The United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) has taken aim at Iran’s nuclear proliferation efforts by placing an Iranian owned bank, Europäisch­-Iranische Handelsbank (“EIH”), on the Specially Designated Nationals (“SDN”) list. A few months ago this would have meant that U.S. persons would be prohibited from engaging in transactions with EIH. However, since the promulgation of the Iranian Financial Sanctions Regulations (“IFSR”) last month, this designation has even greater repercussions.

OFAC contends that EIH provides financial services to Bank Mellat, Persia International Bank, the Export Development Bank of Iran and Post Bank of Iran. All of these entities have previously been designated as SDNs by OFAC.

According to U.S. authorities, EIH has facilitated Iran’s proliferation activities on a number of occasions, including:

1. Facilitating nearly $350,000 of business between a weapons exporter and a subsidiary of WMD proliferator Iran Electronics Industries (IEI);

2. Facilitating a transaction of more than $250,000 directly between IEI and the same arms exporter;

3. Enabling Iran’s missile programs to purchase more than $3 million of material;

4. Facilitating almost $1 million in business involving an Iranian WMD proliferator.

EIH is alleged to have engaged in many of these activities in conjunction with Bank Mellat. In addition, Ali Divandari, Bank Mellat’s Chairman and Managing Director, has also served as EIH Deputy Chairman of the Board. Mr. Divandari is also designated as an SDN.

Parties who have been designated as SDNs do have the ability to challenge the designation under 31 C.F.R. 501.807, however, it should be noted that the process is complicated and can take many years before a designation is overturned. The designations serve as an economic death penalty and will remain in place for the life of the sanctions program or until successfully challenged.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.