U.S. law, particularly the Iranian Transactions and Sanctions Regulations (ITSR), permits without a specific license from OFAC, certain non-commercial remittances to or from Iran (31 C.F.R. § 560.550), as well as the transfer to the United States of the proceeds of the sale of real property in Iran that is inherited by U.S. persons and meets other specified criteria (31 C.F.R. § 560.543). Among other requirements, related funds transfers must be processed by U.S. depository institutions (and/or, for transactions under 31 C.F.R. § 560.550, a U.S. registered broker or dealer in securities) and initially through a third country financial institution.
While the U.S. withdrawal from the Iran Nuclear Deal (the JCPOA) has not altered the permissibility of such transactions (and there is no indication at this point that changes to the relevant regulations are forthcoming), the U.S. withdrawal has nevertheless prompted some third country financial institutions, companies and other parties to begin to wind down business in or involving Iran, or to step back from plans to do Iran business, out of concern about U.S. secondary sanctions.
As a practical matter, the chilling effect of the U.S. withdrawal from the Iran Nuclear Deal on third country financial institutions may extend to legal transactions, such as noncommercial remittances and inheritance proceeds transfers. Whether and to what extent this happens (including inadvertently in some cases) will likely become evident as the U.S. re-imposes sanctions and demonstrates its commitment (or not) to imposing secondary sanctions.
For U.S. persons seeking to engage in permitted noncommercial, personal remittance or inheritance-related transactions, the higher risk sensitivity of some third country (and U.S.-based) financial institutions may complicate (or thwart in some cases), legal transactions. In light of this, persons seeking to engage in such legal transactions in the post-U.S. JCPOA withdrawal environment should exercise extra care in initiating and executing legal transfers with third country financial institutions, including, for example, by:
- conducting (or securing) careful, fact-intensive legal analyses of proposed transactions to ensure they fit within the permissible noncommercial remittance or inheritance proceeds categories;
- checking (as would normally be expected as a matter of basic diligence) that no blocked or otherwise problematic parties are or might become involved in any proposed transactions;
- proactively gathering and presenting needed and relevant information and documentation prior to or at the point of initiation of permitted transactions (preferably to a relationship manager or other knowledgeable or reliable financial institution representative); and,
- engaging OFAC as needed for clarification where there is uncertainty as to the classification of a proposed transaction, or for other reasonable purposes.
Of course, additional or other steps may be warranted depending on the circumstances. Generally, however, parties seeking to transact legal noncommercial remittance or inherited property related transactions should be mindful of the fact that while applicable U.S. regulations have not changed, the perception or reality of increased risk to third country financial institutions vis-a-vis Iran might require enhanced care to avoid delays, unnecessary complexity or other undesirable events.