Frequently Asked Questions and Answers

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General Questions

1. What is OFAC and what does it do?

The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. [09-10-02]

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2. How long has OFAC been around?

The Treasury Department has a long history of dealing with sanctions. Dating back prior to the War of 1812, Secretary of the Treasury Gallatin administered sanctions imposed against Great Britain for the harassment of American sailors. During the Civil War, Congress approved a law which prohibited transactions with the Confederacy, called for the forfeiture of goods involved in such transactions, and provided a licensing regime under rules and regulations administered by Treasury.

OFAC is the successor to the Office of Foreign Funds Control (the "FFC''), which was established at the advent of World War II following the German invasion of Norway in 1940. The FFC program was administered by the Secretary of the Treasury throughout the war. The FFC's initial purpose was to prevent Nazi use of the occupied countries' holdings of foreign exchange and securities and to prevent forced repatriation of funds belonging to nationals of those countries. These controls were later extended to protect assets of other invaded countries. After the United States formally entered World War II, the FFC played a leading role in economic warfare against the Axis powers by blocking enemy assets and prohibiting foreign trade and financial transactions.

OFAC itself was formally created in December 1950, following the entry of China into the Korean War, when President Truman declared a national emergency and blocked all Chinese and North Korean assets subject to U.S. jurisdiction. [05-02-06]

3. What does one mean by the term "prohibited transactions" ?

Prohibited transactions are trade or financial transactions and other dealings in which

U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute. Because each program is based on different foreign policy and national security goals, prohibitions may vary between programs.[06-16-06]

4. Are there exceptions to the prohibitions?

Yes. OFAC regulations often provide general licenses authorizing the performance of certain categories of transactions. OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions. Guidance on how to request a specific license is found below and at 31 C.F.R. 501.801. [06-16-06]

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5. How do I determine if I have a valid OFAC match?

Please take the following “due diligence” steps in determining a valid OFAC match.

If you are calling about a wire transfer or other “live” transaction:

Step 1. Is the “hit” or “match” against OFAC’s SDN list or targeted countries, or is it “hitting” for some other reason (i.e., “Control List” or “PEP,” “CIA,” “Non-Cooperative Countries and Territories,” “Canadian Consolidated List (OSFI),” “World Bank Debarred Parties,” “Blocked Officials File,” or “government official of a designated country”), or can you not tell what the “hit” is?

If it’s hitting against OFAC’s SDN list or targeted countries, continue to 2 below.
If it’s hitting for some other reason, you should contact the “keeper” of whichever other list the match is hitting against. For questions about:
The Denied Persons List and the Entities List, please contact the Bureau of Industry and Security at the U.S. Department of Commerce at 202-482-4811.
The FBI’s Most Wanted List or any other FBI-issued watch list, please contact the Federal Bureau of Investigation (http://www.fbi.gov/contact/fo/fo.htm).
The Debarred Parties list, please contact the Office of Defense Trade Controls at the U.S. Department of State, 202-663-2700.
The Bank Secrecy Act and the USA PATRIOT Act, please contact the Financial Crimes Enforcement Network (FinCEN), 1-800-949-2732.
If you are unsure whom to contact, please contact your interdict software provider which told you there was a “hit.”
If you can’t tell what the “hit” is, you should contact your interdict software provider which told you there was a “hit.”

Step 2. Now that you’ve established that the hit is against OFAC’s SDN list or targeted countries, you must evaluate the quality of the hit. Compare the name in your transactions with the name on the SDN list. Is the name in your transaction an individual while the name on the SDN list is a vessel, organization or company (or vice-versa)?

If yes, you do not have a valid match.*
If no, please continue to 3 below.

Step 3. How much of the SDN’s name is matching against the name in your transaction? Is just one of two or more names matching (i.e., just the last name)?

If yes, you do not have a valid match.*
If no, please continue to 4 below.

Step 4. Compare the complete SDN entry with all of the information you have on the matching name in your transaction. An SDN entry often will have, for example, a full name, address, nationality, passport, tax ID or cedula number, place of birth, date of birth, former names and aliases. Are you missing a lot of this information for the name in your transaction?

If yes, go back and get more information and then compare your complete information against the SDN entry.
If no, please continue to 5 below.

Step 5. Are there a number of similarities or exact matches?

If yes, please call the hotline at 1-800-540-6322.
If no, you do not have a valid match.*

If you are calling about an account:

Step 1. Is the “hit” or “match” against OFAC’s SDN list or targeted countries, or is it “hitting” for some other reason (i.e., “Control List” or “PEP,” “CIA,” “Non-Cooperative Countries and Territories,” “Canadian Consolidated List (OSFI),” “World Bank Debarred Parties,” or “government official of a designated country”), or can you not tell what the “hit” is?

If it’s hitting against OFAC’s SDN list or targeted countries, continue to 2 below.
If it’s hitting for some other reason, you should contact the “keeper” of whichever other list the match is hitting against. For questions about:
The Denied Persons List and the Entities List, please contact the Bureau of Industry and Security at the U.S. Department of Commerce at 202-482-4811.
The FBI’s Most Wanted List or any other FBI-issued watch list, please contact the Federal Bureau of Investigation (http://www.fbi.gov/contact/fo/fo.htm).
The Debarred Parties list, please contact the Office of Defense Trade Controls at the U.S. Department of State, 202-663-2700.
The Bank Secrecy Act and the USA PATRIOT Act, please contact the Financial Crimes Enforcement Network (FinCEN), 1-800-949-2732.
If you are unsure whom to contact, you should contact your interdict software provider which told you there was a “hit.”
If you can’t tell what the “hit” is, you should contact your interdict software provider which told you there was a “hit.”

Step 2. Now that you’ve established that the hit is against OFAC’s SDN list or targeted countries, you must evaluate the quality of the hit. Compare the name of your account holder with the name on the SDN list. Is the name of your account holder an individual while the name on the SDN list is a vessel, organization or company (or vice-versa)?

If yes, you do not have a valid match.*
If no, please continue to 3 below.

Step 3. How much of the SDN’s name is matching against the name of your account holder? Is just one of two or more names matching (i.e., just the last name)?

If yes, you do not have a valid match.*
If no, please continue to 4 below.

Step 4. Compare the complete SDN entry with all of the information you have on the matching name of your account holder An SDN entry often will have, for example, a full name, address, nationality, passport, tax ID or cedula number, place of birth, date of birth, former names and aliases. Are you missing a lot of this information for the name of your account holder?

If yes, go back and get more information and then compare your complete information against the SDN entry.
If no, please continue to 5 below.

Step 5. Are there a number of similarities or exact matches?

If yes, please call the hotline at 1-800-540-6322.
If no, you do not have a valid match.*

* If you have reason to know or believe that processing this transfer or operating this account would violate any of the Regulations, you must call the hotline and explain this knowledge or belief. [08-22-07]

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6. Where can I find the specific details about the embargoes?

A summary description of each particular embargo or sanctions program may be found in the Sanctions Program and Country Summaries area and in the Regulations by Industry area on OFAC's website. The text of Legal documents may be found in the Legal Documents area of OFAC's website which contains the text of 31 C.F.R. Chapter V and appropriate amendments to that Chapter which have appeared in the Federal Register. [09-10-02]

7. Can I get permission from OFAC to transact or trade with an embargoed country?

OFAC usually has the authority by means of a specific license to permit a person or entity to engage in a transaction which otherwise would be prohibited. In some cases, however, legislation may restrict that authority. [09-10-02]

8. What must I do to get permission to trade with an embargoed country?

In some situations, authority to engage in certain transactions is provided by means of a general license. In instances where a general license does not exist, a written request for a specific license must be filed with OFAC. The request must conform to the procedures set out in the regulations pertaining to the particular sanctions program. Generally, application guidelines and requirements must be strictly followed, and all necessary information must be included in the application in order for OFAC to consider an application. For an explanation about the difference between a general and a specific license as well as answers to other licensing questions, see the licensing questions link. [09-10-02]

9. What do you mean by "blocking?"

Another word for it is "freezing." It is simply a way of controlling targeted property. Title to the blocked property remains with the target, but the exercise of powers and privileges normally associated with ownership is prohibited without authorization from OFAC. Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property. [09-10-02]

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10. What countries do I need to worry about in terms of U.S. sanctions?

OFAC administers a number of U.S. economic sanctions and embargoes that target geographic regions and governments. Comprehensive sanctions programs include Burma (Myanmar), Cuba, Iran, Sudan, and Syria. Other non-comprehensive programs include the Western Balkans, Belarus, Cote d'Ivoire, Democratic Republic of the Congo, Iraq, Liberia (Former Regime of Charles Taylor), Persons Undermining the Sovereignty of Lebanon or Its Democratic Processes and Institutions, Libya, North Korea, Somalia and Zimbabwe as well as other programs targeting individuals and entities located around the world. Those programs currently relate to foreign narcotics traffickers, foreign terrorists, transnational criminal organizations, and WMD proliferators. It is important to note that in non-comprehensive programs, there are no broad prohibitions on dealings with countries, but only against specific named individuals and entities. The names are incorporated into OFAC’s list of Specially Designated Nationals and Blocked Persons ("SDN list") which includes over 6,000 names of companies and individuals who are connected with the sanctions targets. A number of the named individuals and entities are known to move from country to country and may end up in locations where they would be least expected. U.S. persons are prohibited from dealing with SDNs wherever they are located and all SDN assets are blocked. Entities that a person on the SDN List owns (defined as a direct or indirect ownership interest of 50% or more) are also blocked, regardless of whether that entity is separately named on the SDN List. Because OFAC's programs are dynamic and constantly changing, it is very important to check OFAC's website on a regular basis to ensure that your SDN list is current and you have complete information regarding current restrictions affecting countries and parties with which you plan to do business. [03-27-12]

11. Who must comply with OFAC regulations?

All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S. origin goods to comply. [09-10-02]

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12. How much are the fines for violating these regulations?

