounts with U.S. financial institutions.

The July 31, 2012 action prohibits financial institutions in the United States from opening or maintaining correspondent or payable-through accounts for Bank of Kunlun. [05-17-2013]

210. What are the consequences for a U.S. financial institution that maintains or opens a new correspondent or payable-through account for Bank of Kunlun?

A U.S. financial institution that maintains or opens a correspondent or payable-through account for Bank of Kunlun is subject to civil penalties in the amount of up to $250,000 or twice the value of the transaction, whichever is greater.

Criminal penalties of up to $1 million can be imposed for willful violations, and individuals who willfully violate the prohibition can face up to 20 years in prison. [05-17-2013]

Any foreign financial institution that knowingly facilitates significant transactions on behalf of designated Iranian banks – whether directly or indirectly – may face CISADA sanctions. OFAC defines “knowingly” in this context as meaning the financial institution knew or should have known of the conduct, circumstance, or result. Bank of Kunlun has demonstrated its willingness to move hundreds of millions dollars on behalf of designated Iranian banks. Accordingly, we would expect heightened due diligence in any dealings with Bank of Kunlun. [05-17-2013]

The prohibitions implemented as a result of today’s action apply to Bank of Kunlun and all of its offices, around the world. [05-17-2013]

213. Are United States financial institutions that do not hold correspondent or payable-through accounts for Bank of Kunlun required to block or reject transactions that otherwise involve Bank of Kunlun?

No. U.S. financial institutions are not required to block or reject financial or trade transactions that involve Bank of Kunlun.

That said, we would expect heightened due diligence in any dealings with Bank of Kunlun given its demonstrated willingness to facilitate transactions on behalf of Iranian banks designated by well over a dozen countries worldwide. [05-17-2013]

214. What is the licensing process for U.S. financial institutions that need to conduct transactions in order to close correspondent or payable-through accounts with a foreign financial institution sanctioned pursuant to CISADA?

Treasury regulations provide a 10-day period in which U.S. financial institutions are authorized to engage in the transactions necessary to close an affected account. If a U.S. financial institution that is in the process of closing an affected account seeks to engage in transactions beyond those already authorized, Treasury may issue specific licenses on a case-by-case basis. [05-17-2013]

215. What is the difference, in practical effect, between this and a designation under one of your other authorities, like E.O. 13382?

The July 31, 2012 CISADA finding prohibits the opening or maintaining of correspondent accounts or payable-through accounts in the United States for Bank of Kunlun. This action does not require the immediate freezing of any assets that Bank of Kunlun may hold within U.S. jurisdiction. [05-17-2013]

Questions Related to Executive Order 13622, “Authorizing Additional Sanctions With Respect to Iran”

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On July 30, 2012, the President signed Executive Order 13622 to authorize additional sanctions with respect to Iran. Effective as of 12:01 a.m. Eastern Standard Time on July 31, 2012, the order provides additional sanctions authorities to the Secretary of the Treasury and the Secretary of State. The order builds, in part, on prior authorities set forth in the National Defense Authorization Act for Fiscal Year 2012 (“NDAA”) and in the Iran Sanctions Act (“ISA”). [07-31-2012]

Executive Order 13622 imposes new sanctions against the Iranian energy and petrochemical sectors.

E.O. 13622 authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated any significant financial transaction with the National Iranian Oil Company (“NIOC”) or Naftiran Intertade Company (“NICO”) (except for sales of refined petroleum products to NIOC or NICO that are below the dollar threshold that could trigger sanctions under ISA). It also provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petroleum or petroleum products from Iran through any channel, with the aim of deterring Iran or any other country or institution from establishing workaround payment mechanisms for the purchase of Iranian oil to circumvent the NDAA oil sanctions. The existing exception rules under the NDAA apply to these new sanctions. Thus, countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil will be excepted from this new measure as well.

In addition, E.O. 13622 provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petrochemical products from Iran.

Finally, E.O. 13622 provides authority for the Secretary of the Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of:

• NIOC, NICO, or the Central Bank of Iran (“CBI”), or
• the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

Additionally, E.O. 13622 grants the Secretary of State, in consultation with the Secretary of the Treasury and other cabinet officials, new powers to impose a range of sanctions on individuals or entities determined to knowingly engage in significant transactions for the purchase or acquisition of petroleum, petroleum products or petrochemical products from Iran. Individuals or entities determined to meet such criteria will be subject to the same sanctions that may be imposed under ISA. [07-31-2012]

E.O. 13622 further strengthens the Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not captured under the sanctions previously implemented against the CBI. The E.O. also addresses concerns that the Government of Iran is utilizing sales of petrochemical products to replace revenue lost as a result of previously enacted sanctions. In addition, the E.O. provides additional authority to combat and deter the use of non-bank intermediaries to conduct petroleum and petrochemical trade, provide support to or for the CBI, NIOC or NICO, or procure U.S. bank notes or precious metals for the Government of Iran.  [07-31-2012]

218. What constitutes a “significant” financial transaction under the new E.O. 13622? Is there a certain dollar threshold?

Treasury expects to apply the same framework under section 1 of E.O. 13622 that it has applied under section 1245 of the NDAA and section 104 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). Under that framework, in determining whether transactions are significant, the Secretary of the Treasury may consider a number of factors related to the transaction or services, including, but not limited to: size, number, and frequency; type, complexity, and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern or practice or an isolated event; the ultimate economic benefit conferred upon the sanctions target; and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.  [07-31-2012]

219. Does E.O. 13622 mean that Iranian trade partners should no longer buy petroleum products from Iran? How will this affect exports of Iranian oil?

These new measures further strengthen the existing comprehensive Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not being captured under the sanctions previously implemented against the CBI. Iranian trade partners can continue to buy petroleum and petroleum products from Iran without risking sanctions under this E.O. if they have received a significant reduction exception under the NDAA. However, in jurisdictions that do not have a significant reduction exception, the purchase of petroleum or petroleum products and significant dealings with NIOC or NICO may be subject to sanctions under this E.O.  [07-31-2012]

220. Does E.O. 13622 mean you are designating NIOC and NICO? Can countries that have been excepted from NDAA sanctions still purchase oil through these companies without facing sanctions?

All property and interests in property of NIOC and NICO subject to U.S. jurisdiction are already blocked pursuant to E.O. 13599 and U.S. persons are prohibited from all dealings with these entities. This new E.O. 13622 provides authority to sanction foreign financial institutions that knowingly conduct or facilitate any significant financial transaction with NIOC or NICO. Financial institutions in countries that have received a significant reduction exception are not subject to these sanctions for petroleum purchase transactions with NIOC and NICO while the exemption is in effect. [07-31-2012]

221. E.O. 13622 targets transactions between foreign financial institutions and NIOC or NICO. What about a NIOC or NICO subsidiary? Are transactions with those entities also sanctionable under this E.O.?

Yes. E.O. 13622 defines these terms to include any entity owned or controlled by, or operating for or on behalf, these entities. [07-31-2012]

No. The relevant provisions of E.O. 13622 do not apply to transactions involving the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [07-31-2012]

223. Are barter arrangements or other non-cash trade transactions involving petroleum, petroleum products, or petrochemical products originating from Iran sanctionable under the terms of the new E.O. 13622?

Yes. To the extent a financial institution is involved, that financial institution could be sanctioned under E.O. 13622 for a barter arrangement related to the purchase or acquisition of petroleum, petroleum products, or petrochemical products from Iran. In addition, barter transactions knowingly conducted with NIOC, NICO, or the CBI also could result in sanctions – regardless of whether a financial institution is involved – to the extent that those transactions constitute material support for, or services to, NIOC, NICO, or the CBI. [07-31-2012]

224. What are the definitions of “petroleum products” and “petrochemical products”?

The term “petroleum products” includes unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of: crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. The term does not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels.

The term “petrochemical products” includes any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea. [07-31-2012]

Questions Related to Humanitarian Assistance to Syria

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The United States government is working with the international community to provide urgently needed humanitarian assistance to the Syrian people while applying comprehensive sanctions against the Government of Syria and targeted sanctions on key individuals and entities supporting the Assad regime, in order to continue pressuring the Syrian government to stop its human rights abuses and other illicit activities. The following frequently asked questions provide an overview of the U.S. Department of the Treasury’s Syria sanctions program and guidance to the public on sending remittances, goods and services, and charitable assistance to Syria.

For additional Treasury guidance on protecting charitable donations from abuse, please view this document or visit this website: www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/Treasury%20Charity%20FAQs%206-4-2010%20FINAL.pdf. Additional questions may be directed to Treasury’s Office of Foreign Assets Control (OFAC) hotline at (800) 540-6322 or (202) 622-2490.

The United States has sanctioned the Syrian government, including the Central Bank of Syria, senior Syrian government officials, and individuals and entities supporting the Assad regime and/or responsible for human rights abuses in Syria, in order to reinforce the President’s call that Bashar al-Assad step down and to disrupt the Assad regime’s ability to finance its campaign of violence against the Syrian people. In addition, Treasury has sanctioned the Commercial Bank of Syria and a number of other entities under Executive Order 13382, an authority that targets proliferators of weapons of mass destruction (WMD) and their supporters. Over the years Treasury has applied a broad range of sanctions using several different authorities and Executive orders (E.O.s), including counter-terrorism (E.O. 13224), human rights abuses (E.O. 13572), and non-proliferation (E.O. 13382). The United States has also prohibited the exportation of services to Syria, and there have long been legal restrictions on what goods U.S. persons can export to Syria.

These sanctions mean that U.S. persons are not permitted to do business with individuals or entities on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) [link to list], or with any entity 50 percent or more owned by an Specially Designated National (SDN), unless exempt or authorized by OFAC through a general or specific license.

Recognizing that the Syrian people need many critical services and goods, OFAC has issued several general licenses that, among other things, allow all U.S. persons to send non-commercial, personal remittances to Syrian persons without needing to apply to OFAC for a separate or specific license. Moreover, U.S. persons may donate humanitarian goods like food and medicine to people in Syria, as long as such donations are consistent with Commerce and OFAC regulations. See http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx#syr.

Finally, OFAC has also issued a general license to allow nongovernmental organizations (NGOs) to engage in not-for-profit activities in Syria in support of humanitarian projects, democracy-building, education, and non-commercial development projects directly benefitting the Syrian people. Copies of all OFAC general licenses issued for Syria can be found here: www.treasury.gov/resource-center/sanctions/Programs/Pages/syria.aspx. For any activities that fall outside of these general licenses, specific authorization from OFAC would be required, unless the transactions fall within a small category that are exempt from regulation by statute.

As mentioned above, one of the goals of the U.S. sanctions on Syria is to reinforce the President’s call for Bashar al-Assad to step down and to disrupt the Assad regime’s ability to finance its campaign of violence against the Syrian people. OFAC can issue a specific license to authorize particular transactions that may otherwise be prohibited by the sanctions, as long as those transactions are in the foreign policy interests of the United States. For example, specific licenses may be issued on a case-by case basis to authorize charitable donations of funds that would otherwise be prohibited by the Syrian sanctions regime.

Yes. OFAC General License No. 6 authorizes U.S. depository institutions, including banks, and U.S.-registered money transmitters, to process non-commercial, personal remittances to or from Syria, or for or on behalf of an individual ordinarily resident in Syria, provided the funds transfer is not by, to, or through the Government of Syria or any other person designated or otherwise blocked by OFAC. Such transactions do not require further authorization from OFAC. If banks or other institutions have questions about processing remittances, they can contact OFAC’s Sanctions Compliance and Evaluation Division via the OFAC hotline at (800) 540-6322 or (202) 622-2490.

228. May I send personal remittances through the Commercial Bank of Syria, the Syrian-Lebanese Commercial Bank, or the Syria International Islamic Bank (SIIB) to family or friends in Syria?

No. General License No. 6 does not authorize any transactions involving individuals or entities designated under E.O. 13382, which targets proliferators of weapons of mass destruction and their supporters, including the Commercial Bank of Syria, the Syrian Lebanese Commercial Bank, and the SIIB. On August 10, 2011, under Executive Order 13382, the Department of the Treasury designated the Commercial Bank of Syria for its involvement in proliferation activities, and also designated its subsidiary, the Syrian-Lebanese Commercial Bank. On May 30, 2012, the Department of the Treasury also designated the SIIB. Therefore, the use of these financial institutions is not authorized by General License No. 6.

No. You may send U.S.-origin food or medicine to Syria without a specific license from OFAC. The Department of Commerce, Bureau of Industry and Security (“BIS”), which maintains jurisdiction over the export of most items to Syria, does not require a license for the export of U.S.-origin food and most medicine to Syria. For further guidance regarding the exportation of items to Syria, including a list of such items, please review the BIS Syria Web page, http://www.bis.doc.gov/policiesandregulations/syriaguidance8_07_09.htm or contact BIS by phone at (202) 482-4252.

Yes. U.S. persons can give a charitable donation to U.S. or third-country NGOs, but U.S. persons cannot send such a donation directly to Syria or a Syrian entity without a specific license in order to try to protect the donations from being misused. U.S. depository institutions, including banks, and U.S.-registered money transmitters, are allowed to process transfers of funds to or from Syria on behalf of U.S. NGOs and third-country NGOs in support of the not-for-profit activities described in OFAC General License No. 11.*

These not-for-profit activities include: (1) activities to support humanitarian projects to meet basic human needs in Syria, including drought relief, assistance to refugees, internally displaced persons, and conflict victims, food and medicine distribution, and the provision of health services; (2) activities to support democracy building in Syria, including rule of law, citizen participation, government accountability, and civil society development projects; (3) activities to support education in Syria, including combating illiteracy, increasing access to education, and assisting education reform projects; and (4) activities to support non-commercial development projects directly benefiting the Syrian people, including preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance.

General License No. 11 does not authorize transactions with the Government of Syria or other blocked persons, except for limited transactions with the Government of Syria that are necessary for the above-described not-for-profit activities, such as payment of taxes and other fees.

*For guidance on specific questions with respect to charitable donations, NGOs, and the scope of General License No. 11, please reach out to OFAC.  Contact information may be found here:  www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx#fragment-7

231. Can U.S. NGOs deliver humanitarian assistance directly to Syria?

Yes. U.S. NGOs may provide services to Syria in support of humanitarian projects in Syria without the need for a specific license from OFAC because this activity is covered under OFAC General License No. 11. However, other U.S. government authorities, including the BIS export requirements, may apply to the delivery of humanitarian assistance to Syria. For further guidance, please review the BIS Syria Web page http://www.bis.doc.gov/policiesandregulations/syriaguidance8_07_09.htm or contact BIS or contact BIS by phone at (202) 482-4252.

