Today, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) amended the Iranian Financial Sanctions Regulations (“IFSR”) in light of the mandates of Section 1245 of the National Defense Authorization Act (“NDAA”). This new amendment accomplishes a number of things which have been outlined below:

1. Updates in light of NDAA Section 1245: Under today’s action, Section 561.203 was amended to add the prohibitions and exceptions set forth in section 1245(d) of the NDAA. Therefore, 31 C.F.R. §§ 561.318 through 561.327 now defines new key terms used in the IFSR, and §§ 561.406 and 561.407 outlines new interpretive provisions under the IFSR. Of particular importance are:

a. 31 C.F.R. §§ 561.318 and 561.319: defining the terms petroleum and petroleum products.
b. 31 C.F.R. § 561.327: defining the term food, medicine, and medical devices.
c. 31 C.F.R. § 561.406: interpreting the meaning of “country with primary jurisdiction over the foreign financial institution.”
d. 31 C.F.R. § 561.404: outlining the factors that the Secretary of the Treasury will consider in determining whether a transaction is significant for purposes of the IFSR.

2. IEEPA Added to the IFSR: OFAC has included the International Emergency Economic Powers Act (“IEEPA”) to the authority citation for the IFSR. This has lead to an amending of 31 C.F.R. § 561.802 of the IFSR to include an extension of IEEPA authorities to the Director of OFAC or any other person delegated the authority to act. In essence, this allows for OFAC to act pursuant not only to IEEPA, but also pursuant to Section 104 of CISADA.

3. New OFAC List: OFAC has removed references to Appendix A to Part 561 in the IFSR. In its place OFAC has developed a new list known as the Part 561 List. This List includes the names of the foreign financial institutions sanctioned under either 31 C.F.R. § 561.201 or § 561.203 and will also state the restrictions being applied to each sanctioned foreign financial institution. This new list will be maintained on OFAC’s Web site on its Iran Sanctions page. In addition, it will be published in the Federal Register.

4. New Reporting Requirements: The IFSR has added a reporting requirement to the general license in § 561.504, which authorizes transactions related to closing a correspondent account or a payable-through account for a foreign financial institution. This amendment extends the general license and reporting requirements applicable to correspondent accounts or payable-through accounts for a foreign financial institution closed pursuant to the newly amended 31 C.F.R § 561.203, as well as § 561.201. If a foreign financial institution is sanctioned pursuant to these amended sections, the name of the foreign financial institution will be added to the Part 561 List. Moreover, paragraph (a) of § 561.504 now authorizes those transactions related to closing a correspondent account or a payable-through account for a foreign financial institution whose name is added to the Part 561 List within 10 days of the effective date of the prohibition. Any U.S. financial institution required to close a correspondent account or a payable-through account for a foreign financial institution whose name is added to the Part 561 List must file a report with OFAC that provides full details on the closing of each such account within 30 days of the closure of the account. Such reports must include complete information on all transactions processed or executed in winding down and closing the account.

There were other changes made to the IFSR which are not included above. This posting only sought to outline the most relevant amendments and changes. For a full reading of the new IFSR please click here.

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.