The fines for violations can be substantial. Depending on the program, criminal penalties can include fines ranging from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation. [11-16-07]

13. Is there a mechanism for a company to report its past undetected violations of OFAC regulations for completed transactions? Is any type of "amnesty" available for inadvertent failure to comply prior to the company becoming aware of the OFAC regulations?

Yes, a company can and is encouraged to voluntarily disclose a past violation. Self-disclosure is considered a mitigating factor by OFAC in Civil Penalty proceedings. A self-disclosure should be in the form of a detailed letter, with any supporting documentation, to Adam Szubin, Director, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Ave., N.W., Washington, DC 20220. OFAC does not have an "amnesty" program. The ramifications of non-compliance, inadvertent or otherwise, can jeopardize critical foreign policy and national security goals. OFAC does, however, review the totality of the circumstances surrounding any violation, including the quality of a company's OFAC compliance program. [11-16-07]

14. Can I regard previously issued and published opinion letters, regulatory interpretations, or other statements as guidance for my transactions?

Great care should be taken when placing reliance on such materials to ensure that the transactions in question fully conform to the letter and spirit of the published materials and that the materials have not been superseded. [09-10-02]

15. Can OFAC change its previously stated, non-published interpretation or opinion without first giving public notice?

Yes. OFAC, therefore, strongly encourages parties to exercise due diligence when their business activities may touch on an OFAC-administered program and to contact OFAC if they have any questions about their transactions. [09-10-02]

126. I tried to ship a package and it was returned to me "due to OFAC sanctions." Why?

There may have been one or more reasons the package was rejected. For example, was it destined for Iran, Sudan or Cuba and lacking a description of the contents? Was it an unlicensed commercial shipment destined for Iran, Sudan or Cuba? Was it a personal gift destined for an individual in Iran or Sudan, with a stated value exceeding $100? These are legitimate reasons for shipping companies to refuse to process such packages. Not only could you be liable for attempting to send such packages, but the shipping companies also could be liable for their role in processing them. See OFAC’s country brochures for more information on the restrictions on shipping goods to Iran, Sudan and Cuba:

Overview of Iran sanctions

Overview of Sudan sanctions

Overview of Cuba sanctions

[02-07-2011]

127. I tried to ship a package and it was "blocked" by the shipping company "due to OFAC sanctions." Why? And how can I get the package unblocked?

Shipping companies are required to “block” packages in which a Specially Designated National (“SDN”) or other blocked person has an interest. When a package is required to be “blocked,” the shipper must retain the package rather than reject and return it to the sender. Blocking is not required if a general or specific license from OFAC authorizes the shipper to reject or process the package, or if the transaction is otherwise exempt based on the type of contents. To request a license for the package’s release, send a letter with a detailed description of the package’s contents and an explanation of the parties involved in the transaction, along with a copy of the package’s air waybill or Customs Declaration and Dispatch form, to:

U.S. Department of the Treasury
Office of Foreign Assets Control
Licensing Division
1500 Pennsylvania Avenue, NW
Washington, DC 20220

[02-07-2011]

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Questions about Specially Designated Nationals (SDNs)

18. What is an SDN?

As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from dealing with them. [09-10-02]

19. How do I get a copy of this list?

The best way to get the list is from OFAC's website. The list is disseminated in a number of different formats, including fixed field/delimited files that can be integrated into databases. [09-10-02]

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20. How often is the SDN list updated?

The SDN list is frequently updated. There is no predetermined timetable, but rather names are added or removed as necessary and appropriate. [09-10-02]

21. How do I know what specific changes have been made to OFAC's SDN list?

All changes for the current calendar year are cumulatively available in a .PDF file and in an ASCII version. Cumulative changes for prior years back to 1994 are also available in ASCII format by following this link. The same link will take you to a *.PDF version of the file for calendar year 2001. [11-16-07]

22. Does OFAC maintain or can it create a country-by-country list of SDNs?

OFAC has long maintained such a list. The file is available for downloading by clicking on the DOS or Windows Delimited SDN List links on OFAC's Website. The file is contained within those self-extracting archives and is called ctry_list.txt. It is important to understand that many SDN individuals and entities may operate in countries other than those in which they are based. The relevant regulations prohibit transactions with and/or block the property of SDNs wherever they are located. [09-10-02]

23. What do I do if I have a match to the SDN list?

If you have checked a name manually or by using software and find a match, you should do a little more research. Is it an exact name match, or very close? Is your customer located in the same general area as the SDN? If not, it may be a "false hit." If there are many similarities, contact OFAC's "hotline" at 1-800-540-6322 for verification. If your "hit" concerns an in-process wire transfer, you may prefer to e-mail your question to OFAC. Unless a transaction involves an exact match, it is recommended that you contact OFAC Compliance before actually blocking assets. [09-10-02]

24. What is the Control list? Who do I call about the Control list? What is the difference between the Control list and OFAC's SDN list?

The Control List was developed by the law enforcement community in response to the events of September 11. It is separate from the OFAC's SDN list and is not disseminated by OFAC. If you have received a copy of this list, you should follow the instructions received with it. [09-10-02]

122. What are weak aliases (AKAs)?

A “weak AKA” is a term for a relatively broad or generic alias that may generate a large volume of false hits. Weak AKAs include nicknames, noms-de-guerre, and unusually common acronyms. OFAC includes these AKAs because, based on information available to it, the sanctions targets refer to themselves, or are referred to, by these names. As a result, these AKAs may be useful for identification purposes, particularly in confirming a possible “hit” or “match” triggered by other identifier information. Realizing, however, the large number of false hits that these names may generate, OFAC qualitatively distinguishes them from other AKAs by designating them as weak. OFAC has instituted procedures that attempt to make this qualitative review of aliases as objective as possible. Before issuing this updated guidance, OFAC conducted a review of all aliases on the SDN list. Each SDN alias was run through a computer program that evaluated the potential of an alias to produce false positives in an automated screening environment. Names were evaluated using the following criteria:

Character length (shorter strings were assumed to be less effective in a screening environment than longer strings);
The presence of numbers in an alias (digits 0-9);
The presence of common words that are generally considered to constitute a nickname (example: Ahmed the Tall);
References in the alias to geographic locations (example: Ahmed the Sudanese);
The presence of very common prefixes in a name where the prefix was one of only two strings in a name (example: Mr. Smith).

Aliases that met one or more of the above criteria were flagged for human review. OFAC subject matter experts then reviewed each of the automated recommendations and made final decisions on the flagging of each alias.

OFAC intends to use these procedures to evaluate all new aliases introduced to the SDN list. [01-18-11]

123. Where can I find weak aliases (AKAs)?

Weak AKAs appear differently depending on which file format of the SDN List is utilized.

In the TXT and PDF versions of the SDN List, weak AKAs are encapsulated in double-quotes within the AKA listing:

ALLANE, Hacene (a.k.a. ABDELHAY, al-Sheikh; a.k.a. AHCENE, Cheib; a.k.a. "ABU AL-FOUTOUH"; a.k.a. "BOULAHIA"; a.k.a. "HASSAN THE OLD"); DOB 17 Jan 1941; POB El Menea, Algeria (individual) [SDGT]

This convention also is followed in the alphabetical listing published in Appendix A to Chapter V of Title 31 of the Code of Federal Regulations.

In the DEL, FF, PIP, and CSV file formats, weak AKAs are listed in the
Remarks field (found at the end of the record) of the SDN file. In
these formats, weak AKAs are bracketed by quotation marks. Please see the data specification for these files for more information:

http://www.treasury.gov/resource-center/sanctions/SDN-List/Documents/dat_spec.txt

8219 @"ALLANE, Hacene"@"individual"@"SDGT"@-0- @-0- @-0- @-0- @-0- @-0-
@-0- @"DOB 17 Jan 1941; POB El Menea, Algeria; a.k.a. 'ABU
AL-FOUTOUH'; a.k.a. 'BOULAHIA'; a.k.a. 'HASSAN THE OLD'."

