In the past two days, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has designated parties pursuant to various economic sanctions programs and has listed their names on the Specially Designated Nationals and Blocked Persons List (“SDN List”). The designations have come under the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”), Executive Order 13224 and the Global Terrorism Sanctions Regulations, and the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRSHRA”). As is the case with most OFAC SDN List designations, U.S. persons are prohibited from engaging in transactions with the designated parties and any assets they hold under U.S. jurisdiction will be blocked during the time the designation is in effect.

The Kingpin Act designations targeted five individuals that OFAC believes are involved with the narcotics trafficking activities of the Sinaloa Cartel. The ITRSHRA designation, on the other hand, targeted an entity that was already blocked under economic sanctions and listed in the Annex to Executive Order 13622: The National Iranian Oil Company (“NIOC”). This designation carries with it many negative consequences for NIOC, however for those foreign persons that knowingly engage in significant transactions with NIOC after yesterday’s designation they also run the risk of being targeted for sanctions. However, any significant transactions, financial services, or material support involving NIOC and the purchase of Iranian petroleum by a foreign financial institution or entity based in a country that has received a significant reduction exception from the Secretary of State does not carry potential sanctions consequences. That said, 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 petroleum and involves NIOC. The consequences of the designation of NIOC under the ITRSHRA is similar to those resulting from its designation under Executive Order 13622, however, a significant difference between these authorities is that the NDAA exception in ITRSHRA section 312 is limited to transactions for the purchase of petroleum from Iran.

Between the Iran Sanctions Act, CISADA, NDAA 1245, Executive Order 13622, and the ITRSHRA, the secondary boycotting of foreign financial institutions and entities that are involved in Iran’s trade of petroleum and petroleum products is becoming an increasingly confusing phenomenon. The rules and exemptions contained in this myriad of regulations and statutes is enough to send anyone’s head spinning. I can’t help but think that this could all be handled in one piece of legislation or one executive order that just brings everything together clearly and concisely. On the other hand, it could be part of the government’s strategy to make the law so confusing and burdensome that foreign financial institutions may just avoid dealings with Iran altogether, rather than figure what they can and can’t do under this mess of regulatory scheme. Or it could just be another unintended consequences of the growing Iran sanctions regime.

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.