NGOs considering entering Syria to conduct assistance operations should be aware that areas of Syria are extremely unstable and dangerous, and should review the State Department’s Travel Warning for Syria http://travel.state.gov/travel/cis_pa_tw/cis/cis_1035.html.

U.S. persons should exercise caution not to engage in prohibited transactions with the Syrian Government or any individual or entity on OFAC’s SDN list.

232. As an individual, can I send financial donations directly to Syria in support of charitable activities under General License No. 11?

No. Without a specific license, U.S. persons are not permitted to transfer financial donations directly to Syria or to NGOs in Syria. Therefore, if you wish to donate funds in support of humanitarian work in Syria, you may do so by giving funds to U.S. or third-country NGOs to support not-for-profit activities in Syria, per General License No. 11 and as described above.

If you still wish to send a charitable donation directly to Syria or to a Syrian NGO, you may apply to OFAC for specific authorization to transmit such funds. You should provide as much information as possible about how the funds would be transferred, the recipients, and the end use of the funds. Although General License No. 6 does not authorize charitable donations, as mentioned above non-commercial, personal remittances can be sent to Syria under GL No. 6.

Questions Related to Determination Pursuant to Section 312 of the Iran Threat Reduction and Syria Human Rights Act of 2012

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Section 312 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA) requires the Secretary of the Treasury, no later than 45 days after the date of the enactment of ITRSHRA, to determine whether the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) is an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (IRGC), and to report to Congress on these determinations and the reasons for them. On September 24, 2012, the Department of the Treasury made a determination that NIOC is an agent or affiliate of the IRGC. Based on the information currently available, Treasury is not able to determine at this time whether NITC is an agent or affiliate of the IRGC.

Yes. Executive Order 13622 provides for sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant financial transactions with NIOC (except for sales of refined petroleum products to NIOC that fall below the dollar threshold that could trigger sanctions under the Iran Sanctions Act). Executive Order 13622 also provides authority for the Secretary of the Treasury to block the property and interests in property of persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC (as well as other specified entities). Note, however, that these sanctions are not applicable to certain transactions related to the Shah Deniz pipeline project, in which NIOC has a minority stake, under Executive Order 13622. In addition, NIOC was already blocked as an entity of the Government of Iran under Executive Order 13599, which was issued pursuant to the International Emergency Economic Powers Act (IEEPA), as amended, among other authorities. Nevertheless, as described below, the determination that NIOC is an agent or affiliate of the IRGC carries consequences.

234. What is the effect of the NIOC determination? Are there CISADA implications?

As a result of this ITRSHRA section 312 determination, NIOC now is also a person described under section 104(c)(2)(E)(i) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) as an agent or affiliate of the IRGC whose property or interests in property are blocked pursuant to IEEPA. This means that foreign financial institutions determined to knowingly facilitate significant transactions or provide significant financial services for NIOC are exposed to CISADA sanctions, including prohibitions or the imposition of strict conditions on the opening or maintaining of correspondent or payable-through accounts in the United States.

In addition, section 302 of ITRSHRA requires sanctions on foreign persons determined to have knowingly provided certain material support to, or engaged in significant transactions with, the IRGC or its officials, agents, or affiliates whose property or interest in property are blocked. Consequently, foreign persons that knowingly engage in significant transactions with NIOC after the September 24, 2012 determination could be exposed to sanctions.

An “IRGC” identifier will be added to NIOC’s entry on the Specially Designated Nationals and Blocked Persons List available on OFAC’s website.

As noted below, the potential application of sanctions under section 104(c)(2)(E)(i) of CISADA and section 302 of ITRSHRA is affected by whether the country with primary jurisdiction has received a significant reduction exception from the Secretary of State.

Significant transactions, financial services, or material support involving NIOC for the purchase of Iranian petroleum or petroleum products by a foreign financial institution or entity based in a country that has received a significant reduction exception from the Secretary of State do not carry potential sanctions consequences – under CISADA, sections 302 and 312 of ITRSHRA, section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), or sections 1 and 2 of Executive Order 13622. Sections 302 and 312 of ITRSHRA authorize the President not to impose sanctions for the purchase of petroleum or petroleum products from Iran if an exception under subsection 1245(d)(4)(D) of the NDAA applies to the country with primary jurisdiction over the foreign financial institution at the time of the transactions or the provision of services. Notwithstanding the foregoing, any significant transaction for other sanctioned entities (such as Iranian designated banks or other persons described in section 104(c)(2)(E) of CISADA) may result in sanctions, regardless of whether the transaction is for the purchase of petroleum or petroleum products and involves NIOC.

This statement means only that, based on the currently available information, Treasury is not able to determine at this time that NITC is an agent or affiliate of the IRGC.

The effect of the determination is similar to the effect of Executive Order 13622 section 1(a), which provides for prohibitions on the opening of and prohibitions or strict conditions on maintaining correspondent accounts or payable-through accounts in the United States for foreign financial institutions determined by the Secretary of the Treasury, in consultation with the Secretary of State, to have knowingly conducted or facilitated significant financial transactions with NIOC. Executive Order 13622 likewise contains an exception that covers transactions with NIOC conducted or facilitated by foreign financial institutions based in NDAA-excepted jurisdictions. A significant difference between these authorities is that the NDAA exception in ITRSHRA section 312 is limited to transactions or financial services for the purchase of petroleum or petroleum products from Iran.

Questions Related to Section 4 of Executive Order Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran

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An Executive Order of October 9, 2012, “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran,” (the “Order”) implements certain statutory requirements of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “TRA”), including amendments to the Iran Sanctions Act and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. Specifically, the Order implements the requirements of Sections 204, 402, and 403 of the TRA. In addition, consistent with Section 218 of the TRA, Section 4 of the Order prohibits foreign subsidiaries (defined below) of United States persons from knowingly violating the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of the Order, and provides for civil penalties on the U.S. parent company for any such violations.

238. What is the new prohibition on foreign subsidiaries of U.S. persons, and how does it work?

Section 4 of the Order prohibits an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “foreign subsidiary”) from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if that transaction would be prohibited by certain Executive orders prohibiting trade and other dealings with, and investment in, Iran and blocking the Government of Iran and Iranian financial institutions, or any regulation issued pursuant to the foregoing, if the transaction were engaged in by a United States person or in the United States. Civil penalties for the foreign subsidiary’s violation shall be applied to the U.S. parent company to the same extent that they would apply to a U.S. person for the same conduct.

To the extent a transaction is exempt from the prohibitions of the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of the Order, or is authorized by a general license issued pursuant to these authorities if engaged in by a U.S. person, it would not be prohibited for a foreign subsidiary (as defined above) to engage in the transaction, provided that it satisfies all the conditions and requirements of the exemption or general license. Similarly, if the transaction is one for which a U.S. person might apply for a specific license — for example, the exportation of medical devices to Iran — a foreign subsidiary or its U.S. parent may apply for a specific license for the foreign subsidiary to engage in the transaction. Note: Whether a U.S. parent company’s specific license covers transactions by its foreign subsidiary that are otherwise prohibited by section 4 of the Order will depend on the terms of that license and the scope of the authorized activities.

Consistent with Section 218(d) of the TRA, Subsection 4(c) of the Order provides that civil penalties shall not apply if the U.S. person divests or terminates its business with the foreign subsidiary (as defined above) not later than February 6, 2013.

Questions Related to the Iranian Transactions and Sanctions Regulations and the Statement of Licensing Procedure on Support Of Human Rights-, Humanitarian-, and Democracy-Related Activities With Respect to Iran

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The Office of Foreign Assets Control ("OFAC") issued a final rule in the Federal Register on October 22, 2012, changing the heading of the Iranian Transactions Regulations, 31 C.F.R. part 560 (the "ITR"), to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the "ITSR"), and amending the renamed ITSR to implement Executive Order ("E.O.") 13599 (other than section 11) and sections 1245(c) and (d)(1)(B) of the National Defense Authorization Act for Fiscal Year 2012 (the "NDAA"). These new regulations implement the blocking of the Government of Iran and all Iranian financial institutions pursuant to E.O. 13599 and the NDAA.

OFAC is adding numerous new sections to the ITSR, including prohibitions, definitions, interpretations, and licensing provisions. OFAC also is revising many existing sections of the ITSR in order to take account of the new government-wide blocking as well as the blocking of all Iranian financial institutions. Due to the extensive nature of these and other amendments described below, OFAC is reissuing the ITSR in their entirety.

In addition, OFAC is publishing on the Iran section of its Web site a Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran. The Statement of Licensing Procedure reflects procedures established pursuant to the Iran Threat Reduction and Syria Human Rights Act of 2012 (the "TRA"), which was signed into law by the President on August 10, 2012.

The ITSR block the property and interests in property of the Government of Iran and all Iranian financial institutions that come within the possession or control of any U.S. person, including any foreign branch, and prohibit all U.S. persons from dealing with any property interests whatsoever, present, future, or contingent, of persons identified as already blocked pursuant to E.O. 13599 and the NDAA.

OFAC is adding section 560.211 to the ITSR to implement the blocking prohibitions set forth in E.O. 13599 and the NDAA.  New sections 560.212 through 560.214 are being added to set forth certain consequences and requirements that stem from the blocking prohibitions, including, inter alia, the requirement to hold blocked funds in interest-bearing accounts.  New paragraphs (e) and (f) are being added to section 560.210 to incorporate two exemptions from the blocking prohibitions that are set forth in E.O. 13599. These exemptions concern the official business of the Federal Government and the property and interests in property of the Government of Iran that were blocked pursuant to Executive Order 12170 of November 14, 1979.

The ITSR authorize United States depository institutions to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account.  See 31 CFR 560.516(a).

In addition, the ITSR authorize United States registered brokers or dealers in securities to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account.  See 31 CFR 560.516(b).

The authorizations set forth in section 560.516 of the ITSR do not allow a U.S. person who is authorized to engage in the underlying transaction to deal directly with money service businesses (MSBs) or hawalas, wherever located.  However, these authorizations do not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.516 of the ITSR.

The ITSR authorize the transfer of funds that are noncommercial and personal in nature to or from Iran or for or on behalf of an individual ordinarily resident in Iran, other than an individual whose property and interests in property are blocked pursuant to § 560.211, subject to certain restrictions and limitations. See 31 CFR 560.550. Such transfers must be processed by a United States depository institution or a United States registered broker or dealer in securities and not by any other U.S. person.  The personal remittances general license does not permit a U.S. person to deal directly with money service businesses (MSBs) or hawalas, wherever located.  However, this general license does not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.550 of the ITSR.

The hand-carrying of certain noncommercial, personal remittances is also authorized, provided that the individual who is a U.S. person is hand-carrying the funds on his or her behalf, but not on behalf of another person. See 31 CFR 560.550.

The ITSR include several general licenses that newly authorize, or continue to authorize, activities that are otherwise prohibited by the regulations.  Categories of activities affected by these changes include, among other things, visa-related transactions, journalistic activities in Iran, the sale of real property in Iran and the transfer of related proceeds to the United States, educational activities (including certain exchange programs), participation in conferences, and the exportation and reexportation of medicine and basic medical supplies to Iran.

The Statement of Licensing Procedure reflects procedures established pursuant to section 413 of the TRA.  These procedures stipulate that, as of the effective date of the TRA, license determinations for complete requests for authorization under this policy shall be made not later than 90 days after receipt by OFAC, with certain exceptions.  The Statement of Licensing Policy applies to applications submitted by the following categories of U.S. persons seeking to engage in certain human rights-, humanitarian-, and democracy-related activities with respect to Iran: (1) entities receiving funds from the Department of State to engage in the proposed activity; (2) the Broadcasting Board of Governors; and (3) other appropriate agencies of the United States Government.   The ITSR also include separate statements of licensing policy related to the sharing of information over the Internet in Iran and the support of democracy and human rights in Iran and academic and cultural exchange programs.

Questions Relating to the Implementation of Section 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012

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On August 10, 2012, the President signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, Public Law 112-158 (“TRA”). Section 504 of the TRA amends section 1245(d)(4)(D) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”), which the President signed into law on December 31, 2011. The section 504 amendments to the NDAA took effect February 6, 2013. Amendments to the Iranian Financial Sanctions Regulations, 31 C.F.R. part 561 (the “IFSR”) were published on March 15, 2013, to implement sections 503 and 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “TRA”) and certain provisions of Executive Order 13622 of July 30, 2012.

Pursuant to the restrictions already in place under the NDAA, foreign financial institutions (“FFIs”) face restrictions on, or loss of, correspondent and payable-through account access in the United States if they knowingly engage in significant financial transactions with the Central Bank of Iran (“CBI”) or a designated Iranian financial institution, unless an NDAA exception, such as the significant reduction exception, applies. The NDAA significant reduction exception applies if the Secretary of State, in consultation with the Secretary of the Treasury and other agencies, has determined that the country with primary jurisdiction over the FFI has significantly reduced its purchases of Iranian crude oil during a specified period of time.

Effective February 6, 2013, section 504 amends the NDAA in several ways. Most importantly, it narrows the NDAA’s significant reduction exception to (a) exempt from sanctions only transactions that conduct or facilitate bilateral trade in goods or services between the country granted the exception and Iran, and (b) require that funds owed to Iran as a result of the bilateral trade be credited to an account located in the country granted the exception and not be repatriated to Iran. In addition, it -

(i) eliminates the distinction between state-owned or -controlled FFIs (not including foreign central banks) and private FFIs, thereby expanding the scope of sanctionable transactions for state-owned or -controlled FFIs with the CBI or designated Iranian financial institutions; and

(ii) clarifies that countries that have reduced their Iranian crude oil purchases to zero may continue to receive the significant reduction exception.

The sale of agricultural commodities, food, medicine, or medical devices to Iran (the “Humanitarian Exception”) is not impacted by section 504 of the TRA.

The purchase or acquisition of petrochemicals from Iran remain sanctionable activities and are not subject to the significant reduction exception.