In the XML version of the SDN List, there is a Type element for each
AKA. The Type can either be 'weak' or 'strong' (see the XML SDN
Schema (XSD file) at:
http://www.treasury.gov/resource-center/sanctions/SDN-List/Documents/sdn.xsd for more information). [01-18-11]

124. Am I required to screen for weak aliases (AKAs)?

OFAC’s regulations do not explicitly require any specific screening regime. Financial institutions and others must make screening choices based on their circumstances and compliance approach. As a general matter, though, OFAC does not expect that persons will screen for weak AKAs, but expects that such AKAs may be used to help determine whether a “hit” arising from other information is accurate. [01-18-11]

125. Will I be penalized for processing an unauthorized transaction involving a weak alias (AKA)?

A person who processes an unauthorized transaction involving an SDN has violated U.S. law and may be subject to an enforcement action. Generally speaking, however, if (i) the only sanctions reference in the transaction is a weak AKA, (ii) the person involved in the processing had no other reason to know that the transaction involved an SDN or was otherwise in violation of U.S. law, and (iii) the person maintains a rigorous risk-based compliance program, OFAC will not issue a civil penalty against an individual or entity for processing such a transaction. [01-18-11]

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Questions from Financial Institutions

25. Does OFAC itself require that banks set up a certain type of compliance program?

No. There is no single compliance program suitable for every financial institution. OFAC is not itself a bank regulator; its basic requirement is that financial institutions not violate the laws that it administers. Financial institutions should check with their regulators regarding the suitability of specific programs to their unique situations. [09-10-02]

26. How do I get the OFAC Starter Kit?

The Starter Kit is comprised of the SDN list, the brochure for the industry you represent (financial, export/import, or securities), and any articles that appear to be of interest based on your specific needs or interest. These documents can be obtained from OFAC's website or from OFAC's fax-on-demand service (202/622-0077). [09-18-02]

27. What do I need to do to comply? Do I have to buy expensive software?

This is primarily a question for your regulator. What constitutes an adequate compliance program depends in large part on who your customers are and what kinds of business you do. Certain areas of bank operations, such as international wire transfers and trade finance, are at a higher risk than others. There are numerous interdiction software packages that are commercially available. They vary considerably in cost and capabilities. If your bank feels it needs to invest in software in its attempt to comply with OFAC regulations, OFAC recommends that you talk to your counterparts in other banks about the systems they have in place and contact vendors for an assessment of your needs. It should be noted that *.TXT and *.PDF versions of OFAC's SDN list can be manually scanned; OFAC's *.TXT list can also be queried using standard word processing software. [09-10-02]

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28. How often do I need to scan my customer database for SDNs?

The frequency of running an OFAC scan must be guided by your internal bank policy and procedures. Keep in mind, however, that if your bank fails to identify and block a target account (of a terrorist, for example), there could be "real world" consequences such as a transfer of funds or other valuable property to an SDN, an enforcement action against your bank, and negative publicity. [09-10-02]

30. How do I know if my compliance program is adequate?

The following information will provide you with areas to consider as you review your OFAC procedures

29. How do I setup a compliance program for my bank?

There is no prepackaged compliance program that fits the needs of every bank. Banks, obviously, range in size from small to some of the largest institutions in the world. A good starting point is to go to the OFAC website and look under "Regulations by Industry." Then read the brochure for the Financial Community. This brochure provides insight as to how your particular bank could set up a compliance program. There are also a number of articles written for banking industry publications available on OFAC's website. See, for example, OFAC Primer or Community Banks. It may be helpful to contact your counterparts in other banks to see what they are doing and talk to your regulator. [09-10-02]

31. What are the features and benefits that banks should be looking for when selecting an OFAC compliance software package?

There are a wide variety of software packages available to the financial community. The size and needs of each institution help to determine what to look for in a package. Some packages are used to interdict sanctioned countries and SDN names in wire transfers, while others are used to check the names of new customers; other packages also filter the names of all account holders. One suggestion for finding the right software for your bank is to research what your peer banks are using and determine if the software package is working for them. Your bank also could talk to a variety of software vendors who can easily be located by doing an Internet search. [09-10-02]

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32. How do I block an account or a funds transfer?

Once it has been determined that funds need to be blocked, they must be placed into an interest-bearing account on your books from which only OFAC-authorized debits may be made. The blocking also must be reported to OFAC Compliance within 10 business days. Some banks have opted to open separate accounts for each blocked transaction, while others have opted for omnibus accounts titled, for example, "Blocked Libyan Funds." Either method is satisfactory, so long as there is an audit trail which will allow specific funds to be unblocked with interest at any point in the future. [09-10-02]

33. How much interest do I have to pay on the blocked funds?

OFAC regulations require that funds earn interest at a commercially reasonable rate, i.e., at a rate currently offered to other depositors on deposits or instruments of comparable size and maturity. [09-10-02]

34. Can my bank deduct service charges from the account?

Generally yes. In most cases (excluding Iraq, for instance) OFAC regulations contain provisions to allow a bank to debit blocked accounts for normal service charges, which are described in each set of regulations. The charges must be in accordance with a published rate schedule for the type of account in which the funds are maintained. [09-10-02]

35. Do all OFAC programs involve blocking transactions?

No. OFAC regulations are tailored to further the requirements and purposes of specific Executive Orders or statutes which provide the basic outline of each program. In some cases, the President has determined that a comprehensive asset freeze is appropriate, and in others the President has determined that more limited restrictions (for example, import bans) are in order. The individual program brochures outline the restrictions for each program. [09-10-02]

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36. I understand blocking a transaction, but what is meant by rejecting a transaction? When should a transaction be rejected rather than blocked?

In some cases, an underlying transaction may be prohibited, but there is no blockable interest in the transaction. In these cases, the transaction is simply rejected, or not processed. For example, a U.S. bank would have to reject a wire transfer between two third-country companies (non-SDNs) involving an export to a non-SDN company in Sudan. Since there is no interest of the Government of Sudan or an SDN, there is no blockable interest in the funds. The U.S. bank cannot process the transaction because that would constitute a transaction in support of a commercial activity in Sudan, which is prohibited by the Sudanese Sanctions Regulations. Similarly, a U.S. bank could not be involved in the financing of a prohibited transaction. A U.S. bank cannot so much as advise a letter of credit if the underlying transaction is in violation of OFAC regulations.

The following examples may help illustrate which transactions should be blocked and which should be rejected.

• A U.S. bank interdicts a commercial payment destined for the account of XYZ Import-Export Co. at the Bank of XYZ in Sudan. The Bank of XYZ is wholly-owned by the Government of Sudan and, accordingly, is a Specially Designated National of Sudan. This payment must be blocked.

• A U.S. bank interdicts a commercial payment destined for the account of ABC Import-Export at Sudanese French Bank, Khartoum, Sudan. Unlike the Bank of XYZ, Sudanese French Bank, Khartoum is a private sector entity so there is no blockable interest in this payment. However, processing the payment would mean facilitating trade with Sudan and providing a service in support of a commercial transaction in Sudan, therefore the U.S. bank must reject the payment.

• A U.S. bank interdicts an unlicensed commercial payment going to a private-sector entity in Cuba. Under the Cuban Assets Control Regulations, all property and property interests of Cuban nationals – defined to include any person or entity in Cuba - are blocked. As a result, this payment must be blocked.

Rejected and blocked funds transfers must be reported to OFAC within 10 days. Questions about whether a transaction should be blocked or rejected should be directed to OFAC Compliance. [11-16-07]

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37. My bank operates accounts for individuals living in Iran. OFAC has told us that these accounts cannot be operated. Does this mean that the accounts are blocked?

No, the accounts are restricted. The Iranian sanctions prohibit the export of goods or services to Iran. By operating an account for an individual or company in Iran, the bank would be exporting services to that person or entity in violation of the Iranian Transactions Regulations. The accounts, however, are not blocked. The account holder can close the account and have the funds transferred to his or her account outside the United States. [09-10-02]

38. Are U-Turn payments for Iran still permitted?

No, as of November 10, 2008 U-Turn payments are no longer allowed. [11-10-08]

118. I have a client that is in Iran to visit a relative. Do I need to restrict the account?

No. As long as you are satisfied that the client is not ordinarily resident in IRAN, then the account does not need to be restricted. [07-28-09]

39. What do I do if I have a blocked account that needs to be escheated to the state?

You need to discuss this with your state authorities and with OFAC. For instance, the state of New York has a license to escheat blocked funds, pending OFAC approval of each transfer. Banks in New York should contact the State Banking Department for instructions on how to proceed. Banks in other states should contact OFAC directly for instructions on how to proceed. [09-10-02]

40. If my financial institution receives a wire going to an embassy in a sanctioned country, can we process the transaction?

This depends on the program. If you have a payment involving an embassy in a targeted country, please contact OFAC Compliance for directions (1-800-540-6322). [09-10-02]

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41. Should an institution tell its customer that it blocked their funds, and, if so, how does the institution explain it to them?

An institution may notify its customer that it has blocked funds in accordance with OFAC's instructions. The customer has the right to apply for the unblocking and release of the funds. Information on OFAC's licensing procedures is available on the website. For a copy of the *.PDF application form for the unblocking of funds transfers (TD F 90-22.54), please direct your customer to this link. [09-10-02]

42. What do I do if a person tries to open an account and the person's name is on OFAC's SDN list? Do I open the account and then block the funds?

