Recently, we had an opportunity to successfully represent a private individual who held assets in an Iranian entity obtain a license from the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC). While this is not uncommon, the twist in this case was that the entity was a Specially Designated National (SDN) which had been designated pursuant to Executive Order 13382 and the Counter Proliferation of Weapons of Mass Destruction sanctions program.

FACTS: The Applicant in this case maintained stock interests in Company X which was located in Iran and is designated pursuant to Executive Order 13382. Company X produces textile products, including clothing and other wool products. Applicant’s stock assets in Company X were purchased in 1977, and are currently valued at several hundreds of thousands of U.S. dollars. The purchase of the stocks was made over thirty (30) years prior to Company X’s designation. Applicant does not have any managerial control or authority over Company X’s operations, nor does he provide any service to this entity. He merely holds shares in Company X and has not transacted in anyway with these shares or received dividends from them since they were first acquired over thirty (30) years ago. Prior to consulting with undersigned counsel, Applicant had no knowledge of the Regulations or the SDN List. In seeking the license, Applicant hoped to sever all ties with this designated entity in order to comply with U.S. law.

ARGUMENTS: In arguing for issuance of this license, the primary point we made to OFAC was that, despite Company X being on the OFAC SDN List, the sale of stock in Company X furthered U.S. foreign policy objectives because at the end of the day it sought divestment from Iran. If the goal is to isolate Iran and/or parties on the OFAC SDN List, then it would be within the spirit of both the Iran sanctions program and the Counter Proliferation sanctions program to allow for a U.S. person to cut his ties with that company and transfer the proceeds to the United States.

Analysis/Conclusion: OFAC agreed with our position, although it took them nineteen (19) months to return a decision on the license application. They granted the license for a one (1) year period. This license allows the Applicant to engage in all transactions necessary to sell the stock assets and to transfer the funds to the U.S. I believe that there was a great deal of discussion about this license application at OFAC. They rarely ever grant authorizations to engage in dealings with SDNs, however, in this case allowing a U.S. person to divest from that entity was in line with the foreign policy objectives of the U.S., and the particular entity involved did not raise any additional concerns which would bar the transaction from proceeding. This may not always be the case as OFAC views every matter on its own specific set of underlying facts. However, this decision gives one a sense that they may be willing in some cases to grant authorizations to divest from entities who have been placed on OFAC’s SDN List.

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.