255. Do the section 504 modifications restrict any other dealings with Iran?

Yes, the section 504 modifications also narrow the scope of transactions excepted from certain sanctions available under E.O. 13622. Accordingly, FFIs in countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil pursuant to the NDAA, that knowingly conduct significant financial transactions with the National Iranian Oil Company (“NIOC”), the Naftiran Intertrade Company (“NICO”), or otherwise for the purchase of petroleum or petroleum products from Iran, are only eligible for the significant reduction exception if the FFIs adhere to the bilateral trade restrictions, credit the funds to an account in the country with primary jurisdiction over the FFI, and do not repatriate the funds to Iran.

Example 1: A FFI in a country which has received a significant reduction exception and with primary jurisdiction over the FFI may facilitate a transaction enabling an oil refinery in that country to purchase crude oil from Iran without having exposure to U.S. correspondent account sanctions, so long as the transaction meets section 504’s bilateral trade requirements, the funds are credited to an account in the FFI in the country with primary jurisdiction over the FFI, and the funds are not repatriated to Iran.

Example 2: If, however, a FFI in a country which has received a significant reduction exception facilitates a third country’s crude oil purchase – even a third country with a significant reduction exception – from Iran, the FFI would have exposure to sanctions because the transaction was not solely for the FFI host country’s purchase of crude oil from Iran.

Starting February 6, 2013, significant financial transactions* knowingly conducted or facilitated by a FFI –

(i) with the CBI or designated Iranian financial institutions;
(ii) with NIOC or NICO (irrespective of the FFI involved); or
(iii) for the purchase or acquisition of petroleum or petroleum products from Iran (irrespective of the FFI involved);

may be subject to NDAA and/or E.O. 13622 sanctions unless –

(i) the country that has primary jurisdiction over the FFI conducting or facilitating such significant financial transactions has received a significant reduction exception; and
(ii) the significant financial transaction is for bilateral trade only, and any funds owed to Iran as a result of such trade are credited to an account at the FFI in the country that has primary jurisdiction over the FFI and are not repatriated to Iran.

Any FFI that knowingly facilitates significant transactions or provides significant financial services for Iranian-linked individuals or entities designated for activities related to terrorism or the proliferation of weapons of mass destruction pursuant to E.O.s 13224 and 13382 can be sanctioned under section 104(c) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and section 561.201 of the IFSR even if those transactions are not sanctionable under section 1245(d) of the NDAA and section 561.203 of the IFSR.

*These do not include sales relating to the Humanitarian Exception.

257. To which jurisdictions does the significant reduction exception apply?

As of February 6, 2013, 20 jurisdictions have been granted a 180-day significant reduction exception.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on September 14, 2012: Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and the United Kingdom.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on December 7, 2012: China, India, Malaysia, Republic of Korea, Singapore, South Africa, Sri Lanka, Taiwan, and Turkey.

258. What is meant by section 504’s requirement that bilateral trade consist of trade in goods and services between the country with primary jurisdiction over the FFI and Iran?

OFAC interprets bilateral trade between Iran and the country with primary jurisdiction over the FFI to mean trade in only those goods or services originating in (e.g., produced in or substantially transformed in) –

(i) the country with primary jurisdiction over the FFI conducting or facilitating the transaction, or
(ii) Iran (for purposes of the import of Iranian-origin goods or services by the country with primary jurisdiction over the FFI),

and the trade in services cannot include brokering transactions involving goods or services from or to third countries.

Furthermore, the goods or services must be exported and sold directly to either the country with primary jurisdiction over the FFI (in the case of Iranian-origin goods or services), or Iran (in the case of goods or services originating in the country with primary jurisdiction over the FFI).

The Humanitarian Exception is not impacted by section 504’s bilateral trade limitations (see FAQ 265).

Section 504 of the TRA requires that, in order for a sanctionable transaction to fall within the bounds of the significant reduction exception, any funds owed to Iran as a result of the bilateral trade transaction must be credited to an “account located in the country with primary jurisdiction over the [FFI].” For purposes of implementing this requirement, OFAC interprets the “account located in the country with primary jurisdiction over the [FFI]” to be an account in the country with primary jurisdiction over the FFI, and at the same FFI that facilitated the transaction for the importation of goods or services from Iran.

Once the funds are deposited in the FFI, they can be -
 
(i) used to pay for a purchase by Iran of goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 1); or
(ii) transferred to a SPECIAL PURPOSE ACCOUNT (see FAQ 260) within that same FFI, in the country with primary jurisdiction over the FFI, where the funds may be later debited to purchase goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 2).

The funds may not be repatriated to Iran.

 

A SPECIAL PURPOSE ACCOUNT is an account set up with conditions and safeguards that require the account to be used only for bilateral trade in goods or services between Iran and the country with primary jurisdiction over the FFI, and for sales made under the Humanitarian Exception (see FAQ 265). Funds paid as a result of bilateral trade under the NDAA’s significant reduction exception may be transferred to a SPECIAL PURPOSE ACCOUNT, so long as the account is at the same FFI that facilitated or conducted the original transaction, in the country with primary jurisdiction over the FFI.

262. Can funds be withdrawn from the RECIPIENT ACCOUNT or a SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, funds withdrawn from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT at the FFI may only be used to pay for bilateral trade or purchases relating to the Humanitarian Exception. Cash withdrawals from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT would be deemed to fall outside of the scope of bilateral trade and would expose the FFI to sanctions. Bank checks written on the account may be used only to pay for bilateral trade or purchases relating to the Humanitarian Exception, and are subject to further restrictions set out in FAQ 263 below.

263. Who can receive payments from funds credited to a RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, the person receiving payment (e.g., the manufacturer or service provider) for goods or services being exported to Iran must be –

(i) a citizen, national, or permanent resident of the country with primary jurisdiction over the FFI maintaining the accounts containing the bilateral trade funds; or
(ii) an entity organized under the laws of the country with primary jurisdiction over the FFI maintaining such accounts.

Furthermore, the person receiving such payment may not be -

(i) the Government of Iran (as defined in 31 CFR Part 561.321) (“GOI”);* or
(ii) a financial institution that appears on the List of Foreign Financial Institutions Subject to Part 561, which is maintained on the Office of Foreign Assets Control’s Web site (www.treasury.gov/ofac).

*The term “Government of Iran” as defined in 31 CFR Part 561.321 includes: (a) The state and the Government of Iran, as well as any political subdivision, agency, or instrumentality thereof; (b) Any entity owned or controlled directly or indirectly by the foregoing; (c) Any person to the extent that such person is, or has been, or to the extent that there is reasonable cause to believe that such person is, or has been, acting or purporting to act directly or indirectly on behalf of any of the foregoing; and (d) Any person or entity identified by the Secretary of the Treasury to be the Government of Iran under 31 CFR Part 560.

264. Can funds be remitted to Iran or the GOI without exposure to sanctions?

No. If funds from the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT are remitted, directly or indirectly, to Iran, or paid to any person that is the GOI, the FFI would be exposed to sanctions.

265. Can the funds be used for sales made under the Humanitarian Exception?

The NDAA generally exempts from sanctions sales made under the Humanitarian Exception (i.e., the sale of agricultural commodities, food, medicine, or medical devices from third countries to Iran). Funds deposited in the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT can be used to pay for sales made pursuant to the Humanitarian Exception.

314. Can an exporter of agricultural commodities, food, medicine, or medical devices get paid out of a Central Bank of Iran (CBI) account at a foreign financial institution (FFI) in a country with a significant reduction exception, even though the exporter is located in a third-country? Can the third-country exporter’s bank handle this transaction?

Yes. So long as the transaction does not involve a designated individual or entity, banks on the Part 561 List located on OFAC’s website (http://www.treasury.gov/ofac/downloads/561list.pdf), or otherwise proscribed conduct, such transactions are not sanctionable under U.S. law. Furthermore, there is no requirement under U.S. law that agricultural commodities, food, medicine, or medical devices be routed through the country with the significant reduction exception.

Such a payment mechanism is not the exclusive mechanism for the purchase of agricultural commodities, food, medicine, or medical devices under U.S. law. Other options include receiving payment from a third-country account of the CBI or a non-designated Iranian financial institution.

The Department of the Treasury Office of Foreign Assets Control regulations describe the exception for transactions relating to agricultural commodities, food, medicine, or medical devices in 31 CFR § 561.203(g) and Note 2 to 51 CFR § 561.203. Additional information and clarifying guidance about humanitarian assistance and related exports to the Iranian people can be found at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/hum_exp_iran.pdf.

266. Does the November 8, 2012 designation of NIOC under E.O. 13382 impact the scope of permissible transactions by FFIs in significantly reducing countries?

Yes. On September 24, 2012, NIOC was identified as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (“IRGC”) under section 312 of the TRA, and designated on November 8, 2012, under E.O. 13382 for providing services and support to the IRGC. Accordingly, CISADA applies to transactions with NIOC. As a result of these additional sanctions against NIOC, only transactions solely for the purchase of petroleum or petroleum products from NIOC will fall within the scope of the significant reduction exception. A FFI in a significantly reducing country that is found to knowingly conduct or facilitate other types of significant transactions with NIOC (i.e., transactions unrelated to the purchase of petroleum or petroleum products from Iran) would face exposure to CISADA sanctions.

Example 3: If a FFI in a country with a significant reduction exception facilitates a transaction enabling a company in that country to purchase drilling equipment from NIOC, the FFI risks restrictions on, or loss of, correspondent and payable-through account access in the United States, because the transaction was not solely for the purchase of petroleum or petroleum products from Iran.

267. What are definitions for the following NDAA terms: “significant financial transaction,” “knowingly,” “food, medicine, and medical devices,” “foreign financial institution,” and “country with primary jurisdiction over the FFI,”?

These definitions are set out in 31 CFR Part 561.

268. What recent steps has the United States taken to ease U.S. economic and trade sanctions against Burma?

In May 2012, President Obama announced that the United States would begin to ease certain financial and investment sanctions on Burma in response to historic reforms in that country.

On July 11, 2012, the Administration took steps to broadly authorize the exportation of U.S. financial services to Burma by issuing General License No. 16 (Burma GL 16), and to permit the first new U.S. investment in Burma in nearly 15 years by issuing General License No. 17 (Burma GL 17).

On November 16, 2012, the Administration took another step toward normalizing our economic relationship with Burma by issuing General License No. 18 (Burma GL 18) to broadly authorize the importation of Burmese-origin goods, except jadeite and rubies, into the United States for the first time in almost a decade.

On February 22, 2013, General License No. 19 (Burma GL 19) was issued to authorize U.S. persons (both individuals and entities) to conduct most transactions – including opening and maintaining accounts and conducting a range of other financial services – with four of Burma’s major blocked financial institutions: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank. This license was issued to address limitations that apply to blocked financial institutions; U.S. persons may engage in transactions with any non-blocked financial institution in Burma.

On August 6, 2013, in light of the expiration of the ban on the importation of Burmese-origin goods contained in the Burmese Freedom and Democracy Act of 2003 (BFDA), the President issued Executive Order 13651 (EO 13651) revoking the provisions of Executive Order 13310 (EO 13310) that implemented the BFDA’s ban on importing Burmese-origin goods. However, due to continuing concerns, including with respect to labor and human rights in specific sectors, EO 13651 reinstates the prohibition on the importation into the United States of any jadeite or rubies mined or extracted from Burma and any articles of jewelry containing jadeite or rubies mined or extracted from Burma that was originally imposed by the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008 (JADE Act), which amended the BFDA. As a result of the revocation in EO 13651 of the general prohibition in EO 13310 on importing Burmese-origin goods, imports of such goods, other than jadeite or rubies, are no longer prohibited and no longer require an OFAC license. Accordingly Burma GL 18, which had authorized such imports, has been removed from OFAC’s Website. [04-01-14]

269. What U.S. economic and financial sanctions remain on Burma?

Except as licensed or otherwise authorized, U.S. persons generally remain prohibited from dealing with blocked persons, including persons on OFAC’s Specially Designated Nationals and Blocked Persons list (SDN list), as well as any entities 50 percent or more owned by such persons, which are blocked by operation of law regardless of whether the entities themselves are listed.

Burma GL 16 does not authorize, in connection with the provision of security services, the exportation of financial services to the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned 50 percent or more by any of the foregoing. Burma GL 17 does not authorize new investment undertaken pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned 50 percent or more by any of the foregoing.

Executive Order 13651 prohibits the importation into the United States of any jadeite or rubies mined or extracted from Burma and any articles of jewelry containing jadeite or rubies mined or extracted from Burma. [04-01-14]

359. Which banks in Burma are available to U.S. persons?

U.S. persons (both individuals and entities) may engage in transactions with any non-blocked Burmese bank. This includes transferring funds to or from, opening and maintaining an account at, and entering into a new investment with a non-blocked Burmese bank, subject to the requirements of any applicable general or specific licenses.

Additionally, pursuant to the authorization in Burma GL 19, U.S. persons may conduct most transactions – including opening and maintaining accounts and conducting a range of other financial services – with the following four blocked Burmese banks: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank.

However, U.S. persons generally remain prohibited from dealing with other blocked banks, including Myanma Foreign Trade Bank, Myawaddy Bank, and Innwa Bank, with the exception of funds transfers pursuant to Burma GL 16 to or from these banks. Funds transfers cannot go directly to or from U.S. financial institutions and these blocked banks, and U.S. financial institutions are also prohibited from opening correspondent accounts with these blocked banks. Therefore, in order to comply with Burma GL 16, funds transfers between U.S. financial institutions and these blocked banks must be routed through a third country. [04-01-14]

270. Can U.S. financial institutions enter into direct correspondent relationships with Burmese financial institutions that are not blocked?

Yes. U.S. financial institutions may enter into direct correspondent relationships with any non-blocked Burmese bank.

As a result of Burma GL 19, U.S. financial institutions also may enter into direct correspondent relationships with the following four blocked Burmese banks: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank.

As a result of Burma GL 16 and Burma GL 19, the special measures against Burma imposed under Section 311 of the USA PATRIOT Act no longer apply to the operation of correspondent accounts for those Burmese banking institutions, or to transactions that are conducted through such accounts, provided the transactions are authorized pursuant to the Burmese Sanctions Regulations. This does not affect any obligation of U.S. financial institutions processing such transactions to conduct enhanced due diligence under Section 312 of the USA PATRIOT Act.

