Since July 1, 2010, when the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) was enacted, there have been many developments under the law, as well as the recent passage of the complementary National Defense Authorization Act for Fiscal Year 2012 (NDAA). The following timeline provides a summary of key actions related to the laws and U.S. sanctions on Iran more generally.
July 1. The CISADA is signed into law, amending the Iran Sanctions Act of 1996 (ISA). Key provisions include the following:
- Provides for sanctions against non-U.S. persons engaging in certain petroleum-related business or investment in Iran. In addition, prospective U.S. government contractors must certify they are not engaging in any activity for which sanctions are imposed. (Sec 102).
- Provides for the prohibition or imposition of strict conditions on opening or maintaining a correspondent or payable-through account by a foreign financial institution that is found to facilitate or support activities related to weapons of mass destruction development, terrorist support, or business with sanctioned entities. (Sec 104(c)).
- Imposes penalties on any individual or entity owned or controlled by a domestic financial institution that engages in a transaction with the Iran Revolutionary Guard Corps. (Sec 104(d)).
- Sanctions persons involved in serious human rights abuses. (Sec 105).
- Authorizes state and local governments to adopt Iran divestment provisions. (Sec 201).
August 16. The Final Rule for the Iranian Financial Sanctions Regulations, 31 CFR Part 561, (IFSR) is published in Federal Register, implementing CISADA provisions 104(c) and 104(d) related to foreign financial institutions.
September 28. The President issues Executive Order 13553, which blocks property in the United States or under the control of U.S. persons of persons determined to be acting on behalf of or supporting the commission of “serious human rights abuses” by the Government of Iran, and specifically designates eight Iranian government officials for blocking.
The same day, the ITR are amended through removal of the general licenses at 31 C.F.R. 560.534 and 560.535 for imports to the United States of foodstuffs and carpets of Iranian origin.
February 11. The Iranian Human Rights Abuses Sanctions Regulations, 31 C.F.R. Part 562, are issued in accordance with Executive Order 13553 (see September 28, 2010, above).
May 23. Executive Order 13574 directs the Secretary of the Treasury to take action consistent with sanctions imposed under the ISA including, as appropriate, prohibiting transactions in foreign exchange, prohibiting financial institutions from making loans or providing credits, prohibiting transfers of credits that are subject to U.S. jurisdiction, blocking all property and interests in property in the United States, and restricting or prohibiting imports into the United States with respect to ISA-sanctioned persons.
May 24. The U.S. Department of State sanctions seven entities, in addition to two already sanctioned, under the ISA.
October 5. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issues a Final Rule requiring U.S. banks, when asked to do so by FinCEN, to request information from non-U.S. banks about correspondent accounts held for certain Iranian-related parties or their affiliates.
November 20. The President issues Executive Order 13590, which authorizes the State Department to impose sanctions against persons providing goods, services, support, or technology above specific dollar thresholds for Iran’s petrochemical sector.
November 25. FinCEN designates Iran as a jurisdiction of primary money laundering concern, paving the way for the Department of the Treasury to take special measures against Iran.
December 31. The NDAA is signed into law. Key provisions include the following:
- The “financial sector of Iran, including the Central Bank of Iran,” is designated as a primary money laundering concern. (Section 1245(b)).
- The President is directed to prohibit the opening, and prohibit or impose strict conditions on the maintenance, of correspondent accounts or payable-through accounts by any foreign financial institution that the President determines has knowingly conducted or facilitated any significant financial transaction with the Central Bank of Iran (the CBI) or another Iranian financial institution designated by the Secretary of the Treasury under the International Emergency Economic Powers Act. (Section 1245(d)).
- The President is required to make a determination 90 days after enactment of the NDAA and every 180 days thereafter of whether the price and supply of petroleum is sufficient to permit purchasers of petroleum products from Iran to reduce their purchases. (Section 1245(d)).
- Sanctions will apply to transactions for the purchase of petroleum or petroleum products “conducted or facilitated” by foreign financial institutions, though sanctions will not apply until 180 days after enactment of the NDAA. There is an exception for countries that have significantly reduced their volume of crude oil purchases from Iran. (Section 1245(d)).
- The President may waive the imposition of sanctions for 120 days if doing so is in the interest of national security. If granting a waiver, the President must report to Congress on concrete cooperation expected in exchange for the waiver. (Section 1245(d)).
- There is an exception for sales of food, medicine, and medical devices to Iran. (Section 1245(d)).
January 12. As of January 12, a total of thirteen firms were subject to sanctions under the ISA, representing entities based in Belarus, China, Jersey, Liberia, Monaco, Singapore, Switzerland, the United Arab Emirates, and Venezuela.
February 5. The President issues Executive Order 13599 to block property of the Government of Iran, including the CBI, and anyone deemed to be acting on the Government’s behalf.
February 27. The IFSR are amended to reflect the NDAA. Thus, as of this date, there are two main triggers of activity that can result in prohibitions or restrictions on correspondent or payable-through accounts for foreign financial institutions:
- Under the CISADA, e.g., facilitation of the Government of Iran’s efforts to develop weapons of mass destruction, support of terrorists or those persons sanctioned by the United Nations, or money laundering (31 C.F.R. 561.201); and
- Under the NDAA (significant financial transactions with the CBI) (31 C.F.R. 561.203).
February 29. The first date on which the Secretary of the Treasury may designate foreign financial institutions doing business with the CBI for restrictions on correspondent accounts or payable-through accounts.
March 20. The Secretary of State announces that 11 countries – Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and the United Kingdom – have significantly reduced their volume of crude oil purchases from Iran. As a result, the NDAA financial sanctions will not apply to these countries for a renewable period of 180 days. Several days later, a State Department spokesperson indicates that another 12 countries import Iranian crude oil but have not reduced their volume of crude oil purchases.
March 30. The President announces his determination that there are sufficient levels of petroleum production to allow countries to significantly reduce their import of Iranian oil.
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Going Forward. In addition to steps taken to date, it seems likely that the U.S. government will continue to look for opportunities to extend sanctions on Iran, particularly when action can be taken in concert with European and other allies that already have taken steps to reduce trade with Iran. One forthcoming date of note is June 28, 2012, which is 180 days after the NDAA was enacted. This is the first date on which NDAA restrictions related to correspondent accounts and payable-through accounts may apply on foreign central banks or other government-owned banks for conducting or facilitating transactions for the sale or purchase of petroleum or petroleum products from Iran.
Also presumably forthcoming, though the precise timing is unknown, is release of a Part 561 List that identifies foreign banks designated under the IFSR. Since 2010, banks in Iran and a number of other countries have been designated on Office of Foreign Assets Control Specially Designated Nationals List with reference to the IFSR, but to date, no banks have been specifically designated under the IFSR, nor has the Part 561 List been made publicly available.
One striking aspect of the developments to date is how many authorities have been amassed under the CISADA and NDAA. Although a number of entities have been sanctioned under the ISA, it appears that more designations, including of foreign financial institutions, could be possible under existing authorities. Now that some of the key dates have arrived and predicate steps have been taken under the NDAA, further actions related to the financial, energy, and other effected industries could occur at any time. Parallel diplomatic and political action with respect to Iran – including multi-party talks in Turkey on April 14, 2012, and further talks that are scheduled for Baghdad, Iraq on May 23, 2012 – may also, of course, affect further U.S. actions under the CISADA and NDAA. We will continue to monitor the situation and provide updates as appropriate.