A U.S. bank cannot open an account for a person named on the SDN list. This is a prohibited service. However, you should pay careful attention to be sure the person trying to open the account is the same person as the one named on OFAC's list. In many cases you may get a "false positive," where the name is similar to a target's name, but the rest of the information provided by the applicant does not match the descriptor information on OFAC's SDN list. If the bank does come into the possession or control of any property in which a blocked person has an interest, it is obligated to block that property. In other words, if you receive an application to open an account from a person who matches the information on the SDN list, together with an opening deposit, you are obligated to block the funds. The same is true for other banking transactions. If, for example, a customer asks if he or she is allowed to send money to a relative's account with Bank of XYZ in Sudan, the bank can say "no, that's illegal." If, on the other hand, a bank receives instructions from its customer to debit his or her account and send the funds to Bank of XYZ, the bank must act on the instructions by blocking the funds which contain a future interest of the Sudanese SDN bank. You might think of the analogy of a bouncing ball. Once the ball starts moving, you must stop it if it comes into your possession.
[04-06-05]

43. Does a financial institution need to scan names against OFAC's list of targets upon account opening or can it wait for 24 hours to receive a report from its software vendor on whether or not there is a hit?

There is no legal or regulatory requirement to use software or to scan. There is a requirement, however, not to violate the law by doing business with a target or failing to block property. OFAC realizes that financial institutions use software that does not always provide an instantaneous response and may require some analysis to determine if a customer is indeed an SDN. The important thing is not to conclude transactions before the analysis is completed. [09-10-02]

44. Is there a dollar limit on which transactions are subject to OFAC regulations?

There is no minimum or maximum amount subject to the regulations. [09-10-02]

45. Does my bank need to check the OFAC list when selling cashier's checks and money orders? In the case of cashier's checks, do I need to check both the purchaser and the payee? As a mortgage lender, do I need to check both the purchaser and the seller's name against the SDN list?

Every transaction that a U.S. financial institution engages in is subject to OFAC regulations. If a bank knows or has reason to know that a target is party to a transaction, the bank's processing of the transaction would be unlawful. [09-10-02]

46. If a loan meets underwriting standards but is a true "hit" on the OFAC list, what do we use as a denial reason on the adverse action notice?

If you have confirmed with OFAC that you have a "good hit," there is no reason not to explain that to the customer. The customer can contact OFAC directly for further information. [09-10-02]

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47. Through corporate giving programs, many banks contribute toward charities and other non-profits. To what extent does a bank need to review the recipients of these gifts or the principals of the charities?

Donations to charitable institutions must be handled as any other financial transaction. The donating bank or institution should crosscheck the recipient names against OFAC's SDN list and assure that the donations are in compliance with OFAC sanctions programs. [09-10-02]

48. I just received an interdiction "alert." What do I do?

When your interdiction software or account holder checking service shows a potential match, OFAC recommends that you do an initial analysis prior to contacting OFAC. If you have a reasonably close match to a name on the SDN list and your customer is located in the same vicinity as the SDN, feel free to contact OFAC Compliance. Computer software can only deal with letters and numbers. It will inevitably flag some transactions that are not actually OFAC targets. This is where human intervention becomes critical and some hands-on research may be necessary. Questions that ought be asked by a Compliance Officer before calling OFAC include: Is it an exact name match, or very close? Is the suspect party located in the same general area as the SDN? If there are many similarities, then contact OFAC for verification. Unless you have an exact match or are otherwise privy to information indicating that the hit is a target, it is recommended that you not actually block a transaction without discussing the matter with OFAC. [09-10-02]

49. When a transaction is rejected or blocked, I have ten days to report it. Do I have to do it in writing or can I call OFAC Compliance and report it that way?

At the moment, OFAC requires that all blocking and reject reports be submitted in writing. Optional reporting forms are available at this link. Reports may be mailed in or faxed to OFAC Compliance at 202-622-2426. Blocking and reject reports must contain a copy of the original transfer instructions. OFAC is currently working with the financial community on a pilot project to permit the filing of such reports electronically. If you wish to participate in the pilot project, please contact OFAC Compliance. [09-10-02]

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50. Is there a requirement for annual reporting of blocked property? Is there a required format?

Yes. A report of blocked property is to be submitted annually by September 30 to OFAC Compliance, Department of the Treasury, Washington, D.C., 20220. The standardized form can be accessed by visiting this link. If you wish to use a different format, please contact OFAC's Blocked Assets Division at 202-622-2440. [09-10-02]

51. How do I apply for a license to get my money unblocked?

With respect to blocked funds transfers, you will need to submit an application for the release of blocked funds form which is available on OFAC's website under "Forms." You should print this form, complete the required information, attach payment instructions, and mail it to:

Office of Foreign Assets Control
U.S. Department of the Treasury
Treasury Annex
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Attn: Licensing Division

OFAC requests that the application form be submitted in triplicate. The form must be sent by hard copy - fax copies will not be accepted. It is extremely important that the underlying transaction be described in detail and copies of supporting documentation be included in the package. [09-10-02]

52. Can U.S. financial institutions open correspondent accounts for Iraqi financial institutions, or process funds transfers to and from Iraqi financial institutions?

Yes, U.S. financial institutions are authorized to open correspondent accounts for, and process funds transfer to or on behalf of Iraqi financial institutions.
[07-27-04]

53. How do I differentiate between an "inquiry" and a "payment instruction" when a customer wants to send a wire transfer to a sanctioned party or country?

In those programs with blocking provisions, OFAC's regulations block all "property" in which a target has an interest. The term "property" is very broadly defined, including present, future or contingent interests. In the case of a wire transfer, the bank will be holding blocked property upon the receipt of concrete instructions from its customer to send the funds. In this case, the funds must be blocked and reported to OFAC within ten days. If, on the other hand, a customer simply asks "Can I send money to Cuba?" there is no blockable interest in the inquiry and the bank can answer the question or direct them to OFAC. The same logic applies to cases where the transaction would be required to be rejected under OFAC regulations. There is not technically a "reject" item until the bank receives instructions from its customer to debit its account and send the funds. [09-17-04]

54. I have an account with a W-8 showing an address in Iran. Is the account automatically restricted?

In the absence of information proving to your satisfaction that the account holder is not in Iran, you should consider the account restricted based on the W-8 filing. [06-24-05]

95. Does a financial institution have the obligation to screen account beneficiaries for compliance with OFAC regulations?

"Property," as defined in OFAC regulations, includes most products that financial institutions offer to their clients. "Property interest," as defined by OFAC, includes any interest whatsoever, direct or indirect, present, future or contingent. Given these definitions and as a matter of sound banking practice, it is prudent for financial institutions to screen account beneficiaries upon account opening, while updating account information, when performing periodic screening and, most definitely, upon disbursing funds. Where there is a property interest of a sanctions target under a blocking program, the property must be blocked. Beneficiaries include, but are not limited to, trustees, children, spouses, non-spouses, entities and powers of attorney. [12-04-06]

116. On February 14, 2008, OFAC issued guidance stating that the property and interests in property of an entity are blocked if the entity is owned, directly or indirectly, 50% or more by a person whose property and interests in property are blocked pursuant to an Executive Order or regulations administered by OFAC. We act as an intermediary bank in wire transfers between other banks. Does OFAC expect banks that are acting as financial intermediaries to research non-account parties that do not appear on the SDN List, but are involved with or referenced in transactions that are processed on behalf of correspondents?

A wire transfer in which an entity has an interest is blocked property if the entity is 50% or more owned by a person whose property and interests in property are blocked. This is true even in instances where such a transaction is passing through a U.S. bank that (1) is operating solely as an intermediary, (2) does not have any direct relationship with the entity (e.g., the entity is a non-account party), and (3) does not know or have reason to know the entity’s ownership or other information demonstrating the blocked status of the entity’s property (e.g., that the entity is located in Cuba). In instances where all three conditions are met, notwithstanding the blocked status of the wire transfer, OFAC would not expect the bank to research the non-account parties listed in the wire transfer that do not appear on the SDN List and, accordingly, would not pursue an enforcement action against the bank for having processed such a transaction.

If a bank handling a wire transfer currently has information in its possession leading the bank to know or have reason to know that a particular individual or entity involved with or referenced in the wire transfer is subject to blocking, then the bank will be held responsible if it does not take appropriate steps to ensure that the wire transfer is blocked.

OFAC expects banks to conduct due diligence on their own direct customers (including, for example, their ownership structure) to confirm that those customers are not persons whose property and interests in property are blocked.

With regard to other types of transactions where a bank is acting solely as an intermediary and fails to block transactions involving a sanctions target, OFAC will consider the totality of the circumstances surrounding the bank’s processing of the transaction, including but not limited to the factors listed above, to determine what, if any, enforcement action to take against the bank. [02-24-09]

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Questions from Exporters & Importers

55. Does OFAC have an exporter assistance phone line?

Yes. The number is 1-800-540-6322 (local: 202-622-2490). Staff includes individuals with extensive experience working at the Trade Information Center at Commerce headquarters in Washington, D.C., running workshops on international trade, and even assisting with articles in Export America magazine. [09-10-02]

56. What is the difference between the SDN List and the Commerce Department's List of Denied Parties? Why can't they be integrated into one list?

Specially Designated Nationals and Blocked Persons (SDNs) are individuals and entities located throughout the world that are blocked pursuant to the various sanctions programs administered by OFAC. SDNs can be front companies, parastatal entities, or individuals determined to be owned or controlled by, or acting for or on behalf of, targeted countries or groups. They also can be specially identified individuals such as terrorists or narcotics traffickers. U.S. persons are prohibited from engaging in any transactions with SDNs and must block any property in their possession or under their control in which an SDN has an interest. SDNs are designated primarily under the statutory authority of the Trading With the Enemy Act, the International Emergency Economic Powers Act, the Anti-Terrorism and Effective Death Penalty Act and the Foreign Narcotics Kingpin Designation Act. Implementing regulations can be found in Chapter V, Title 31 of the U.S. Code of Federal Regulations.

The Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce maintains separate lists for the purposes of the programs that it administers (including the Denied Persons List and the Entity List). The Denied Persons List consists of individuals and companies that have been denied export and re-export privileges by BIS. The Entity List consists of foreign end users who pose an unacceptable risk of diverting U.S. exports and the technology they contain to alternate destinations for the development of weapons of mass destruction. Accordingly, U.S. exports to those entities may require a license. Authority for the Denied Persons List and the Entity List can be found in Title 15, Part 764, Supplement No. 2 and Title 15, Part 744, Supplement No.4 of the U.S. Code of Federal Regulations, respectively.

The foreign policy objectives and legal requirements of the SDN list are significantly different from those of the BIS lists. The Commerce lists do not involve a full trade embargo of all goods and services nor do they require U.S. persons to block property. They are concerned with issues of export privileges and export licensing. The unique goals of the OFAC and BIS programs preclude the creation of a unified "master list." [09-10-02]

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Questions related to NGO Registration Numbers

57. How do I get an NGO registration number?

Pursuant to 31 CFR §538.521 (Sudan) and 31 CFR §537.523 (Burma) registration numbers may be issued to nongovernmental organizations involved in humanitarian or religious activities in certain area of Sudan and Burma. NGOs can provide assistance in the Specified Areas of Sudan without a specific license or registration number. The Specified Areas of Sudan are identified as Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur and marginalized areas in and around Khartoum. Marginalized areas include the following official camps for internally displaced persons: Mayo, El Salaam, Wad El Bashir and Soba. NGOs involved in humanitarian or religious activities in the non-Specified Areas of Sudan would need to apply for a specific license or registration number. Specific guidelines for NGO registration can be found on OFAC's website under "Guidelines and Information for Sudan" under "Sanctions Programs and Country Summaries." This document outlines the necessary steps for becoming a registered NGO. These guidelines can also be found in 31 CFR §501.801(c). Providing all of the required information will help to expedite the registration process. [11-16-07]

58. What are the chances that my application will be approved?

Each application is reviewed on a case-by-case basis and often requires interagency consultation. Although we cannot predict how long this review might take, following existing application guidelines will help to expedite your determination. [09-10-02]

59. Do I need a registration number or license to donate goods?

Most OFAC sanctions programs provide exemptions to their prohibitions for certain donated goods, such as articles to relieve human suffering. This is not the case for all programs, however. If you wish to donate food to Sudan, for example, you must apply for a specific license. You should refer to the legal section of OFAC's website for the regulations applicable to the specific target or target country of your donation. [09-10-02]

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Questions from the Insurance Industry

61. State insurance statutes regulate an insurer's ability to withhold claim payments, cancel policies or to decline to enter into policies. In some cases, insurers must commit an ostensible violation of state insurance regulations to comply with OFAC regulations. Does OFAC have a position as to whether OFAC regulations preempt state insurance regulations in this context?

OFAC's regulations under the Trading with the Enemy Act and the International Emergency Economic Powers Act are based on Presidential declarations of national emergency and preempt state insurance regulations. OFAC regulations are not federal insurance regulations, they are regulations promulgated under the President's exercise of foreign-affairs and national emergency powers. [09-10-02]

62. At what point must an insurer check to determine whether an applicant for a policy is an SDN?

If you receive an application from an SDN for a policy, you are under an obligation not to issue the policy. Remember that when you are insuring someone, you are providing a service to that person. You are not allowed to provide any services to an SDN. If the SDN sends a deposit along with the application, you must block the payment. [09-10-02]

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63. What should an insurer do if it discovers that a policyholder is or becomes an SDN--cancel the policy, void the policy ab initio, non-renew the policy, refuse to pay claims under the policy? Should the claim be paid under a policy issued to an SDN if the payment is to an innocent third-party (for example, the injured party in an automobile accident)?

The first thing an insurance company should do upon discovery of such a policy is to contact OFAC Compliance. OFAC will work with you on the specifics of the case. It is possible a license could be issued to allow the receipt of premium payments to keep the policy in force. Although it is unlikely that a payment would be licensed to an SDN, it is possible that a payment would be allowed to an innocent third party. The important thing to remember is that the policy itself is a blocked contract and all dealings with it must involve OFAC. [09-10-02]

64. A workers' compensation policy is with the employer, not the employee. Is it permissible for an insurer to maintain a workers compensation policy that would cover a person on the SDN List, since the insurer is not transacting business with the SDN, but only with his/her employer?

If an insurer knows that a person covered under the group policy is an SDN, that person’s coverage is blocked, and if he or she makes a claim under the policy, the claim cannot be paid. If an insurer does not know the names of those covered under a group policy, it would have no reason to know it needed to block anything unless and until an SDN files a claim under that policy. At that point its blocking requirement would kick in.
[03-12-03]

65. How frequently is an insurer expected to scrub its databases for OFAC compliance?

That is up to your firm and your regulator. Remember that a critical aspect of the designation of an SDN is that the SDN's assets must be frozen immediately, before they can be removed from U.S. jurisdiction. If a firm only scrubs its database quarterly, it could be 3 months too late in freezing targeted assets. The SDN list may be updated as frequently as a few times a week or as rarely as once in six months. [09-10-02]

66. Is it sufficient if my company screens life insurance policies only prior to policy issuance?

That’s up to your firm and your regulators. Conducting screening only before policy issuance is critical but would not likely achieve your desired level of compliance. After the policy issuance, the U.S. Government may designate an existing policyholder or a named beneficiary as a Specially Designated National or Blocked Person (“SDN”), or it may expand sanctions with respect to a particular country, or impose sanctions against a new country. If an existing policyholder or a named beneficiary became an SDN or otherwise subject to U.S. sanctions, the insurer may be required to “block” the policy, report such blocking to OFAC within 10 days of the SDN designation, place any future premiums into a blocked, interest-bearing account at a U.S. financial institution, and seek an OFAC license before making any payments under the policy. Consequently, routine screening of all policies in force against OFAC’s SDN list, as frequently updated, would enable the insurer to comply with the applicable OFAC regulatory requirements. It also is important to screen the policyholder and beneficiary prior to paying a claim. [05-01-03]

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67. If my policyholder, who is a U.S. person, requests a change of beneficiaries and designates a cousin living in Cuba as a beneficiary under the life insurance policy, what shall I do?

In general, an insurance policy is considered “property” and a beneficiary’s interest in the policy is considered an “interest in property” that may require blocking under the applicable regulations. The Cuban Assets Control Regulations, however, contain a general license that deals with transactions involving blocked life insurance policies. 31 C.F.R. § 515.526. In this case, the only blocked interest is that of a beneficiary, so the general license would authorize the insurer to accept premium payments and interest on policy loans as well as to pay loans to the insured or process the insured’s request for a change of beneficiary. Also, the insurer would be authorized under the general license to deduct premiums from cash surrender value, if any, or accumulate dividends or otherwise increase cash surrender value on the books of the insurer, pursuant to the terms of the policy. However, the insurer usually cannot pay an entire claim (the face amount of the policy) to the beneficiary without a specific license from OFAC. Recent amendments to the Cuba regulations authorize by general license remittances to a Cuban beneficiary of up to $300 per quarter from a blocked account at a U.S. banking institution if the funds in that account were deposited there as a result of a payment from a life insurance policy triggered by the death of the policy holder. If you have a blocked policy, you should seek legal advice or contact OFAC for further guidance regarding the handling of that particular account. [05-01-03]

68. If my screening efforts uncover a policyholder who became an SDN after policy issuance, can I notify the policyholder that the policy is “blocked”?

Yes, the insurer may notify the policyholder that the policy is blocked, without obtaining a specific license from OFAC. [05-01-03]

69. In my letter to the policyholder whose policy is “blocked,” may I also instruct the policyholder not to send any more premium or that we will not accept additional premium under this account?

The insurer may instruct the policyholder as follows: “If you send any more premium, we are required under applicable U.S. laws and regulations to place such funds in a blocked account. If you have any questions, please contact the U.S. Department of Treasury’s Office of Foreign Assets Control.” [05-01-03]

102. How can an insurer participate in worldwide insurance markets through global insurance policies if, by definition, coverage extends to potential risks in sanctioned countries?

The best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions law. For example, the following standard exclusion clause is often used in open marine cargo policies to avoid OFAC compliance problems: “whenever coverage provided by this policy would be in violation of any U.S. economic or trade sanctions, such coverage shall be null and void.” The legal effect of this exclusion is to prevent the extension of a prohibited service (insurance or risk assumption) to sanctioned countries, entities or individuals. It essentially shifts the risk of loss for the underlying transaction back to the insured - the person more likely to have direct control over the economic activity giving rise to the contact with a sanctioned country, entity or individual. [11-16-07]

103. What if the commercial setting and/or market circumstances of a global insurance policy does not permit the use of an OFAC exclusion such as the one noted above?

