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How will new Iran Sanctions impact the black market trade in U.S. dollars?

Buried among the flurry of Iran sanctions measures imposed this summer by the United States Government was the little talked about Executive Order (E.O) 13622. This new executive order placed additional sanctions against the Iranian energy and petroleum sectors. Specifically, E.O. 13622 authorizes the Secretary of the Treasury to impose financial sanctions on foreign financial institutions found to have knowingly conducted any significant financial transactions with the National Iranian Oil Company (“NIOC”) or Naftiran Intertrade Company (“NICO”), excluding those transactions for sales of refined petroleum products to NIOC or NICO that are below the threshold triggering sanctions under the Iran Sanctions Act. In addition, E.O. 13622 authorizes the imposition of sanctions on foreign financial institutions found to have knowingly facilitated significant transactions for the acquisition of petroleum or petroleum products from Iran through any channel. The exceptions under the NDAA apply to those sanctions imposed under E.O. 13622.

Moreover, E.O. 13622 authorizes the Secretary of the Treasury to block the interests in property of any person determined to have provided material assistance, goods, and/or services in support of the NIOC, NICO, or the Central Bank of Iran (“CBI”), or in the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

In my mind the most interesting aspect of this executive order is the imposition of sanctions upon those assisting the Government of Iran in the acquisition of U.S. bank notes. It is widely reported that there is a very active trade on the black market in Iran for U.S. dollars. With many people now seeking to physically transport currency between Iran and the United States for legitimate authorized transactions between the two countries, it will be interesting to see how the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) will deal with those involved in transporting such funds. Since the amounts are so low OFAC will likely ignore those transactions. Moreover, many of those individuals could possibly be U.S. persons. Since, OFAC normally does not designate U.S. persons, because it leads to litigation arising from Due Process claims, it will be interesting to see how often the authorities under E.O. 13622 relating to trade in U.S. bank notes with the Government of Iran will be utilized.

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.

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