The Los Angeles Times is reporting to day that U.S. officials have stated that they will not seek sanctions against the Central Bank of Iran (CBI) despite pressure to impose such sanctions in recent months. Although no U.S. officials are cited in the article, it was stated that the U.S. believes that sanctions on CBI would be detrimental to the Iranian people and be difficult to enforce due to a need for international cooperation which may not be easily obtained.

This news comes as surprising particularly after the House Foreign Affairs Committee’s Mark Up Hearing on the new Iran Threat Reduction Act of 2011 bill that occurred this past Wednesday. Even more surprising is the revelation the CBI will not be designated after the amendment to the Iran Threat Reduction Act proposed by Representative Howard Berman and approved by the House Foreign Affairs Committee. Essentially the amendment requires that the President impose sanctions upon CBI upon a finding that CBI has provided financial services to Iran’s proliferation activities, Iran’s Revolutionary Guard Corps, or to any financial institution sanctioned under the International Emergency Economic Powers Act (IEEPA) for Iran’s proliferation activities or support of terrorism.

Well that doesn’t necessarily mean CBI will be designated does it? If this bill as it is currently written passes into law then yes it does. CBI as a regulating body supervises Iran’s banks, issues and controls currency, etc. Since a number of Iranian banks have been designated for sanctions due to their alleged involvement in the aforementioned activities, then CBI’s supervision can surely be interpreted as providing a financial service. Thus, Rep. Berman’s amendment is merely a thinly veiled attempt to sanction CBI by placing certain criteria for their designation; criteria which will surely be met by the mere existence of sanctions on other banks which CBI has supervises.

Whether this bill will one day pass into law is anyone’s guess. A number of commentators have stated it will pass the House but get shot down in the Senate. On the other hand, 90 Senators just a few months ago sent President Obama a letter requesting the designation of CBI. In sum, a CBI designation could still be on the horizon so now maybe a good time for OFAC compliance programs to consider the possibility and adjust operations accordingly.

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