U.S. persons generally remain prohibited from dealing with other blocked banks, including Myanma Foreign Trade Bank, Myawaddy Bank, and Innwa Bank, with the exception of funds transfers made pursuant to Burma GL 16. Because U.S. financial institutions are not permitted to open correspondent relationships with these blocked banks, funds transfers to or from these banks are routed through third countries (see Question 359 for more information). [04-01-14]

271. Does Burma GL 16 authorize U.S. persons to open accounts at blocked Burmese banks?

No. Burma GL 16 does not authorize U.S. persons to open accounts at blocked Burmese banks. However, an exception in Burma GL 16 permits transfers of funds even though they may involve transfers to or from an account of a blocked Burmese financial institution.

Burma GL 19 authorizes most transactions – including opening and maintaining accounts – with the following four blocked Burmese banks: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank. A U.S. person must obtain a specific license from OFAC in order to open an account at a blocked Burmese financial institution other than those authorized under Burma GL 19. [04-01-14]

272. Does Burma GL 19 authorize new investment with the four banks?

No. Burma GL 19 does not authorize any new investment, including in or with Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, or Myanma Investment and Commercial Bank. “New investment” is defined in 31 C.F.R. § 537.311. [04-01-14]

273. Does Burma GL 19 unblock property of the four banks?

No. All property and interests in property blocked as of the date of Burma GL 19 (February 22, 2013), remain blocked.

Effective February 22, 2013, Burma GL 19 prospectively authorizes most other transactions with Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank. [04-01-14]

274. Is the exportation of financial services to the Burmese Ministry of Defense, state or non-state armed groups, or entities owned 50 percent or more by any of the foregoing only prohibited in connection with the provision of security services?

Yes. This limitation on the exportation of financial services is only in connection with the provision of security services. [03-18-13]

275. What is meant by “any state or non-state armed group”? Does this include private security firms?

“Any state or non-state armed group” includes the Burmese military, state-organized militias, and other armed state security forces, as well as non-state armed groups within Burma that are in conflict with or have entered into ceasefires with the Government of Burma.

Private security companies are not included within this definition [03-18-13]

276. “Any state or non-state armed group” is not limited to armed groups in Burma, but applies globally?

The prohibition itself is on the exportation or reexportation of financial services to Burma, not globally. Money cannot be sent to Burma, directly or indirectly, to pay a state or non-state armed group, wherever that group may be located, for the provision of security services. [03-18-13]

277. What about prohibitions in the JADE Act on dealing with the State Peace and Development Council (SPDC) or any entity owned, controlled, or operated by the SPDC? Is there a chance that we could accidentally do business with the SPDC and be subject to enforcement measures?

The State Department has determined that the SPDC no longer exists. In addition, in Executive Order 13651, the President waived the sanctions described in section 5(b) of the JADE Act, including prohibitions applicable to transactions involving the SPDC, or entities owned, controlled, or operated by the SPDC. Accordingly, the financial and blocking sanctions related to the SPDC in section 5(b) of the JADE Act no longer apply. [04-01-14]

278. Does Burma GL 17 authorize U.S. persons to facilitate new investment by foreign persons?

Yes, provided that the facilitated new investment would be authorized if undertaken by a U.S. person.

Consistent with Burma GL 17, U.S. persons may approve, finance, facilitate, or guarantee new investment by foreign persons provided such new investment is not pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that (a) is entered into with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned 50 percent or more by any of the foregoing, or (b) involves a transaction, directly or indirectly, with any person blocked under the Burma sanctions program. [04-01-14]

279. Does Burma GL 17 authorize investment in a third-country company whose main business activity is in Burma?

Yes, provided that the third-country company’s activities in Burma would not be prohibited if that third-country company were a U.S. person. [04-01-14]

280. Who needs to report on their activities in Burma?

Any U.S. person (both individuals and entities) engaging in new investment in Burma whose aggregate new investment, over any period, exceeds $500,000 must provide to the State Department the information set forth in the State Department’s “Reporting Requirements on Responsible Investment in Burma” (available at www.HumanRights.gov/BurmaResponsibleInvestment). These reports are due 180 days after the $500,000 threshold is reached and thereafter annually on July 1.

Whether specific activities constitute “new investment” is dependent on the facts and circumstances of each particular situation. U.S. persons considering new investment in Burma should examine any proposed agreement or contract in light of the definition of “new investment” in 31 C.F.R. § 537.311. If investors are uncertain about whether their activities constitute new investment in Burma, we suggest erring on the side of caution and reporting to the State Department.

In addition, any U.S. person that has undertaken any new investment pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Myanma Oil and Gas Enterprise (MOGE) must notify the State Department within 60 days of such a new investment. [04-01-14]

281. Is the $500,000 threshold an annual threshold, or do you accumulate investments over several years, with reporting triggered when you finally reach $500,000?

The annual report is required of any U.S. person engaging in new investment in Burma once that person’s aggregate new investment, over any period, exceeds $500,000. [04-01-14]

282. What happens if you sell all or part of your investment?

The annual report would no longer be required if a person’s aggregate new investment fell below $500,000. [03-18-13]

283. Does leasing office space constitute a new investment if the office is used for sales of goods or services?

Whether specific activities constitute “new investment” is dependent on the facts and circumstances of each particular situation. U.S. persons considering new investment in Burma should examine any proposed agreement or contract in light of the definition of “new investment” in 31 C.F.R. § 537.311. Regardless, new investment in Burma by U.S. persons is now authorized, subject to the limitations and requirements described in Burma GL 17.

An annual report is required of any U.S. person engaging in new investment in Burma once that person’s aggregate new investment, over any period, exceeds $500,000.

If investors are uncertain about whether their activities constitute new investment in Burma, we suggest erring on the side of caution and reporting in compliance with the requirements set forth in the State Department’s “Reporting Requirements on Responsible Investment in Burma” (available at www.HumanRights.gov/BurmaResponsibleInvestment). [04-01-14]

284. Are U.S. persons who are employed by or otherwise work for foreign persons engaged in new investment subject to the Reporting Requirements?

No, the Reporting Requirements are required only of U.S. persons engaging in new investment in Burma.

U.S. persons facilitating new investment by foreign persons are not subject to these Reporting Requirements. [03-18-13]

285. If a Burmese Government minister is an SDN, how does that impact the ministry he leads?

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN. [03-18-13]

286. What are the plans to update the SDN list for Burma?

Listings and any potential delistings under our Burma authorities will be pursued as appropriate to meet changing conditions in Burma.

An SDN may seek to be delisted, including based on evidence that the circumstances resulting in the designation no longer apply, by submitting a written request to OFAC. OFAC investigates and assesses such requests on a case-by-case basis, taking into consideration the facts and circumstances specific to each individual or entity, as reflected in the evidence presented and other information available to OFAC. The procedures governing delisting from the SDN list are outlined in 31 C.F.R. § 501.807. [04-01-14]

360. Can U.S. persons sell goods or services to Burmese persons who are not on the SDN list or blocked?

Yes. Other than the exportation of financial services to Burma, now broadly authorized by Burma GL 16, there has never been a general prohibition on the exportation of goods, technology, or services to Burma, and transactions ordinarily incident to such exportations are authorized, subject to certain limitations in the general license.

However, except as licensed or otherwise authorized, U.S. persons generally remain prohibited from dealing with blocked persons, including persons on the SDN list, as well as any entities 50 percent or more owned by such persons. [04-01-14]

Questions Related to the Issuance of the Executive Order “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran” and the Implementation of Certain Provisions of the Iran Freedom And Counter-Proliferation Act of 2012 (IFCA)

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On June 3, 2013, the President signed an Executive Order (E.O.) “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran.” The E.O. implements certain statutory provisions of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) and authorizes the imposition of additional sanctions with respect to Iran. Most of the IFCA provisions target conduct occurring on or after July 1, 2013. The E.O. becomes effective on July 1, 2013. [06-03-13]

General Questions

313. What is the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA)?

IFCA was signed into law on January 2, 2013, as a part of the National Defense Authorization Act for Fiscal Year 2013, and provides for several new sanctions related to Iran. IFCA authorizes broad sanctions on: certain activities related to Iran’s energy, shipping, and shipbuilding sectors; the sale, supply, or transfer to or from Iran of precious and certain other metals, graphite, coal, and industrial software; the provision of underwriting services, insurance, or reinsurance to activities and persons targeted by U.S. sanctions against Iran; financial transactions involving sanctioned Iranian individuals and entities; and persons involved in the diversion of goods intended for the Iranian people. Most of the IFCA provisions target conduct occurring on or after July 1, 2013.

The U.S. Department of the Treasury will be issuing regulations to implement certain provisions in IFCA. In addition, the U.S. Department of State expects to adopt an interpretation of IFCA similar to that set forth below. [06-03-13]

288. What is the purpose of the Executive Order of June 3, 2013 entitled “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Freedom and Counter-Proliferation Act of 2012 and Additional Sanctions With Respect to Iran” (E.O.)?

The E.O. implements certain statutory provisions of IFCA. The E.O. also authorizes the imposition of additional sanctions with respect to Iran, targeting certain transactions and other activity related to the Iranian rial, Iran’s automotive sector, and persons that materially assist Iranian persons on the list of Specially Designated Nationals and Blocked Persons (SDN List) as well as certain persons whose property and interests in property are blocked under the E.O. or Executive Order 13599. The E.O. becomes effective at 12:01 a.m. eastern daylight time on July 1, 2013. Questions and Answers (Q&As) 306-312 below provide guidance regarding the E.O.

The Department of the Treasury will be issuing regulations to implement certain provisions in the E.O. In addition, the Department of State expects to adopt an interpretation of the E.O. similar to that set forth below [06-03-13]

289. How will the following IFCA terms be interpreted: “Iran,” “knowingly,” “significant,” “transfer,” “Iranian person included on the SDN List ”?

As a general matter, we intend to rely, where applicable, on definitions of terms previously included in Treasury regulations.

“Iran”

The Iranian Financial Sanctions Regulations (31 CFR part 561) (IFSR) define “Iran” as the Government of Iran and the territory of Iran and any other territory or marine area, including the exclusive economic zone and continental shelf, over which the Government of Iran claims sovereignty, sovereign rights, or jurisdiction, provided that the Government of Iran exercises partial or total de facto control over the area or derives a benefit from economic activity in the area pursuant to international arrangements. (31 CFR § 561.329)

“Iranian person included on the SDN List”

OFAC anticipates publishing on its website a list to assist in identifying Iranian persons included on the SDN List for purposes of IFCA and the E.O.

“knowingly”

The IFSR define “knowingly” with respect to conduct, a circumstance, or a result, to mean that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result. (31 CFR § 561.314)

“significant”

As a general matter, in determining for purposes of IFCA and the E.O. whether transactions, financial transactions, or financial services are significant, the Department of the Treasury will rely on the interpretation set out in §561.404 of the IFSR. The IFSR provide a list of broad factors that can play a role in the determination whether transactions, financial services, and financial transactions are significant, including: (a) the size, number, and frequency of the transactions, financial services, or financial transactions; (b) the type, complexity, and commercial purpose of the transactions, financial services, or financial transactions; (c) the level of awareness of management and whether the transactions are part of a pattern of conduct; (d) the nexus of the transactions, financial services, and financial transactions and blocked persons; (e) the impact of the transactions, financial services, and financial transactions on statutory objectives; (f) whether the transactions, financial services, and financial transactions involve deceptive practices; (g) whether the transactions solely involve the passive holdings of Central Bank of Iran (CBI) reserves or repayment by the CBI of official development assistance or the transfer of funds required as a condition of Iran’s membership in an international financial institution; and (h) other relevant factors that the Secretary of the Treasury deems relevant. We anticipate adopting a similar approach to interpreting the term “significant” as it applies to goods or services.

“transfer”

“Transfer” includes import, transshipment, export, or reexport, whether direct or indirect. [06-03-13]

290. Are payments or deliveries that are made on or after July 1, 2013, for contracts that existed prior to July 1, 2013, exempted from IFCA provisions?

There is no general exception for payments, sales, deliveries, or transfers arising out of contracts entered into prior to July 1, 2013, on or after which date certain activities become sanctionable under IFCA. The assessment of whether such payments are “significant” or result in the transfer of “significant goods or services” or “significant financial support” will be done on a case-by-case basis in line with the criteria discussed above. [06-03-13]

291. How does the Executive Order relate to the IFCA provisions?

The E.O. implements and builds upon certain provisions of IFCA as set out in more detail in Q&As 306 and 312 below. [06-03-13]

292. What are the implications of IFCA on the provision of humanitarian goods to the people of Iran?

IFCA generally excepts from sanctions transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran, as set out in more detail in Q&As 297 and 304. (See Q&A 312 for a similar exception in the E.O.) [06-03-13]

293. What will the “energy, shipping, and shipbuilding sectors of Iran” mean for the purposes of IFCA?

We anticipate that regulations to be promulgated will define “energy sector of Iran” to include activities involving the exploration, extraction, production, refinement, or liquefaction of petroleum, natural gas, or petroleum products in Iran. (See also discussion of activities involving natural gas in Q&A 297.)

We anticipate that regulations to be promulgated will define “shipping sector of Iran” to include activities involving the transportation of goods by seagoing vessels, including oil tankers and cargo vessels, flying the flag of the Islamic Republic of Iran, or owned, controlled, chartered, or operated directly or indirectly by the Government of Iran. Two entities previously identified or designated under Treasury authorities that are part of the shipping sector of Iran are the National Iranian Tanker Company and the Islamic Republic of Iran Shipping Lines.

We anticipate that regulations to be promulgated will define “shipbuilding sector of Iran” to include activities involving the construction of seagoing vessels, including oil tankers and cargo vessels, in Iran. [06-03-13]

294. How will I know if someone is part of Iran’s energy, shipping, or shipbuilding sectors or is a port operator in Iran?

Persons determined to be part of Iran’s energy, shipping, or shipbuilding sectors, or a port operator in Iran for purposes of section 1244(c) will be identified as such on the SDN List. Knowingly providing certain significant support to persons determined to be part of Iran’s energy, shipping, or shipbuilding sectors, or a port operator in Iran will have exposure to sanctions, unless the transaction is excepted (see also Q&A 297). [06-03-13]

295. What are goods or services used in connection with Iran’s energy, shipping, or shipbuilding sectors for purposes of section 1244(d)(3)?

