When is an exemption no longer an exemption? Apparently, when you are a U.S. depository institution attempting to comply with U.S. economic sanctions regulations administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). What prompts me to say this? Well I have received a couple of calls last week, both from regular persons as well as counsel from other firms, stating that U.S. banks are no longer willing to process funds transfers to or from Iran related to travel expenses. What is the banks’ reasoning for not doing so? Apparently, it is because section 560.516(a) of the new Iranian Transactions and Sanctions Regulations (ITSR) states that U.S. depository institutions are authorized to process transfers arises from transactions, or ordinary and incidental to such transactions, authorized by a general or specific license issued pursuant to the ITSR and that does not involve the debiting and crediting of an Iranian account.

The old language of 560.516 found in the former Iranian Transactions Regulations (ITR) while containing the same authorization now found in the ITSR also included a subsection which read: “The transfer arises from an underlying transaction that is exempted from regulation pursuant to §203(b) of the International Emergency Economic Powers Act (50 U.S.C. 1702(b)), such as an exportation to Iran or importation from Iran of information and informational materials, a travel-related remittance, or payment for the shipment of a donation of articles to relieve human suffering.” In the ITSR this section has been removed and there is no mention of travel or exempted transactions anywhere in the new 560.516. Of course, that does not mean travel related remittances are no longer authorized. The transactions in question are clearly allowed. Such allowance isn’t explicitly stated in 560.516, because it doesn’t need to be. Indeed, there is no need to authorize these transactions because the prohibitions in the ITSR do not apply to them.

For those skeptical compliance officers out there, I offer you all of the security you need (or can get from an OFAC perspective) in 31 C.F.R. 560.210(d) which reads: “The prohibitions contained in this part do not apply to transactions ordinarily incident to travel to or from any country, including importation or exportation 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 of such travel including nonscheduled air, sea, or land voyages.” There you have it, and it’s pretty self explanatory and clear: If the prohibitions of the ITSR do not apply to travel transactions, then the processing of transfers related to travel transactions do not require authorization under 31 C.F.R. 560.516. Compliance personnel, this is your captain speaking. You are now free to move around the sanctions.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.