OFAC recognizes that U.S. insurers often compete in international markets where non-U.S. insurers are willing and able to issue global insurance policies without a U.S. sanctions exclusion. In cases where such an exclusion is not commercially feasible, the insurer should apply for a specific OFAC license for the global insurance policy. In making a licensing determination, OFAC will review the facts and circumstances of each global insurance policy, including both risk frequency and risk severity, to assure that issuance of the policy will not undermine U.S. foreign policy goals. A separate license would be required for the insurer to pay claims arising under any authorized global insurance policy. [11-16-07]

104. Can an insurer offer global travel insurance and worldwide travel assistance without violating U.S. sanctions?

The provision of all travel related services are authorized for all OFAC country sanctions programs (including Burma, Iran and Sudan) except Cuba. Travel related services may only be provided in Cuba pursuant to a valid general or specific OFAC license. If the traveler is a U.S. person traveling to Cuba pursuant to a valid OFAC license, travel insurance may be issued to the traveler by a U.S. insurer without a separate license. While there are some instances when U.S. persons travel to Cuba without a valid license (and thus pose sanctions problems for U.S. travel insurers), U.S. travel insurance providers most frequently face sanctions problems when they offer travel insurance products to third country nationals traveling to Cuba. In such cases the U.S. insurer must obtain a license to issue the travel insurance product. Additionally, insurers must also be sure to check OFAC’s list of Specially Designated Persons to ensure that no services of any kind are rendered to persons or entities on this list. [02-11-08]

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Consumer Credit Report

70. What Is This OFAC Information On My Credit Report?

Credit bureaus and agencies in particular have adopted new measures to ensure compliance with OFAC regulations. Before issuing a credit report, they use special "interdiction" software developed by the private sector to determine if a credit applicant is on the SDN list. This software matches the credit applicant's name and other information to the individuals on the SDN list. If there is a potential match, the credit bureaus are placing a "red flag" or alert on the report. This does not necessarily mean that someone is illegally using your social security number or that you have bad credit. It is merely a reminder to the person checking your credit that he or she should verify whether you are the individual on the SDN list by comparing your information to the OFAC information. If you are not the individual on the SDN list, the person checking your credit should disregard the OFAC alert, and there is no need to contact OFAC. However, if the person checking your credit believes you are the person on the SDN list, then he or she should call the OFAC Hotline to verify and report it.

71. How Can I Get The OFAC Alert Off My Credit Report?

A consumer has the right under the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., to request the removal of incorrect information on his/her credit report. To accomplish this, consumers should contact the credit reporting agency or bureau that issued the credit report. For more information on consumers' rights under the FCRA, visit the Federal Trade Commission's website at http://www.ftc.gov/os/statutes/fcrajump.shtm

Online Compliance

72. Can I send money to a sanctioned country using a third-country company’s website? Can I buy gifts for someone in a sanctioned country over the internet? The websites tell me that it’s ok because they themselves are not sanctioned parties.

You cannot do something indirectly that you would not be able to do directly. Therefore, these sites can be used to facilitate authorized transactions, but you cannot use them to perform a transaction which would be in violation of U.S. law. For example, the Cuban Assets Control Regulations authorize any U.S. person to send $300/quarter to any individual in Cuba. The U.S. remitter can use a third-country provider to send these funds to Cuba. If the person attempts to send more than $300/quarter to any one individual, however, he or she is in violation of U.S. law and subject to penalties. Another example is booking tourist travel to Cuba using an internet travel service provider in a third country. Spending money on tourism is prohibited by the CACR, regardless of how the travel is booked or how it is paid for. Ultimately some of these funds will end up in Cuba in violation of U.S. law. The fact that the trip was booked through a third-country company, either in person or over the internet, is irrelevant. [04-13-04]

73. My company provides money remittance and account services via the Internet. Does OFAC have any compliance guidance for this type of business?

Complying with United States sanctions policy presents unique challenges to institutions that operate exclusively on the Internet. The Internet has often been thought of as an “anonymous venue” in that e-commerce transactions can be conducted in relative privacy with little or no face-to-face contact among the parties in a transaction. This anonymity creates a significant challenge for Internet businesses that wish to satisfy their due diligence requirements.

In order to be compliant with OFAC-governed sanctions regulations, US jurisdiction entities must ensure that they are not:

A. Engaging in trade or transaction activities that violate the regulations behind OFAC’s country-based sanctions programs, and;

B. Engaging in trade or transaction activities with sanctions targets named on OFAC's list of Specially Designated Nationals and Blocked Persons (SDN's).

A number of Internet-based financial service companies already developed Internet Protocol (IP) address blocking procedures. These companies use publicly available data to maintain tables of IP addresses based on geographic region. Users attempting to initiate an online transaction or access an account from a sanctioned country are blocked based on their IP address. While this approach is effective, it does not fully address an Internet firm’s compliance risks. The fact that international distribution authorities can reassign IP blocks makes the geographic location of an IP potentially dynamic.

The anonymous character of Internet-based transactions often places obstacles in the path of rigorous compliance practices. Firms that facilitate or engage in e-commerce should do their best to know their customers directly. In order to minimize their liabilities, Internet remittance and account service firms should attempt to gather authentic identification information on their customers before a new account is opened or new transaction is initiated. This information will help confirm the customer’s identity and help the e-commerce firm ensure it is not conducting business with a sanctions target. Currently many Internet remittance companies use credit card authentication as the primary method of confirming a customer’s identity. While this method is technologically expedient, it does not meet the standards of due diligence normally found in the non-Internet-based financial community. A company cannot rely on another firm’s compliance program in order to mitigate risk.

It is recommended that e-commerce firms gather and record “purpose of payment” information on each transaction they process. In the non-Internet sector, financial institutions are able to stop in-process transactions and gather more information on them. Due to the level of automation found within the Internet financial sector, this type of in-process information gathering is not always possible. Collecting information on the purpose of payments up front will allow Internet firms to better screen outgoing and incoming transactions for potential violations. [04-13-04]

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Licensing Questions

74. What is a license?

A license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited. There are two types of licenses: general licenses and specific licenses.

A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license.

A specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application.

Persons engaging in transactions pursuant to general or specific licenses must make sure that all conditions of the licenses are strictly observed.

OFAC’s regulations may contain statements of OFAC's specific licensing policy with respect to particular types of transactions. [06-16-06]

75. Do I have to fill out a particular form to get a license to engage in a transaction?

Most license applications do not have to be submitted on a particular form. However, it is essential to include in the request all necessary information as required in the application guidelines or the regulations pertaining to the particular embargo program. When applying for a license, provide a detailed description of the proposed transaction, including the names and addresses of any individuals/companies involved. The mailing address for license applications is:

Office of Foreign Assets Control
U.S. Department of the Treasury
Treasury Annex
1500 Pennsylvania Avenue, NW
Washington , DC 20220
Attn: Licensing Division

Further contact information can be found under the "Contacts" section of OFAC's website. Depending upon the transaction, there may be specific guidance available on OFAC's website under relevant "Guidelines and Information" in "Sanctions and Country Program Summaries." [06-16-06]

76. Can I appeal a denial of my license application?

A denial by OFAC of a license application constitutes final agency action. The regulations do not provide for a formal process of appeal. However, OFAC will reconsider its determinations for good cause, for example, where the applicant can demonstrate changed circumstances or submit additional relevant information not previously made available to OFAC. [09-10-02]

77. How can I find out the status of my pending license application?

OFAC will notify applicants in writing as soon as a determination has been made on their application. The length of time for determinations to be reached will vary depending on the complexity of the transactions under consideration, the scope and detail of interagency coordination, and the volume of similar applications awaiting consideration. Applicants are encouraged to wait at least two weeks before telephonically contacting the Licensing Division at (202) 622-2480 or the Compliance Division at (202) 622-2490 to inquire about the status of their application. [06-16-06]

78. What agencies other than Treasury review OFAC license applications and what are the roles of these other agencies?

Many of OFAC's licensing determinations are guided by U.S. foreign policy and national security concerns. Numerous issues often must be coordinated with the U.S. Department of State and other government agencies, such as the U.S. Department of Commerce. Please note that the need to comply with other provisions of 31 C.F.R. chapter V, and with other applicable provisions of law, including any aviation, financial, or trade requirements of agencies other than the Department of Treasury’s Office of Foreign Assets Control. Such requirements include the Export Administration Regulations, 15 C.F.R. Parts 730 et seq., administered by the Department of Commerce, and the International Traffic in Arms Regulations, 22 C.F.R. Parts 120-130, administered by the Department of State. [06-16-06]

94. Is a license required to enter into an over flight permit agreement with the Cuban Civil Air Authority, even if there is no cost?

Yes. A permit from the Government of Cuba is property in which the Government of Cuba has an interest. Therefore, a license from OFAC is necessary prior to obtaining the permit, even if no funds are changing hands at this point in the process. Many U.S. companies provide permitting and payment services on behalf of their clients. If such a facilitator holds an OFAC license to obtain the permits and make the payments to the Government of Cuba, there is no need for each individual client to obtain a separate OFAC authorization. [01-06-06]

97. What format options are permitted for submitting license applications pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA)?