We anticipate that regulations to be promulgated will define goods and services used in connection with Iran’s energy, shipping and shipbuilding sectors to include:

a.   Energy Sector: In the case of Iran’s energy sector, goods or services that contribute to,
• Iran’s ability to develop its domestic petroleum resources;
• The maintenance or expansion of Iran’s domestic production of petroleum products; and
• Iran’s ability to import or export petroleum or petroleum products.

b.   Shipping Sector: In the case of Iran’s shipping sector,
• The provision of crude and product tankers to Iran;
• The provision of registry, flagging, or classification services of any kind;
• The supervision of and participation in the repair of ships and their parts;
• The inspection, testing, and certification of marine equipment materials and components;
• The carrying out of surveys, inspections, audits and visits, and the issuance, renewal or endorsement of the relevant certificates and documents of compliance, as they relate to ships and shipping; and
• Any other goods or services relating to the maintenance, supply, bunkering, and docking of vessels flying the flag of the Islamic Republic of Iran, or owned, controlled, chartered, or operated directly or indirectly by, or for or on behalf of the Government of Iran (GOI) or an Iranian person.

c.   Shipbuilding Sector: In the case of Iran’s shipbuilding sector,
• The building and refit of vessels;
• The provision or refit of items such as (i) steam turbines and their parts for marine propulsions, (ii) marine propulsion engines and parts used solely or principally with them, (iii) other gas turbines for marine propulsion, (iv) ship or boat propellers and blades, and (v) direction finding compasses and other navigational instruments and appliances solely for the maritime industry;
• Other goods used in connection with building and propulsion of vessels; and
• Technical assistance and training relating to, and financing of, the building, maintenance or re-fitting of vessels.

Sections 1244(d)(1) and (2) of IFCA make sanctionable certain transactions for the sale, supply, or transfer to or from Iran of such goods and services if they are significant goods or services used in connection with Iran’s energy, shipping, or shipbuilding sectors. (See Q&A 289 above for an interpretation of “significant.”) The provision of goods or services identified above could be sanctionable regardless of whether any person involved in the transaction has been determined to be part of Iran’s energy, shipping, or shipbuilding sectors. [06-03-13]

296. Will payment for bunkering of third-country ships carrying non-sanctionable goods to or from Iran be subject to sanctions?

If a non-Iranian vessel is transporting non-sanctionable goods to or from Iran, bunkering in a third country will not be subject to sanctions provided that no other sanctionable activity is involved. [06-03-13]

297. Are there any exceptions to the sanctions provisions of section 1244 of IFCA?

The following transactions are excepted from the provisions of section 1244 of IFCA.

a.   Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran or for the provision of humanitarian assistance to the people of Iran.
b.   The export of petroleum or petroleum products from Iran to a country with a significant reduction exception under section 1245(d)(4)(D)(i) of the National Defense Authorization Act for Fiscal Year 2012.
c.   A significant financial transaction conducted or facilitated by a foreign financial institution (FFI), provided that a significant reduction exception under 1245(d)(4)(D)(i) of the National Defense Authorization Act For Fiscal Year 2012 (NDAA) applies to the country with primary jurisdiction over the FFI and the financial transaction is for trade in goods or services (i) between Iran and the country with primary jurisdiction over the FFI and (ii) not otherwise subject to sanctions under the law of the United States, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR §561.203(j) and 31 CFR §561.203(k).
d.   The sale, supply, or transfer of natural gas to or from Iran. Section 1244, however, does set out sanctions that may apply to FFIs that conduct or facilitate a transaction for the sale, supply, or transfer of natural gas to or from Iran unless the financial transaction is for trade in goods or services (i) between Iran and the country with primary jurisdiction over the FFI and (ii) not otherwise subject to sanctions under the law of the United States, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR §561.203(j) and 31 CFR §561.203(k).
e.   Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [06-03-13]

315. Will routine payments or fees be subject to sanctions if they are made to a person determined to be a port operator in Iran and if the vessel is carrying non-sanctioned goods?

Any company involved in loading or unloading cargo in Iran should exercise great caution to avoid engaging in transactions with entities designated by the United States, including the Tidewater Middle East Co. and South Shipping Line Iran which were both designated for their involvement in Iran’s proliferation of weapons of mass destruction. However, to the extent that a shipping company transacts with port operators in Iran that have been identified as such under IFCA but not otherwise designated, and as long as such payments are limited strictly to routine fees including port dues, docking fees, or cargo handling fees, paid for the loading and unloading of non-sanctioned goods at Iranian ports, we anticipate that such transactions would not be considered significant transactions for the purposes of IFCA. Non-routine and/or large payments or fees that materially exceed standard industry rates could expose a person to sanctions. Furthermore, providing any port operator in Iran with any significant financial, material, technological, or other support could expose a person to sanctions. [07-01-13]

298. What materials are considered graphite, raw or semi-finished metals?

For purposes of IFCA, we anticipate that regulations to be promulgated will define graphite, raw or semi-finished metals described in section 1245(d) of IFCA to include steels; aluminum metal and its alloys; base metals of single or complex borides of titanium; beryllium metal and its alloys; boron metal and its alloys; cobalt metal and its alloys; copper infiltrated tungsten metal; copper-beryllium metal; germanium metal and its alloys; graphites; hastelloy; inconel; magnesium metal and its alloys; molybdenum metal and its alloys; neptunium-237 metal and its alloys; nickel metal and its alloys; nickel aluminide metals; niobium metal and its alloys; niobium-titanium filaments; plutonium metal and its alloys; porous nickel metal; silver infiltrated tungsten metal; tantalum metal and its alloys; tellurium metal and its alloys; titanium aluminide metals; titanium metal and its alloys; tungsten metal, tungsten carbide metal, and their alloys; uranium titanium alloy metals; and zirconium metal and its alloys and compounds. [06-03-13]

299. What are considered precious metals?

For purposes of IFCA, we anticipate that regulations to be promulgated will define the term “precious metals” to include silver (including silver plated with gold or platinum, unwrought or in semi-manufactured forms, or in powder form); gold (including gold plated with platinum, unwrought or in semi-manufactured forms, or in powder form); base metals or silver, clad with gold, not further worked than semi-manufactured; platinum, unwrought or in semi-manufactured forms, or in powder form; iridium; osmium; palladium; rhodium; ruthenium; base metals, silver or gold, clad with platinum, not further worked than semi-manufactured; waste and scrap of precious metal or of metal clad with precious metals, other waste and scrap containing precious metal or precious-metal compounds, of a kind used principally for the recovery of precious metal. [06-03-13]

300. For purposes of sanctions under section 1245, how will I know which sectors are controlled by Iran’s Islamic Revolutionary Guard Corps?

By July 1, 2013, a report will be published in the Federal Register with respect to which sectors of the Iranian economy are controlled directly or indirectly by Iran’s Islamic Revolutionary Guard Corps.  [06-03-13]

301. How will the determination be made as to whether materials are used in a manner that would make them subject to sanctions under section 1245 of IFCA?

A FFI, prior to conducting or facilitating a significant financial transaction for the sale, supply, or transfer to or from Iran of the materials will need to undertake due diligence to ensure that the transaction does not involve the materials listed in section 1245(d) – as described in part in Q&A 298 – being sold, supplied, or transferred, directly or indirectly, to or from Iran for sanctionable uses under section 1245. [06-03-13]

302. Are there any exceptions to section 1245 of IFCA?

A person will not be subject to sanctions under section 1245 of IFCA if a determination is made by the Department of the Treasury or the Department of State, as appropriate, that the person has established and enforced official policies, procedures, and controls to ensure that the person does not sell, supply, or transfer to or from Iran, or facilitate or conduct a significant financial transaction to sell supply, or transfer to or from Iran, materials listed in section 1245 as sanctioned under section 1245.  The Department of the Treasury or the Department of State, as appropriate, will make this determination on a case by case basis as part of an investigation or enforcement action by the relevant Department. [06-03-13]

303. Which insurance, reinsurance, or underwriting activities are potentially subject to sanctions under section 1246(a)(1)?

A number of insurance activities are subject to sanctions under IFCA, including providing insurance, reinsurance, or underwriting services to persons on the SDN List sanctioned for activities with respect to Iran.  [06-03-13]

304. Are there exceptions to insuring, reinsuring, or underwriting sanctioned activities?

Yes. IFCA includes the following exceptions to insuring, reinsuring, or underwriting sanctioned activities.

a.   Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran or for the provision of humanitarian assistance to the people of Iran can be insured, reinsured, or underwritten.
b.   A person that provides insurance, reinsurance, or underwriting services to sanctioned activity, if a determination is made by the Department of the Treasury or the Department of State, as appropriate, that the person has established and enforced official policies, procedures, and controls to ensure that the person does not underwrite or enter into a contract to provide insurance or reinsurance for activities targeted under section 1246 of IFCA. The Department of the Treasury or the Department of State, as appropriate, will make this determination on a case by case basis as part of an investigation or enforcement action by the relevant Department. [06-03-13]

305. Sanctions under section 1247 of IFCA apply to FFIs that facilitate financial transactions on behalf of an Iranian person on the SDN List.  How does the Executive Order relate to section 1247?

The E.O. tightens the financial sanctions applicable to FFIs under section 1247 of IFCA.  (See Q&A 312 below for a discussion of the applicable financial sanctions and exceptions.) [06-03-13]

306. How does the Executive Order relate to the IFCA provisions?

The E.O. provides additional tools related to the IFCA provisions by:

a.   Authorizing prohibitions or restrictions on the importation of goods; and
b.   Implementing the statutory requirements of section 105C of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as added by section 1249 of IFCA, by blocking the property and interests in property and suspending the entry into the United States of persons determined to have engaged, on or after January 2, 2013, in corruption or other activities relating to the diversion of goods intended for the Iranian people or the misappropriation of proceeds from the sale or resale of such goods. [06-03-13]

307. In addition to implementing certain IFCA provisions, what else does the Executive Order do?

In addition to implementing IFCA, the E.O. authorizes both new sanctions with respect to Iran and the broadening of existing sanctions.

The new sanctions under the E.O. target significant transactions related to (1) the purchase or sale of Iranian rials and derivative, swap, future, forward, or other similar contracts whose value is based on the exchange rate of the Iranian rial, as well as the maintenance of significant funds and accounts outside the territory of Iran denominated in the Iranian rial (see Q&A 309 below), and (2) Iran’s automotive sector (see Q&As 310 and 311 below).

The broadened sanctions under the E.O. allow for the imposition of sanctions on:

a.   Persons that materially assist certain Iranian persons on the SDN List (see Q&A 308 below);
b.   Persons that materially assist certain other persons whose property and interests in property are blocked under Executive Order 13599 and the E.O. (see Q&A 308 below); and
c.   FFIs that knowingly conduct or facilitate a significant financial transaction on behalf of an Iranian person included on SDN List, and certain other persons whose property and interests in property are blocked under Executive Order 13599 or the E.O. (see Q&A 312 below). [06-03-13]

308. What are the implications of the material assistance provision of the Executive Order?

Subsection 2(a)(i) of the E.O. authorizes the Department of the Treasury to block the property and interests in property of persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, (i) Iranian persons included on the SDN List as well as other persons included on the SDN List whose property and interests in property are blocked pursuant to Executive Order 13599, in both cases other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599, and (ii) persons whose property and interests in property are blocked pursuant to subsection 2(a)(i) of the E.O. Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey are excepted from the material support provision of the E.O.

In implementing this provision, the United States Government will take appropriate steps to avoid, among other things, undue impacts on the access of the people of Iran to humanitarian items, telecommunications, and other basic services. [06-03-13]

309. What transactions involving the Iranian rial will be subject to sanctions?

FFIs risk correspondent and payable-through account and blocking sanctions for (i) knowingly conducting or facilitating, on or after July 1, 2013, significant transactions related to the purchase or sale of Iranian rials or a derivative, swap, future, forward, or other similar contract whose value is based on the exchange rate of the Iranian rial, or (ii) maintaining, on or after July 1, 2013, significant funds or accounts outside the territory of Iran denominated in the Iranian rial. [06-03-13]

310. What is considered Iran’s automotive sector for purposes of the Executive Order?

The E.O. authorizes the imposition of correspondent and payable-through account and Iran Sanctions Act-style sanctions for certain transactions, on or after July 1, 2013, for the sale, supply, or transfer to Iran of significant goods or services used in connection with Iran’s automotive sector.  The E.O. defines the automotive sector of Iran as the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles, as well as original equipment manufacturing and after-market parts manufacturing relating to such vehicles. [06-03-13]

311. What are goods or services used in connection with Iran’s automotive sector for purposes of the E.O.?

We anticipate that regulations to be promulgated will define goods or services used in connection with Iran’s automotive sector to include goods or services that contribute to (i) Iran’s ability to research, develop, manufacture, and assemble light and heavy vehicles, and (ii) the manufacturing or assembling of original equipment and after-market parts used in Iran’s automotive industry.

The E.O. makes sanctionable certain transactions for the sale, supply, or transfer to Iran of “significant” goods or services used in connection with the automotive sector of Iran. (See Q&A 289 above for an interpretation of “significant.”) [06-03-13]

316. Is the sale, supply, or transfer of finished vehicles or “auto kits” to Iran sanctionable under the E.O.?

The E.O. does not make sanctionable the export of finished vehicles to Iran if no further assembly or manufacturing is required. As such, exporting fully assembled and finished vehicles to Iran for sale by a non-sanctioned Iranian dealer or distribution network would not be sanctionable.

In contrast, “auto kits” (or “knock-down kits”) exported to Iran for assembly in Iran would be considered goods or services used in connection with the automotive sector of Iran and the export of such kits to Iran would be sanctionable if the transaction is “significant.” (See Q&A 289 above for an interpretation of “significant.”) [07-01-13]

317. Is the sale, supply, or transfer of goods or services for the maintenance of finished vehicles sanctionable under the E.O.?

