We frequently get calls where clients want to know the “approved” banks in Iran they can work with or have accounts at. As I frequently mention, there are no “approved” Iranian banks, and moreover, all Iranian financial institutions are either blocked (pursuant to Executive Order (“E.O.”) 13599) or they are designated pursuant to other sanctions programs administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). As readers of this blog may know, those Iranian banks blocked solely pursuant to E.O. 13599 can still be utilized if the transaction in which they have an interest in is authorized pursuant to an exemption, or an OFAC general or specific license. This does not mean, however, that a U.S. person can have a bank account at those banks or in any other Iranian banks.

The maintenance of a bank account in Iran is a violation of 31 C.F.R. 560.201 (importation of an Iranian-origin service) and 31 C.F.R. 560.206 (transaction in Iranian-origin services). As such, it is clearly a violation of U.S. law to have a bank account in Iran. That said, in terms of enforcing against such violations, OFAC has taken a very different stance than that of the Department of Justice (DOJ).

DOJ, through various U.S. Attorney’s Offices, has brought a slew of criminal prosecutions over the last several years against parties maintaining bank accounts in Iran. Included with such charges are typically tax violations for failing to report foreign bank accounts (Report of Foreign Bank and Financial Accounts or FBAR), and money laundering. DOJ has been particularly aggressive in these types of cases when money leaves the United States and is deposited into an Iranian account, an act they view as a separate violation of 31 C.F.R. 560.207 for prohibited investment. In addition, DOJ really gets hung up on the fact if a bank account is held at a “designated bank”, namely a bank designated pursuant to E.O.s 13382 or 13224. There is some misguided belief that if the defendant knew the funds were being sent to a 13382 designated bank for example–which include many of Iran’s largest banks–that the defendant must have intended to support Iran’s proliferation efforts. As such, I have represented a number of defendants in criminal cases where the maintenance of such accounts and the transfer of funds from the U.S. to those accounts has been prosecuted.

On the other hand, I have also found that OFAC–the agency that is actually tasked with the administration and enforcement of U.S. economic sanctions–treats such violations much differently. Typically in that context, I have found that OFAC will react to the finding of a violation for having a bank account in Iran with a Cautionary (warning) Letter. This letter basically says, yes having that bank account was/is a violation, don’t do it again. However, it was a recent case I had which caused me to write this post.

In that case a U.S. person sent millions of dollars to Iran to be held in bank account at a bank which was designated pursuant to E.O. 13382. This account was opened to send money to family members in Iran and have a place for them to draw upon funds for their various personal needs. In this case, OFAC, after a two year investigation, decided to return a Cautionary Letter as well. I was fairly surprised, because this is clearly the type of case that DOJ would have prosecuted had it been in their hands.

What’s the point? First, and regardless of anything else, don’t have a bank account in Iran without first obtaining an OFAC license to maintain that account. Two, there are different enforcement processes which one may be subjected to in relation to having such a bank account. Of course, the DOJ enforcement process is much harsher, but DOJ must also prove that the defendant acted willfully, meaning that the defendant knew what the law was and ignored it in carrying out the offense conduct. This is not too onerous a burden as DOJ often uses the theory that willfulness of an embargo violation can be proven by a defendant knowing that they can not remit funds directly between the United States and Iran.

In short, it’s important to note that there are different enforcement priorities between OFAC and DOJ. As such, some things that OFAC would close with a Cautionary Letter, DOJ would potentially pursue for criminal prosecution. Although you could argue to DOJ that OFAC wouldn’t deem this a violation worth prosecuting–a strategy I have effectively used in the past–sometimes it won’t matter. DOJ is not bound by what OFAC would do or what OFAC thinks of a situation. As such, when it comes to Iranian bank accounts the golden rule is that there are no approved banks, and if you’ve got one it’s time to get a license to close it.