OFAC permits two format options for submitting TSRA license applications: hard-copy and CD-ROM. Applications submitted using a CD-ROM, however, must be accompanied by a cover letter that includes some essential information: the purpose of the application and the applicant’s full contact information. If either the cover letter or the pertinent information is missing, the application is considered incomplete and risks delay or rejection.

In addition, the CD-ROM should contain an electronic copy of the application. OFAC prefers that the application be saved as a pdf file on the CD-ROM; however, this is not required. [06-14-2007]

98. How should I present my TSRA license application?

Applicants should clearly enumerate in a table format all pertinent information related to their proposed transactions, including: a) Full names and addresses of all parties involved in the transactions and their roles, including financial institutions and any Iranian or Sudanese broker (identify company principals), purchasing agent (identify company principals), end-user(s) (full contact name), or other participants involved in the purchase of the proposed export items; and b) If applicable, the commodity classification numbers that are associated with the proposed export items. [06-14-2007]

99. What is the procedure for submitting multiple copies of the same TSRA license application?

OFAC requires applicants to submit each individual application in a separate envelope, accompanied by a separate cover letter. Applicants should not submit multiple applications in a single envelope with a single cover letter. If you submit applications in that manner, you may encounter some delay in the processing of your applications. Therefore, in order to prevent such delay, submit one application with one cover letter per envelope. [06-14-2007]

100. If I am submitting multiple TSRA license applications at the same time, should I send them under a single cover letter?

101. Should I send a sample of the proposed export product as an attachment to my TSRA license application?

No. OFAC does not require samples of proposed export products to be sent as attachments to any application. OFAC does not need to examine samples of the actual product in making its final determination. Therefore, please do not include any samples with your application.

117. I hold a specific license to sell agricultural goods, medicine, or medical devices to Iran. The terms of the license allow me to accept a letter of credit issued by a bank in Iran which has not been named a Specially Designated National under any of the programs administered by OFAC. The license, however, also states that a U.S. financial institution may not advise, confirm or otherwise deal in that credit. How am I supposed to know if/when a letter of credit has been issued for my sale and how do I get paid? My bank accounts are all at U.S. financial institutions.

This language is in the license because it is against U.S. foreign policy to allow U.S. financial institutions to maintain active correspondent relationships with Iranian banks. The language, however, does not preclude a U.S. financial institution from being a “second advising bank” (i.e. receiving and passing forward advice from a third-country bank that the credit has been issued), nor does it preclude the U.S. financial institution from receiving funds in payment for the licensed export from a third-country bank. You should also note that the Iranian Transactions Regulations authorize U.S. financial institutions to directly advise or confirm letters of credit issued by third-country banks for authorized shipments. The third-country bank may not be an overseas branch of a U.S. financial institution, a financial institution appearing on OFAC's SDN List. In none of these circumstances, however, may there be any direct or indirect involvement with entities the property and interests in property of which have been blocked under any of the programs administered by OFAC.

119. The US exporter has a valid, one-year specific license issued pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC), to enter into contracts during the one-year period of the license for the export/reexport of medical devices and to ship these medical devices within the 12-month period beginning on the date of signing of the contract (the “validity period”). Out of the box, the medical device has a defective component, or a component breaks within the validity period of the license. Can the US exporter send a replacement part pursuant to its valid OFAC license as a transaction that is ordinarily incident and necessary to the sale of the medical device as a whole?

The export or reexport of the replacement part would be considered ordinarily incident and necessary to the sale of the medical device and would be covered by the original valid OFAC license, provided that the replacement part has been classified separately as EAR99 by the Department of Commerce (DOC) under the Export Administration Regulations, 15 CFR parts 730 et seq., and provided further that the replacement part is shipped within the validity period of the original license. A commodity classification issued for the medical device as a whole would not necessarily cover the replacement part; however, if the commodity classification issued by DOC does specifically reference replacement parts, only those replacements parts that are covered by this classification would be eligible for export under this scenario. A one-for-one policy would be applied to the replacement of a defective or unusable component of a medical device. The US exporter would remain subject to the recordkeeping and reporting requirements of §§ 501.601 and 501.602 of the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501, including the requirement that all records of transactions conducted pursuant to the license must be made available to OFAC upon request.

120. The US exporter exports a medical device pursuant to a valid OFAC TSRA license. After a few years, some components break. The US exporter wants to send replacement parts. What is the US exporter required to do?

The US exporter would have to submit a new application to OFAC for a specific license to export the replacement parts. In addition to providing all of the information outlined in the License Application Guidelines for Exports to Iran and Sudan of Agricultural Commodities, Medicine, and Medical Devices posted on OFAC’s website, applications should also include a copy of the original license application submitted to OFAC and the license under which the original medical device was exported.

121. The US exporter has a valid OFAC TSRA license to export/reexport a medical device. The US exporter has exported a medical device pursuant to this license. The medical device breaks during the validity period of the license. Can the US exporter import the item back into the US pursuant to the original license?

The US exporter would have to submit a new application to OFAC for a specific license to import the medical device into the United States. Such a license may be issued, depending on the facts and circumstances. The license application should include 1) a copy of the original license application submitted to OFAC; 2) a copy of the original license under which the medical device was exported; 3) a statement regarding the circumstances under which the medical device broke; and 4) an explanation of what will be done to the medical device in the United States.

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Technology Questions

79. Does OFAC provide its SDN List in a format that can be easily imported into a database?

Yes. OFAC's SDN list is available in XML, fixed-field and delimited formats that can be imported into a variety of software programs. [12-19-07]

80. Does OFAC provide its SDN List in a spreadsheet format?

OFAC publishes the SDN data in a comma separated values format (CSV). This format is recognized by Excel and other spreadsheet programs and can be imported into spreadsheet format by simply opening the file in your default spreadsheet application [06-14-07]

105. OFAC says it has updated its SDN list, but when I download the appropriate SDN files from the OFAC website, they appear to be out-of-date. Where can I get the latest SDN information?

OFAC has rigorous quality control procedures in place to ensure that all SDN data are current and accurate when they are released. All of the SDN information is downloaded and checked by OFAC personnel using the same interface that any member of the public might employ. A number of local issues can impact a user’s ability to download current information; many of these issues are associated with caching done by a user’s browser or by the firewall/security systems that protect a specific enterprise. OFAC can only offer technical support when it comes to OFAC provided data and OFAC managed systems (like the OFAC website or OFAC FTP servers). If you continue to have difficulty downloading the latest SDN information, OFAC recommends that you contact your internal IS/IT support and request their assistance in resolving a caching issue. Users having specific problems opening the PDF/Adobe Acrobat version of the SDN list may also review the information available here. [03-20-2008]

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81. What is the delimiter in OFAC's delimited files?

The delimiter varies based upon the file type. Files that end in .DEL have an @ (at) symbol as the delimiter. Files that end in .CSV have a comma delimiter. Files that end in .FF have a fixed width delimiter. Files that end in .PIP use the | (pipe) symbol as a delimiter. [06-14-07]

83. How are OFAC's delimited files structured?

All of OFAC's delimited files are described in OFAC's SDN data file specification. [06-14-07]

84. Does OFAC maintain its files in locations other than on its website?

Yes. OFAC maintains many of its critical files on a web server run by the Government Printing Office. This server can be accessed at :http://permanent.fdlp.gov/fbb/library . OFAC's data is stored in the directories listed below.

library/fac_sdn - SDN data and delimited files
library/fac_bro - country and program brochures
library/fac_dlim - SDN data files in un archived format

The delimited files are stored in archives that have different names from those on OFAC's web site. DOS delimited files are stored in sdall.exe, windows delimited files are stored in sdallw32.exe, and the standard zip archive is called sdall.zip. The individual components of OFAC's delimited files are also stored in a GPO directory called "library/fac_dlim". [05-04-12]

OFAC also maintains its own FTP server.

This server can be accessed at:
ftp://ofacftp.treas.gov. The server will accept an anonymous login. OFAC's data is stored in the directories listed below.

/fac_sdn - SDN data and delimited files
/fac_bro - country and program brochures
/fac_delim - SDN data files in un archived format

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85. Is there a version of the SDN data file archive that works with UNIX, Linux or other command line operating systems?

Yes. The standard zip archive should work with most UNIX and Linux systems and is available on OFAC's FTP site and GPO's FTP site. [06-14-07]

86. Does OFAC have an email service that will notify me when there are updates to the SDN list?

Yes. OFAC has multiple e-mail subscription services available. Please visit the following link to sign up for these services:

https://service.govdelivery.com/service/multi_subscribe.html?code=USTREAS

OFAC also maintains a Really Simple Syndication (RSS) feed. This feed is updated whenever the OFAC site is updated. [11-18-10]

87. Your FTP site has gone offline. Who should I contact to remedy this problem?

The FTP site at ofacftp.treas.gov is run by OFAC. Contact OFAC's support hotline at 1-800-540-6322 for technical support. [02-07-03]

The FTP site at fedbbs.access.gpo.gov is run by the Government Printing Office (GPO). OFAC acts as a content provider to this system and is not responsible for its administration. Users experiencing problems with the FEDBBS system should contact GPO's technical support line at (202) 512-1530. [09-10-02]

88. I am a systems administrator looking to design an automated process that will download the SDN list without human intervention. How can I do this given that changes to the SDN list can be sporadic?