Goods or services for the maintenance of finished vehicles exported to Iran would generally not be considered “significant goods or services used in connection with the automotive sector of Iran,” for the purposes of the E.O., and the provision of such goods or services would generally not be sanctionable. However, the export, sale, or distribution of goods (e.g., auto parts and accessories) or services that would contribute to Iran’s ability to manufacture or assemble vehicles, or manufacture original equipment and after-market parts in Iran could create exposure to sanctions. Persons exporting parts and services to Iran for the maintenance or upkeep of finished automobiles, and foreign financial institutions facilitating such exports, should exercise caution to ensure that the parts or services are not diverted for the manufacturing or assembly of vehicles in Iran or the manufacturing of original equipment or after-market parts in Iran, and are used only for maintenance and upkeep. [07-01-13]

312. How does the Executive Order tighten the financial sanctions applicable to FFIs under section 1247 of IFCA?

Section 3 of the E.O. tightens the financial sanctions applicable to FFIs under section 1247 of IFCA and provides for correspondent and payable-through account sanctions on FFIs that knowingly conduct or facilitate a significant financial transaction on behalf of an Iranian person included on the SDN List (other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599) or any other person included on the SDN List whose property and interests in property are blocked pursuant to Executive Order 13599 (other than Iranian depository institutions whose property and interests in property are blocked solely pursuant to Executive Order 13599) or subsection 2(a)(i) of the E.O.

The following transactions would not be subject to sanctions under this section of the E.O.:

a.   Transactions for the provision of agricultural commodities, food, medicine, or medical devices to Iran.
b.   A significant financial transaction conducted or facilitated by a FFI for the purchase of petroleum or petroleum products from Iran if a significant reduction exception under section 1245(d)(4)(D) of the NDAA applies to the country with primary jurisdiction over such FFI and the financial transaction is for trade between Iran and the country with primary jurisdiction over the FFI, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR § 561.203(j) and 31 CFR § 561.203(k).
c.   A significant financial transaction conducted or facilitated by a FFI for the sale, supply, or transfer of natural gas to or from Iran only if the financial transaction is solely for trade between the country with primary jurisdiction over the FFI and Iran, and any funds owed to Iran as a result of such trade are credited to an account located in the country with primary jurisdiction over the FFI. We anticipate the implementation of these trade requirements to be similar to the trade requirements set forth in the IFSR, in particular 31 CFR § 561.203(j) and 31 CFR § 561.203(k).
d.   Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey. [06-03-13]

318. Does the GL for basic medical supplies authorize the export of all medical devices?

No. The GL for basic medical supplies appearing at section 560.530(a)(3)(i) of the Iranian Transactions and Sanctions Regulations (“ITSR”) authorizes the export or reexport to Iran of items defined in section 560.530(a)(3)(ii) of the ITSR and included on the List of Basic Medical Supplies (the “List”), which is maintained on OFAC’s Web site. Any changes to the List will be published in the Federal Register. Over 200 categories of medical supplies are included on the List. Basic medical supplies, as defined in 31 CFR 560.530(a)(3)(ii), also include EAR99-classified components, accessories and optional equipment that are designed for and are for use with an EAR99-classified medical device included on the list, but does not include replacements parts for such devices. [01-20-14]

319. Does the GL for basic medical supplies authorize the export of these items to all entities in Iran?

No. While the GL under section 560.530(a)(3)(i) of the ITSR authorizes exports or reexports to most entities in Iran, it does not authorize exports or reexports to military or law enforcement entities, nor does it authorize exports or reexports to persons whose property and interests in property are blocked under counter-proliferation, counter-terrorism, counter-narcotics, or other authorities administered by OFAC, including such persons identified on OFAC’s Specially Designated Nationals and Blocked Persons List. When engaging in activities pursuant to this GL, exporters and reexporters are expected to undertake due diligence regarding all parties to the transactions, just as they would when acting pursuant to a specific license issued by OFAC. [01-20-14]

361. What items and persons are excluded from the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations?

The specified items excluded from the scope of the agricultural commodities general license are:  castor beans, castor bean seeds, certified pathogen-free eggs (unfertilized or fertilized), dried egg albumin, live animals (excluding live cattle), embryos (excluding cattle embryos), Rosary/Jequirity peas, non-food-grade gelatin powder, peptones and their derivatives, super absorbent polymers, western red cedar, and all fertilizers. 

The persons excluded from the scope of the agricultural commodities general license are Iranian military or law enforcement purchasers or importers.  In addition, the agricultural commodities general license does not authorize any transaction or dealing with any person whose property and interests in property are blocked, or who is designated or otherwise subject to any sanction, under the terrorism, proliferation of weapons of mass destruction, or narcotics trafficking programs administered by OFAC, among others.

Exports or reexports involving the specified items or excluded persons discussed above continue to require the level of review afforded by specific licensing and therefore are not authorized by the agricultural commodities general license. [4-7-2014]

362. Is the export or reexport of non-U.S.-origin agricultural commodities, medicine, or medical devices to Iran authorized?

Yes.  The definitions of the terms “agricultural commodities,” “medicine,” and “medical device” used in the relevant general licenses in the Iranian Transactions and Sanctions Regulations include, in the case of items subject to the Export Administration Regulations (EAR), items that are designated as EAR99 and, in the case of items not subject to the EAR, items that would be designated as EAR99 if they were located in the United States.  For example, under the agricultural commodities general license, a company located in the United States would be authorized to arrange for the export from a third country to Iran of agricultural commodities produced in the third country if those commodities would be designated as EAR99 if they were located in the United States, provided that all conditions of the general license are otherwise satisfied.  [4-7-2014]

363. Is the export or reexport by non-U.S. persons of agricultural commodities, medicine, or medical devices to Iran authorized?

Yes.  A non-U.S. person may export or reexport agricultural commodities, medicine, or medical devices to Iran under the relevant general licenses in the Iranian Transactions and Sanctions Regulations, provided that the items are subject to the EAR and all conditions of the relevant general license are otherwise satisfied.  For example, a non-U.S. person would be authorized under the medicine and medical supplies general license to arrange for the export or reexport to Iran of EAR99 medicines located in the United States or a third country.

In addition, an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “U.S.-owned or -controlled foreign entity”) may export or reexport agricultural commodities, medicine, and medical devices to Iran under the relevant general licenses in the Iranian Transactions and Sanctions Regulations (including both items subject to the EAR and items not subject to the EAR), provided that all conditions of the relevant general license are otherwise satisfied.  For example, a U.S.-owned or -controlled foreign entity would be authorized under the medicine and medical supplies general license to arrange for the reexport to Iran of EAR99 medicines, as well as the export to Iran of medicines not subject to the EAR (e.g., medicines produced outside the U.S. by a non-U.S. person with no controlled U.S. content) that would be designated as EAR99 if they were located in the United States.  [4-7-2014]

364. Who can apply for a specific license if an export or reexport to Iran is not authorized by general license?

If an export or reexport is not authorized by general license, any U.S. person, wherever located, or U.S.-owned or -controlled foreign entity may apply for a specific license.  For example, a U.S.-owned or controlled foreign entity may apply for a specific license for the export or reexport to Iran of agricultural commodities excluded from the scope of the agricultural commodities general license, such as live animals. [4-7-2014]

365. What is authorized with respect to brokerage services related to exports or reexports of agricultural commodities, medicine, or medical devices to Iran?

U.S. persons continue to be authorized to provide brokerage services on behalf of U.S. persons for the sale and exportation or reexportation by U.S. persons of agricultural commodities, medicine, and medical devices to Iran, provided that the sale and exportation or reexportation itself is authorized by either general or specific license. [4-7-2014]

366. Do I still need to come in to OFAC for a license to export certain types of agricultural commodities to Iran?

OFAC will no longer be issuing specific licenses for exports or reexports that are covered by the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations. 

However, a small number of specified agricultural commodities and certain persons are excluded from the agricultural commodities general license and continue to require the level of review afforded by specific licensing.  As a result, persons seeking authorization for the exportation or reexportation to Iran of castor beans, castor bean seeds, certified pathogen-free eggs (unfertilized or fertilized), dried egg albumin, live animals (excluding live cattle), embryos (excluding cattle embryos), Rosary/Jequirity peas, non-food-grade gelatin powder, peptones and their derivatives, super absorbent polymers, western red cedar, or all fertilizers, or for the exportation or reexportation of any agricultural commodities to Iranian military or law enforcement purchasers or importers, must still obtain a specific license from OFAC. 

The agricultural commodities general license in the Iranian Transactions and Sanctions Regulations also does not authorize any transaction or dealing with a person whose property and interests in property are blocked, or who is designated or otherwise subject to any sanction, under the terrorism, proliferation of weapons of mass destruction, or narcotics trafficking programs administered by OFAC, among others. [4-7-2014]

367. What is the definition of a “bioactive peptide”?

For purposes of the relevant exclusion from the agricultural commodities general license in the Iranian Transactions and Sanctions Regulations, the term “bioactive peptide” means an item that must be less than 50 amino acids in length and bioactive (antioxidant, antiallergic, antimicrobial, antithrombotic, antiatherogenic, hypoglycaemic, anti-inflammatory, antitumor, cytostatic, immunosuppressive properties, or hepatoprotective properties.) [4-7-2014]

376.What types of sanctions relief provided to Iran pursuant to the JPOA will be continued during the Extended JPOA Period?

The USG has committed to continue to suspend temporarily certain sanctions involving Iran’s purchase and sale of gold and other precious metals, Iran’s export of petrochemical products, Iran’s automotive industry, and certain associated services regarding each of the foregoing.  The USG will also continue to coordinate with Iran regarding the use of financial channels established during the JPOA Period to facilitate Iran’s import of certain humanitarian goods to Iran, payment of medical expenses incurred by Iranians abroad, payments of Iran’s UN obligations, and payments of $400 million in governmental tuition assistance for Iranian students studying abroad.  The USG will extend the favorable licensing policy issued in furtherance of the JPOA in connection with transactions related to the safety of Iran’s civil aviation industry.  Finally, during the Extended JPOA Period, the USG will continue to pause efforts to further reduce Iran’s crude oil exports and will enable Iran to access $2.8 billion in Restricted Funds in installments.  Unless otherwise noted, these relief measures do not include transactions with persons on the U.S. Treasury Department’s Office of Foreign Assets Control’s (OFAC) List of Specially Designated Nationals and Blocked Persons (the SDN List) (http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx). [7-23-2014]

The USG will continue to vigorously enforce our sanctions against Iran that are not subject to the limited relief provided pursuant to the JPOA, including by taking action against those who seek to evade or circumvent our sanctions.  The USG also retains the authority to revoke this limited sanctions relief at any time if Iran fails to meet its commitments under the JPOA.

377. How does the JPOA and the extension of relief thereunder impact U.S. sanctions on Iran? 

Except for the limited, temporary, and reversible relief provided pursuant to the JPOA, all U.S. sanctions with respect to Iran, including financial sanctions, sanctions pertaining to the purchase of Iranian crude oil, and sanctions on investment in Iran’s energy and petrochemical sectors, remain in effect with respect to U.S. and non-U.S. persons. The relief provided in the JPOA only pertains to conduct and transactions fully completed during the JPOA Period and/or the Extended JPOA Period, and, with limited exceptions, involves only certain sanctions on non-U.S. persons not otherwise subject to section 560.215 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR) (hereinafter “non-U.S. persons not otherwise subject to the ITSR”), as described in more detail in these FAQs.*  U.S. persons and U.S.-owned or -controlled foreign entities continue to be generally prohibited from conducting transactions with Iran, including any transactions of the types permitted pursuant to the JPOA, unless licensed to do so by OFAC. 

For additional details regarding the steps taken by the USG to extend the temporary sanctions relief with respect to Iran pursuant to the JPOA, see the January 20, 2014, Guidance Relating to the Provision of Certain Temporary Sanctions Relief and the July 21, 2014, Guidance Relating to the Provision of Certain Temporary Sanctions Relief. [7-23-2014]

* Consistent with section 218 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and with 31 C.F.R. section 560.215, foreign entities that are owned or controlled by U.S. persons (“U.S.-owned or -controlled foreign entities”) are subject to the ITSR [http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#238].

378. Are U.S. persons able to engage in any of the transactions with Iran outlined in the JPOA?

U.S. persons and U.S.-owned or -controlled foreign entities continue to be generally prohibited from conducting transactions with Iran, including any transactions of the types permitted pursuant to the JPOA, unless licensed to do so by OFAC.  This prohibition includes any associated services undertaken in conjunction with activities outlined in the JPOA.  Except under limited circumstances such as for humanitarian transactions, the USG has a policy of not authorizing business with Iran.  For additional information regarding the licensing of transactions related to the safety of flight for Iranian civil aviation see Question #385 below.  U.S. persons and U.S.-owned or -controlled foreign entities may continue to engage in generally or specifically licensed humanitarian-related transactions. [7-23-2014]

379. The JPOA provided that U.S. sanctions on Iran’s petrochemical exports, as well as sanctions on associated services, would be suspended for the JPOA Period.  What does the suspension entail for the Extended JPOA Period and which petrochemicals are covered?

For the Extended JPOA Period, the USG will continue to suspend certain sanctions on purchases by non-U.S. persons not otherwise subject to the ITSR of petrochemical products exported from Iran as well as associated services that are required to facilitate such transactions.  As part of this relief, such transactions exclusively for the export of Iran’s petrochemicals may involve Iranian depository institutions* listed solely pursuant to E.O. 13599 and certain other specified Iranian entities on the SDN List (see Question #380 for a list of these petrochemical companies).  Non-U.S. persons not otherwise subject to the ITSR may undertake these specific activities only during the JPOA Period and/or the Extended JPOA Period without exposure to U.S. sanctions, subject to certain conditions explained in the January 20 and July 21, 2014, versions of the Guidance Relating to the Provision of Certain Temporary Sanctions Relief.  The relief provided in the JPOA with respect to Iran’s exports of petrochemical products will expire on November 24, 2014, and any transactions, payments, deliveries, or associated services provided in connection with such exports that occur after November 24, 2014, could expose the relevant parties to potential U.S. sanctions.  For additional information regarding associated insurance services, see Question 14.

