The new sanctions targeting Iran which impose prohibitions on U.S. depository institutions maintaining correspondent or payable through accounts for foreign financial institutions who engage in “significant” transactions with the Central Bank of Iran or other designated banks has caused a number of questions to arise. The most prevalent question is: what constitutes a “significant” transaction for purposes of the Iranian Financial Sanctions Regulations (IFSR).
While there is no set definition for the term “significant” as used in the IFSR, when determining whether a transaction or financial service is “significant,” OFAC will consider a number of factors:
(1) the size, number, frequency, and nature of the transaction(s);
(2) the level of awareness of management of the transaction(s) and whether or not the transaction(s) are a part of a pattern of conduct;
(3) the nexus between the foreign financial institution involved in the transaction(s) and a blocked Islamic Revolutionary Guard Corps individual or entity or blocked Iran-linked financial institution;
(4) the impact of the transaction(s) on the goals of CISADA;
(5) whether the transaction(s) involved any deceptive practices; and
(6) any other factor that may be relevant to OFAC.
As is usually the case with OFAC, these determinations are always made on a case-by-case basis. Once, a transaction is determined to be significant, then the foreign financial institution engaged in such transactions will be sanctioned and lose access to U.S. banks by losing their ability to maintain correspondent or payable through accounts at those institutions. The entities which are designated in such a manner are to be listed in a new list maintained by OFAC known as the Part 561 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 firstname.lastname@example.org.