Petrochemical products from Iran are defined in E.O. 13622 to include any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea.  Examples of such products include: butene, ethylhexanol, acetic acid, acrylonitrile butadiene styrene, alachlor, ammonium nitrate, ammonium sulfate, anhydrous ammonia, argon, butachlor, C2+, C3+, C4 cut, chlorinated paraffin, chlorine, chloracetyl chloride, citric acid, diammonium phosphate, diethanolamine, ethylene glycol, diethylene glycol, dioctyl phthalate, dodecycle benzene, ethane, ethoxylates, ethylbenzene, ethylene dichloride, ethylene glycol, ethylene oxide, heavy alkyl benzene, high density polyethylene, hydrochloric acid, isoprene, linear alkyl benzene, linear low density polyethylene, low density polyethylene, melamine, methyl tertiary butyl ether, methylene diphenyl diisocyanate, mid density polyethylene, monoethanolamine, monoethylene glycol, nitric acid, nitrogen, orthoxylene, paraxylene, pentene, perchlorine, phosphoric acid, phthalic anhydride, polybutadiene, polyethylene terephthalate, polypropylene, polystyrene, polyvinyl chloride, propylene, purified terephthalic acid, pyrolysis gasoline, raffinate, soda ash, sodium bicarbonate, sodium carbonate, sodium chloride, sodium hydroxide, sodium hypochlorite, styrene, tyrene acrylonite copolymer, sulfur, sulfuric acid, styrene butadiene, toluene diisocyanate, triethanolamine, triethylene glycol, and vinyl chloride monomer.** 

This list, however, is not exhaustive. The term “petrochemical products” does not include finished products derived from these substances, such as pipes, plastic bags, tires, and solvents; it also does not include bitumen, condensates, and other substances considered “petroleum products” under E.O. 13622.***

All other sanctions on transactions with respect to Iran's petrochemical industry, including the provision of certain goods and services described in E.O. 13590, remain in place.

For additional information regarding associated insurance services, see Question #389. [7-23-2014]

* For purposes of these FAQs, as defined in section 14(g) of Executive Order 13645, the term “Iranian depository institution” means any entity (including foreign branches), wherever located, organized under the laws of Iran or any jurisdiction within Iran, or owned or controlled by the Government of Iran, or in Iran, or owned or controlled by any of the foregoing, that is engaged primarily in the business of banking (for example, banks, savings banks, savings associations, credit unions, trust companies, and bank holding companies). 

** See the Department of State’s November 13, 2012, publication in the Federal Register providing an illustrative list of petrochemical products [77 FR 67726, November 13, 2012].

*** E.O. 13622 defines ‘‘petroleum products’’ to include unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of: crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. The term does not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels.

380. Does the petrochemical sanctions relief in the JPOA as extended cover dealings with any SDNs?

As noted above, the USG will continue to temporarily suspend during the Extended JPOA Period certain sanctions on Iran’s exports of petrochemical products as well as associated services that are required to facilitate such transactions.  Such transactions may not involve persons on the SDN List, other than Iranian depository institutions listed solely pursuant to E.O. 13599 and the fourteen specified Iranian entities listed below.  These fourteen entities may only participate in transactions that are exclusively for the export of petrochemical products from Iran.                                            

• Bandar Imam Petrochemical Company
• Bou Ali Sina Petrochemical Company
• Ghaed Bassir Petrochemical Products Company
• Iran Petrochemical Commercial Company
• Jam Petrochemical Company
• Marjan Petrochemical Company
• Mobin Petrochemical Company
• National Petrochemical Company
• Nouri Petrochemical Company
• Pars Petrochemical Company
• Sadaf Petrochemical Assaluyeh Company
• Shahid Tondgooyan Petrochemical Company
• Shazand Petrochemical Company
• Tabriz Petrochemical Company

Any transaction with these SDNs not for the export of petrochemical products from Iran or associated services that are required to facilitate such transactions will remain sanctionable.

381. The JPOA provided that U.S. sanctions related to gold and other precious metals would be suspended during the JPOA Period.  What does the suspension entail for the Extended JPOA Period? 

For the Extended JPOA Period, the USG will continue to suspend sanctions on the sale to and purchase from Iran of gold and other precious metals* by non-U.S. persons not otherwise subject to the ITSR, as well as associated services that are required to facilitate such transactions.  Such transactions may not involve persons on the SDN List, other than Iranian depository institutions listed solely pursuant to E.O. 13599 or any political subdivision, agency, or instrumentality of the Government of Iran listed solely pursuant to E.O. 13599. 

Notwithstanding the foregoing, Restricted Funds may not be used to purchase gold or other precious metals, even if the transaction would otherwise be considered qualifying bilateral trade (see Question #258 for additional information regarding qualifying bilateral trade).

For additional information regarding associated insurance services, see Question #389. [7-23-2014]

* For purposes of this sanctions relief, “precious metals” includes silver (including silver plated with gold or platinum, unwrought or in semi-manufactured forms, or in powder form); gold (including gold plated with platinum, unwrought or in semi-manufactured forms, or in powder form); base metals or silver, clad with gold, not further worked than semi-manufactured; platinum, unwrought or in semi-manufactured forms, or in powder form; iridium; osmium; palladium; rhodium; ruthenium; base metals, silver or gold, clad with platinum, not further worked than semi-manufactured; waste and scrap of precious metal or of metal clad with precious metals, other waste and scrap containing precious metal or precious-metal compounds, of a kind used principally for the recovery of precious metal.

382. The JPOA provided that U.S. sanctions related to Iran’s automotive industry would be suspended during the JPOA Period.  What does the suspension entail for the Extended JPOA Period? 

For the Extended JPOA Period, the USG will continue to suspend sanctions on the sale, supply, or transfer to Iran of goods (including complete knock-down kits, or CKDs) and services (including shipping, warranty, insurance, and maintenance services) used in connection with the automotive sector* by non-U.S. persons not otherwise subject to the ITSR, as well as associated services that are required to facilitate such transactions. Such transactions may not involve any person on the SDN List, other than Iranian depository institutions listed solely pursuant to E.O. 13599.

For additional information regarding associated insurance services, see Question #389. [7-23-2014]

*E.O. 13645 defines the term “automotive sector of Iran” to mean the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles, as well as original equipment manufacturing and after-market parts manufacturing relating to such vehicles. 

383. The JPOA provided that the P5 + 1 would enable the repatriation of $4.2 billion of Iranian revenue held abroad during the JPOA Period and the extension of the JPOA provides for the repatriation of an additional $2.8 billion of Iranian revenue held abroad.  What will happen during the Extended JPOA Period?

The P5 + 1 fulfilled their commitment to facilitate the release of $4.2 billion of Iran’s Restricted Funds during the JPOA Period.

In accordance with the terms of the extension of sanctions relief under the JPOA, the P5 + 1 and Iran have agreed on a process to authorize or facilitate the release in installments over the Extended JPOA Period of $2.8 billion of Iran’s Restricted Funds (the four-month prorated amount of the original JPOA commitment), and the USG is working with our partners and relevant foreign financial institutions (FFIs) to implement this provision.  Unless an FFI is notified directly in writing by the USG that a release is not sanctionable, any release or receipt of Iran’s Restricted Funds would expose an FFI to U.S. sanctions. [7-23-2014]

384. What does the channel to facilitate humanitarian-related transactions do? 

Transactions for the sale of food, agricultural commodities, medicine, and medical devices to Iran by non-U.S. persons not otherwise subject to the ITSR are not generally sanctionable, so long as such transactions do not involve persons designated in connection with Iran’s proliferation of weapons of mass destruction (WMD) or WMD delivery systems, or Iran’s support for international terrorism.  For prior OFAC guidance on the sale of certain humanitarian-related goods to Iran, see http://www.treasury.gov/resource-center/sanctions/Programs/Documents/hum_exp_iran.pdf and http://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_guidance_med.pdf. 

In furtherance of the JPOA, the P5 + 1 and Iran established a mechanism to further facilitate the purchase of, and payment for, the export of food, agricultural commodities, medicine, and medical devices to Iran, as well as medical expenses incurred abroad by Iranians.  The mechanism will remain in place during the Extended JPOA Period.  FFIs whose involvement was sought by Iran in hosting this new mechanism have been contacted directly by the USG and provided specific guidance. Companies interested in using this financial mechanism should coordinate with their Iranian counterparties.  Please note that transactions for the export of food, agricultural commodities, medicine, and medical devices to Iran are not required to be processed through this new mechanism. [7-23-2014] 

385. The JPOA provided that the U.S. would license (i) the supply and installation in Iran of spare parts for safety of flight for Iranian civil aviation and associated services and (ii) safety related inspections and repairs in Iran as well as associated services.  What does this entail for the Extended JPOA Period?

OFAC is issuing an Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry (Amended SLP) that extends the date of the previously-issued statement of licensing policy to the end of the Extended JPOA Period.  The Amended SLP explains how OFAC intends to license the supply and installation of spare parts to ensure the safe operation of Iranian commercial passenger aircraft (including transactions with Iran Air) and associated services and safety related inspections and repairs. U.S. persons, U.S.-owned or -controlled foreign entities, and persons involved in the export of U.S.-origin goods that are interested in providing such parts and services should review the Amended SLP to determine if their contemplated transaction is consistent with its provisions and, if so, apply for a specific license from OFAC.  In addition, sanctions on the conduct of activities of a type covered by the Amended SLP by non-U.S. persons not otherwise subject to the ITSR have been temporarily suspended. 

386. What does the pause in the reduction of imports in Iranian crude oil mean for the Extended JPOA Period?

387. If contracts related to activities for which sanctions relief has been provided pursuant to the JPOA were entered into during the JPOA Period or the Extended JPOA Period, and such contracts terminate after the Extended JPOA Period ends, will transactions or other activities undertaken pursuant to those contracts after the end of the Extended JPOA Period be sanctionable?

Yes. The temporary suspension of sanctions applies only to activities that are initiated and completed entirely within the JPOA Period and/or the Extended JPOA Period, and not to activities undertaken before the JPOA Period or after the Extended JPOA Period, even if they are undertaken pursuant to contracts entered into during those periods, with the limited exception of claims payments for activities insured pursuant to the JPOA with respect to incidents that occurred during the JPOA Period or the Extended JPOA Period.  For additional information regarding insurance claims payments, see Question 14.  Any conduct for which sanctions have been suspended pursuant to the JPOA that occurs after the end of the Extended JPOA Period, will not qualify for relief pursuant to the JPOA.

For example, if a contract is entered into on January 25, 2014, for the sale of CKDs to be delivered to Iran on November 30, 2014, the delivery of such CKDs after November 24, 2014, could be sanctionable because it falls outside of the relief period.  Similarly, any payments relating to such CKDs received after the Extended JPOA Period could be sanctionable. [7-23-2014]

388. Will payment received during the JPOA Period or the Extended JPOA Period for activity covered by the JPOA that took place prior to the start of the JPOA Period benefit from the sanctions relief?

Transactions related to sanctionable conduct that began prior to January 20, 2014, and for which a temporary suspension of sanctions has been provided pursuant to the JPOA, would still have exposure to U.S. sanctions. [7-23-2014] 

389. How does the temporary relief provided by the JPOA affect the provision of insurance for transactions involving Iran?

To the extent that the provision of insurance or reinsurance is an associated service of an activity for which the JPOA provides temporary relief, the provision by a non-U.S. person not otherwise subject to the ITSR of that insurance or reinsurance during the Extended JPOA Period would not be sanctionable.  Otherwise, sanctions on the provision of insurance or reinsurance for certain types of activities involving Iran remain in place. 

In addition, insurance payments for claims arising from incidents that occur during the JPOA Period and/or the Extended JPOA Period may be paid after November 24, 2014, so long as the underlying transactions and activities conform to all others aspects of the sanctions remaining in place and the terms of the sanctions relief provided by the JPOA.  Insurance and reinsurance companies should contact the USG directly with any inquiries.  U.S. persons and U.S.-owned or -controlled foreign entities remain prohibited from participating in the provision of insurance or reinsurance services to or for the benefit of Iran or sanctioned entities, including with respect to all elements of the sanctions relief provided pursuant to the JPOA, unless specifically authorized by OFAC.

For example, the payment of a cargo insurance claim on November 30, 2014, by a non-U.S. person not otherwise subject to the ITSR for a loss associated with a shipment of CKDs delivered to Iran on November 15, 2014, pursuant to a contract signed on January 25, 2014, would not be sanctioned by the USG, so long as the underlying transactions and activities conform to all others aspects of the sanctions remaining in place and the terms of the sanctions relief provided by the JPOA. [7-23-2014]

390. Are transactions with Tidewater Middle East Co. still sanctionable?

Yes.  Transactions with Tidewater Middle East Co. remain sanctionable, even if they are related to activities for which a temporary suspension of sanctions has otherwise been provided pursuant to the JPOA (for additional information see Question #315). [7-23-2014]

337. What are key changes made by amended General License D-1?    

First, GL D-1 expands the authorization in GL D to permit the exportation, reexportation, or provision, directly or indirectly, to Iran of certain personal communications software, hardware, and related services subject to the Export Administration Regulations, 15 C.F.R. parts 730 through 774 (“EAR”) (rather than just the exportation or reexportation from the United States or by a U.S. person of such software, hardware, and services).  See GL D-1, paragraphs (a)(2)(i) & (a)(3).  For purposes of GL D-1, the term “provision” could include, for example, an in-country transfer of covered software or hardware.  The general license now authorizes, for example, a non-U.S. person located outside the United States to export certain hardware and software subject to the EAR to Iran.  See FAQ #341. 

Second, GL D-1 adds new authorizations for the exportation, reexportation, or provision, directly or indirectly, by a U.S. person located outside the United States to Iran of certain software and hardware not subject to the EAR.  See GL D-1, paragraphs (a)(2)(ii) & (a)(3).  The general license now authorizes, for example, a U.S. company to export to Iran, from a location outside the United States, certain hardware or software that is not subject to the EAR (including foreign-origin hardware or software containing less than a de minimis amount of U.S. controlled content).  See FAQ #342. 

Third, a new Note has been added to paragraphs (a)(2) and (a)(3) clarifying that the authorization in those paragraphs includes the exportation, reexportation, or provision, directly or indirectly, of the authorized items by an individual leaving the United States for Iran.  GL D-1 also adds a new authorization for the importation by an individual into the United States of certain hardware and software previously exported by the individual to Iran pursuant to other provisions of GL D-1 or 31 C.F.R. § 560.540.  See GL D-1, paragraph (a)(5).  The general license now authorizes, for example, an individual to carry a smartphone that falls within the scope of the GL D-1 authorization while traveling to and from Iran.  See FAQ #343. 

Finally, to further ensure that the sanctions on Iran do not have an unintended chilling effect on the willingness of companies to make available certain publicly available, no cost personal communications tools to persons in that country, GL D-1 adds a new authorization related to the potential recipients of certain publicly available, no cost services and software.  See GL D-1, paragraph (a)(6).

Notwithstanding these changes, nothing in this general license relieves an exporter from compliance with the export license requirements of another Federal agency. [02-07-2014]

338. With respect to the authorizations in paragraphs (a)(1) and (a)(2), what services and software are covered?   

Qualifying services or software must be “incident to the exchange of personal communications over the Internet.”  In addition, qualifying software under paragraph (a)(2) must meet the stated export control-related criteria.  Both paragraphs provide an illustrative but not exhaustive list of the types of services that are authorized:  “instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging.”  See FAQ #344 and OFAC’s Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran (March 20, 2012), available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/internet_freedom.pdf. 

Qualifying services or software need not be specifically listed in the Annex in order to be authorized by paragraphs (a)(1) or (a)(2), provided that they otherwise meet the requirements of paragraphs (a)(1) or (a)(2). [02-07-2014]

339. With respect to the authorization in paragraph (a)(3), do exporters need to make a determination as to whether an export of an item or service listed in the Annex to GL D-1 is “incident to personal communications”? 

No.  The Annex lists software, hardware, and related services determined to be “incident to personal communications” for purposes of the authorization in paragraph (a)(3) of GL D-1. [02-07-2014]    

If you require assistance interpreting the authorizations contained in GL D-1 and how they apply to your situation, please contact OFAC’s Licensing Division online at http://www.treasury.gov/resource-center/sanctions/Pages/licensing.aspx, by phone at 202-622-2480, or by email at ofac_feedback@do.treas.gov. [02-07-2014]

341. May a non-U.S. person export, reexport, or provide to Iran hardware and software that is subject to the EAR pursuant to GL D-1?   

Yes, for purposes of the authorities administered by OFAC, amendments made by GL D-1 authorize the exportation, reexportation, or provision of certain hardware and software subject to the EAR by non-U.S. persons outside the United States.  See GL D-1, paragraphs (a)(2)(i) & (a)(3).  For example, a non-U.S. person manufacturer of smartphones that are (a) subject to the EAR because they contain more than a de minimis amount of U.S. controlled content and (b) within the scope of the GL D-1 authorization may export the smartphones from its third-country manufacturing facility directly or indirectly to Iran.  See FAQ #337. [02-07-2014]

342. Does GL D-1 authorize U.S. persons located outside the United States to export or reexport to Iran certain specified hardware or software that is not subject to the EAR? 
 
Yes.  Amendments made by GL D-1 authorize the exportation, reexportation, or provision to Iran by U.S. persons located outside of the United States of certain specified hardware and software items that are not subject to the EAR.  See GL D-1, paragraphs (a)(2)(ii) & (a)(3).  GL D-1 also extends this authorization to an entity owned or controlled by a U.S. person and established or maintained outside the United States (“a U.S.-owned or -controlled foreign entity”), subject to the conditions set forth in 31 C.F.R. § 560.556.  See GL D-1, Note 2 to paragraph (a).  Under these amendments, for example, an overseas branch of a U.S. company or a U.S.-owned or -controlled foreign entity may export to Iran, from a location outside the United States, certain hardware or software that is not subject to the EAR (including foreign-origin hardware or software containing less than a de minimis amount of U.S. controlled content) if the hardware or software is within the scope of the GL D-1 authorization.  These amendments also authorize the exportation, reexportation, or provision of certain fee-based software that is not subject to the EAR because it is described in section 734.3(b) of the EAR.  See FAQ #337.  Section 734.3(b) of the EAR describes “publicly available” software for purposes of those regulations. [02-07-2014]

343. Does GL D-1 authorize the exportation to Iran and importation into the United States of personal communication devices by persons travelling from the United States to Iran and back to the United States? 

Yes.  As amended, GL D-1 authorizes both the exportation, reexportation, or provision to Iran and the importation into the United States by an individual entering the United States directly or indirectly from Iran, of software authorized by 31 C.F.R. § 560.540 paragraph (a)(2) and software and hardware authorized by paragraphs (a)(2) and (a)(3) of GL D-1, provided that the items were previously exported, reexported, or provided by the individual to Iran.  See GL D-1, paragraph (a)(5) and the Note to paragraphs (a)(2) and (a)(3).  See FAQ #337. [02-07-2014]

344. How do the authorizations in paragraphs (a)(1), (a)(2), and (a)(6) of GL D-1 compare to the previously existing general license in 31 C.F.R. § 560.540 authorizing certain services and software incident to Internet-based communications? 

The general license in § 560.540 authorizes the exportation from the United States or by U.S. persons, wherever located, to persons in Iran of no-cost services incident to the exchange of personal communications over the Internet and no-cost software necessary to enable such services.  Please also see OFAC’s Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran (March 20, 2012).  See http://www.treasury.gov/resource-center/sanctions/Programs/Documents/internet_freedom.pdf.  Paragraphs (a)(1) and (a)(2) of GL D-1 go beyond § 560.540 by, among other things, authorizing fee-based services and software incident to the exchange of personal communications over the Internet. 

In addition, to further ensure that the sanctions on Iran do not have an unintended chilling effect on the willingness of companies to make available certain publicly available, no cost personal communications tools to persons in Iran, pursuant to paragraph (a)(6) of GL D-1, the exportation, reexportation, or provision to the Government of Iran of certain publicly available, no-cost services and software described in § 560.540(a) or categories (6) through (11) of the Annex to GL D-1 is authorized.  U.S. persons continue generally to be prohibited from exporting goods and services to persons whose property and interests in property are blocked pursuant to any part of 31 C.F.R. chapter V, other than Government of Iran end-users blocked solely pursuant to Executive Order 13599.  See GL D-1 paragraph (b)(2).  Prohibited end-users include Iranian persons whose property and interests in property are blocked pursuant to OFAC authorities relating to WMD proliferation, terrorism, and human rights abuses.  In addition, GL D-1 does not authorize any action or activity involving any item (including information) subject to the EAR that is prohibited by, or otherwise requires a license under, part 744 of the EAR or participation in any transaction involving a person whose export privileges have been denied pursuant to part 764 or 766 of the EAR, without authorization from the Department of Commerce. [02-07-2014]

345. How can U.S. companies arrange for payment from Iran for exports authorized under GLD-1? 
                                  
In general, the payment requirements under GL D-1 are the same as for all other general licenses under the Iranian Transactions and Sanctions Regulations (“ITSR”).  Section 560.516 of the ITSR authorizes U.S. depository institutions to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to the ITSR and does not involve debiting or crediting an Iranian account.  31 C.F.R. § 560.516(a). [02-07-2014]

Due diligence programs should be tailored to the particular risks encountered by exporters.  As a general matter, companies selling fee-based services, software, or hardware authorized by GL D-1 should undertake reasonable, risk-based measures designed to ensure that they do not export their products to persons whose property and interests in property are blocked pursuant to any sanctions program administered by OFAC, regardless of whether the Government of Iran or other end-user appears on OFAC’s list of Specially Designated Nationals and Blocked Persons. [02-07-2014]

347. Are there any restrictions as to the use of the Farsi language in authorized advertising or software?

U.S. sanctions on Iran do not impose any restrictions as to the use of the Farsi language. [02-07-2014]

348. May U.S. persons employ agents in Iran to facilitate sales, create or fund a physical sales presence on the ground in Iran, or utilize Iranian commercial marketing services in furtherance of exports authorized under GL D-1?

No.  GL D-1 does not authorize the employment of persons in Iran to facilitate sales, the maintenance of a physical sales presence in Iran, or the utilization of Iranian marketing services.  However, certain copy-ready advertising materials are exempt from the prohibitions of the ITSR to the extent they qualify as information or informational materials pursuant to 31 C.F.R. § 560.210(c). [02-07-2014]

349. Are all applications designed to run on mobile operating systems (“apps”) covered by GL D-1?

Amendments made by GL D-1 clarify that the exportation to Iran of apps that are designated EAR99 or classified under export control classification number (“ECCN”) 5D992.c, as specified in category (8) of the Annex to GL D-1, is authorized under GL D-1, including apps downloaded via online app stores. [02-07-2014]

350. Is the exportation of anti-virus, anti-malware, anti-tracking, and anti-censorship software authorized?

Yes.  Paragraph (a)(3) of GL D-1 authorizes the exportation of certain anti-virus, anti-malware, anti-tracking, and anti-censorship software, as specified in categories (6), (7), and (9) of the Annex.  [02-07-2014]

351. What do Secure Socket Layers (SSLs), listed in the Annex to GL D-1, encompass?

Amendments made by GL D-1 to category (11) of the Annex clarify that SSLs encompass “[p]rovisioning and verification software for Secure Socket Layer (SSL) certificates designated EAR99 or classified under ECCN 5D992.c, and services necessary for the operation of such software.”  Additional provisioning and verification software not subject to the EAR may be included under the new GL D-1 authorization for, in relevant part, software not subject to the EAR that is exported or reexported, directly or indirectly, by a U.S. person located outside the United States, that is of a type described in the Annex to GL D-1 provided that it would be eligible for classification under an ECCN listed in the Annex (here, ECCN 5D992.c), or designated as EAR99, if it were subject to the EAR. [02-07-2014]

352. Are mobile phone accessories and computer accessories and peripherals authorized for export under GL D-1?

Yes.  Amendments made by GL D-1 clarify that accessories for use in conjunction with hardware specified in categories (1) and (5) of the Annex and peripherals for use in conjunction with hardware specified in category (5) are authorized for export to Iran under GL D-1.  Authorized accessories for mobile phones include headsets, cases, holsters, mounts, chargers, docks, display protectors, cables, adapters, and batteries.  Authorized accessories for computers include keyboards and mice; authorized peripherals for computers include consumer disk drives and other data storage devices.  As set forth in a note to the Annex to GL D-1, for the purposes of the Annex, the term “consumer” refers to items that are: (1) generally available to the public by being sold, without restriction, from stock at retail selling points by means of any of the following:  (a) over-the-counter transactions; (b) mail order transactions; (c) electronic transactions; or (d) telephone call transactions; and (2) designed for installation by the user without further substantial support by the supplier.  [02-07-2014]

353. Is the exportation of parts or components for authorized hardware, such as microprocessors, authorized under GL D-1?

No.  While the exportation of certain accessories and peripherals specified in categories (1) and (5) of the Annex is authorized under paragraph (a)(3) of GL D-1, the exportation of hardware parts or components is not.  Requests for specific licenses to export parts or components, including replacement parts, will be considered on a case-by-case basis. [02-07-2014]

354. Does GL D-1 authorize the export of bundled software that includes both software authorized by GL D-1 and software that is not authorized by GL D-1? 

No.  To qualify for GL D-1, all individual software items in a bundled package must fall within one of the GL D-1 authorizations.  If some software in a bundled package is authorized by GL D-1, but other software is not, the portion of the software falling outside the authorizations in GL D-1 would need to be otherwise exempt or authorized or would require a specific license for export.  For example, a bundle of software that included exclusively software authorized by GL D-1 and by ITSR § 560.540 could be exported. [02-07-2014]

355. Does GL D-1 authorize the exportation to Iran of fee-based desktop publishing software and productivity software suites used to publish documents, presentations, spreadsheets, charts, music, movies, and digital images? 

Yes.  Fee-based desktop publishing software and productivity software suites have been determined to fall within the scope of fee-based software necessary to enable services incident to the exchange of personal communications as described in paragraph (a)(2) of GL D-1, provided that the software meets the additional criteria in that paragraph (e.g., for software subject to the EAR, the software is designated EAR99 or is classified by the U.S. Department of Commerce on the Commerce Control List, 15 C.F.R. part 774, supplement No. 1 (“CCL”) under ECCN 5D992.c).  By contrast, enterprise management software has been determined not to fall within the scope of fee-based software necessary to enable services incident to the exchange of personal communications as described in paragraph (a)(2) of GL D-1. [02-07-2014]

356. Does GL D-1 authorize the exportation of fee-based cloud computing services to Iran?

Yes.  Paragraph (a)(1) of GL D-1 authorizes the exportation to Iran of fee-based cloud computing services incident to the exchange of personal communications over the Internet.  In addition, paragraphs (a)(2)(i) and (a)(3) authorize software necessary to enable such services, provided that such software is designated EAR99 or classified by the U.S. Department of Commerce on the CCL under export control classification number (“ECCN”) 5D992.c or, in the case of software that is not subject to the EAR, would be designated EAR99 if it were located in the United States or would meet the criteria for classification under ECCN 5D992.c if it were subject to the EAR. [02-07-2014]

357. For purposes of category (5) of the Annex to GL D-1, what would be considered “software required for effective consumer use” of personal computing devices, laptops, and tablets?

“Software required for effective consumer use” consists of software essential to the operation of the hardware listed in category (5) of the Annex to GL D-1, including, for example, drivers and patches.  Operating systems are separately authorized in category (5) of the Annex to GL D-1. [02-07-2014]

358. What are “residential consumer” satellite terminals and transceiver equipment?

Satellite terminals and other equipment listed in category 4 of the Annex to GL D-1 shall be deemed “residential consumer” if the equipment is designated EAR99 or classified under ECCN 5A992.c, 5A991.b.2, or 5A991.b.4 or, in the case of equipment that is not subject to the EAR, would be designated EAR99 if it were located in the United States or would meet the criteria for classification under ECCN 5A992.c, 5A991.b.2, or 5A991.b.4 if it were subject to the EAR. [02-07-2014]

397. What are the changes made by Sudan General License No. 1A?

On April 15, 2013, OFAC issued General License 1 authorizing certain academic and professional exchange activities between the United States and Sudan, which are otherwise prohibited by the Sudanese Sanctions Regulations (31 C.F.R. Part 538).  

On August 11, 2014, OFAC issued amended Sudan General License No. 1A (“GL 1A”).  These amendments modify the scope of the authorizations as follows:

1. GL 1A expands the definition of “U.S. academic institutions” to include their third-country branch campuses, and the authorizations for U.S. academic institutions as defined now include their contractors.
2. GL 1A authorizes U.S. academic institutions to engage in activities involving Sudanese nationals that are necessary for such nationals to apply to U.S. academic institutions and for authorized professional training seminars.  Such activities may include accepting payments for tuition, admission application fees, and document certification or warehousing fees.  U.S. academic institutions located in the United States may engage in transactions with Sudanese nationals authorized by this general license before a non-immigrant student visa is issued to such nationals.
3. GL 1A also authorizes U.S. financial institutions to process transfers of funds by Sudanese nationals to pay fees and expenses (including tuition, living expenses, and enrollment fees) to enable Sudanese nationals to participate in authorized academic exchange programs (in the United States or at a third-country branch campus) or authorized professional training seminars.

[08-11-2014]