While OFAC cannot give specific advice on how to design an automated system for SDN downloads, many institutions solve this problem by setting up a scheduled download of the SDN list. These firms conduct their own risk assessments and decide how often they need to download the list in order to comply with U.S. law. [09-10-02]

89. I am a database administrator at a financial institution and am responsible for keeping my company's SDN data current. Is the SDN list comprehensive or do I need to download some kind of supplement to the list every time there is an update?

The SDN list is comprehensive. Database administrators can overwrite any old data in their systems with the latest versions of the delimited files, thus ensuring that their database is current. [09-10-02]

90. Do you offer the OFAC Financial Operations Bulletin in a delimited format?

No. OFAC's Financial Operations Bulletin is only available in a free-form, ASCII text file. Database administrators interested in refreshing their databases with new SDN data should use the comprehensive delimited files available on OFAC's web site. [09-10-02]

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91. I am looking for the terrorist list on your web site so I can bring my company in compliance with U.S. law. Where can I find this list?

OFAC's regulations are broader than the specific laws that deal with the terrorists and persons who support them. All individuals and entities that fall under U.S. jurisdiction should use OFAC's comprehensive list of Specially Designated Nationals. This list includes the designated terrorists and is available on OFAC's website. It is important to note that some OFAC sanctions, such as those pertaining to Iraq, Libya, Sudan, and Cuba, apply to persons acting on behalf of those targeted governments even if those persons do not appear on the SDN list. It is also important to note that OFAC's Cuba sanctions prohibit transactions with Cuban nationals, wherever located. U.S. persons are expected to exercise due diligence in determining whether any such persons are involved in a proposed transaction. [09-10-02]

92. I'm a subscriber to OFAC’s e-mail notification services. For some reason I have stopped receiving the broadcast messages when OFAC updates its website. Why is this?

You may have responded to one of these incoming messages. Responding to a broadcast message removes you from the subscription list. If you wish to provide feedback to OFAC without inadvertently removing yourself from the subscription list, you should write to us at our support e-mail address (O_F_A_C@treasury.gov). Also note that if you have an “out of the office” message that replies to all e-mails in your absence, this, too, will result in your being deleted from the subscription list. If you'd like to re subscribe, please do so here . [12-22-03]

93. I recently attempted to subscribe to one of OFAC’s e-mail list services and I have not yet received my confirmation e-mail. Why is this?

Failure to receive a confirmation e-mail is typically (though not always) the result of a configuration problem on the user’s end. The user should follow these steps to ensure that he or she is using the system properly.

1. Be patient. For a variety of reasons e-mail sometimes take a little longer than expected to reach a user. If you do not receive a confirmation e-mail within a day of subscribing, proceed to step 2.

2. Confirm that you have entered the correct e-mail address and address punctuation. A surprising number of errors have been the result of users accidentally using commas instead of periods.

3. Check to see if you have a SPAM filter in place. SPAM filters have a variety of configurations. Some of these filters have been known to erroneously block e-mails originating from OFAC’s list servers. OFAC cannot provide technical support for local configuration issues. If you believe a SPAM filter is preventing you from receiving OFAC e-mails, please discuss the matter with your IT department or network administrator. You will need to have your IT personnel allow e-mails from the following domain to come through the SPAM filter "subscriptions.treas.gov". Once this is done you may proceed to step 4. If you can confirm that you do not have a SPAM filter in place or any other local configuration problem, please skip step 4 and proceed to step 5.

4. If your network or e-mail client’s configuration is preventing you from receiving your subscription confirmation e-mail, it is likely that you will not be able to receive e-mail from OFAC’s list servers even if OFAC manually adds you to our listserv. These configuration issues must be resolved with your IT department or network administrator before you can proceed.

5. If, after you have exhausted all of the above options, you still fail to receive OFAC’s broadcast notifications, please call our support hotline at 1-800-540-6322. [12-19-07]

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SDN Search Questions

82. Does OFAC have a web-based SDN search engine?

Yes, OFAC does maintain its own web-based search service. It can be accessed at the following URL: http://sdnsearch.ofac.treas.gov/. A beta of the SDN Fuzzy Logic Search can be accessed here. [02/05/2013]

246. How does SDN Fuzzy Logic Search work?

In addition to returning results that are exact matches (when the match threshold slider bar is set to 100%), SDN Search can also provide a broader set of results using fuzzy logic. This logic uses character and string matching as well as phonetic matching. Only the name field of SDN Search invokes fuzzy logic when the tool is run. The other fields on the tool use character matching logic. Please click here for more information on what a true SDN match is. [02/05/2013]

247. What does the SDN Search Score mean?

The score field indicates the similarity between the name entered and resulting matches on the SDN List. It is calculated using two matching logic algorithms: one based upon phonetics, and a second based upon the similarity of the characters in the two strings. A score of 100 indicates an exact match, while lower scores indicate potential matches. [02/05/2013]

248. How do I use the Minimum Name Score field and score slider bar?

The minimum name score field limits the number of names returned by the search. A value of 100 will return only names that exactly match the characters entered into the name field. A value of 50 will return all names that are deemed to be 50% similar based upon the matching logic of the search tool. By lowering the match threshold the system will return a broader result set. [02/05/2013]

249. How is the Score calculated?

SDN search uses two matching logic algorithms, and two matching logic techniques to calculate the score. The two algorithms are Jaro-Winkler, a string difference algorithm, and Soundex, a phonetic algorithm. The first technique involves using the Jaro-Winkler algorithm to compare the entire name string entered against full name strings of SDN entries. The second technique involves splitting the name string entered into multiple name parts (for example, John Doe would be split into two name parts). Each name part is then compared to name parts on the SDN list using the Jaro-Winkler and Soundex algorithms. The search calculates a score for each name part entered, and a composite score for all name parts entered. SDN Search uses both techniques each time the search is run, and returns the higher of the two scores in the Score column. [02/05/2013]

250. Does OFAC recommend a specific match threshold score?

OFAC cannot make such a recommendation because each search has its own unique set of facts surrounding it. Users of SDN Search must make their own match threshold determinations based upon their own internal risk assessments and established compliance practices. [02/05/2013]

251. What fields influence the score?

Only the name field influences the score. [02/05/2013]

252. What fields use fuzzy logic?

Only the name field uses the fuzzy searching logic. [02/05/2013]

253. When conducting a search using the ID field, does SDN Search account for variations in non-alphanumeric characters?

At present, SDN Search’s ID field uses exact character matching to provide users with a result. In order to receive the broadest number of results, users should conduct ID field searches both with and without any non-alphanumeric characters. An upcoming update to SDN Search will allow for searching of the ID field regardless of whether or not non-alphanumeric characters are included. [02/05/2013]

Questions Regarding Private Relief Efforts in Somalia

129. Can I make a private donation to a charity that is delivering humanitarian assistance in Somalia?

Yes. Please visit USAID’s website for more information about how you can help.[08-04-11]

130. Can my organization provide humanitarian assistance in Somalia?

Yes, non-governmental organizations may provide humanitarian assistance in Somalia without the need for a license from OFAC. Organizations considering entering Somali territory to conduct assistance operations should be aware that areas of Somalia are extremely unstable and dangerous, and should review the State Department’s Travel Warning for Somalia. Among the most powerful armed groups operating in Somalia is al-Shabaab, a Specially Designated Global Terrorist and a Foreign Terrorist Organization under U.S. law. U.S. persons should exercise caution not to provide funds or material support to this organization or other designated groups. [08-04-11]

131. What if, in delivering humanitarian assistance, my organization unintentionally provides food or medicine to members of al-Shabaab?

Due to the dangerous and highly unstable environment combined with urgent humanitarian needs in south and central Somalia, some food and/or medicine delivered in these areas may end up in the hands of al-Shabaab members. Such incidental benefits are not a focus for OFAC sanctions enforcement. [08-04-11]

132. What if, in delivering humanitarian assistance, my organization unintentionally provides cash to members of al-Shabaab?

U.S. persons should be extremely cautious in making cash payments in areas under the control of al-Shabaab. Al-Shabaab has, in the past, demanded “taxes” and “access” payments from assistance organizations. To the extent that such a payment is made unintentionally by an organization in the conduct of its assistance activities, where the organization did not have reason to know that it was dealing with al-Shabaab, that activity would not be a focus for OFAC sanctions enforcement. To the extent that an organization is facing demands for large or repeated payments in al-Shabaab-controlled areas, it should consult with OFAC prior to proceeding with its operations. [08-04-11]

133. I have heard that certain U.S. humanitarian assistance organizations are exempted from the prohibition on making certain cash payments to al-Shabaab. Is that correct?

Under the current extreme circumstances on the ground, the Department of State and USAID and their contractors and grantees are authorized to engage in certain transactions in the conduct of their official assistance activities in Somalia, under rigorous controls aimed at preventing diversion of assistance or cash payments to designated parties.
Humanitarian assistance organizations that wish to apply for a contract or grant with the State Department or USAID should visit USAID’s website. [08-04-11]

134. I have family members or friends in Somalia and would like to send remittances to them. Can I do that without violating OFAC sanctions?

Yes, you can send remittances to Somalia, as long as the transactions do not involve parties listed on OFAC’s Specially Designated Nationals and Blocked Persons List.
For additional information on OFAC’s Somalia-related sanctions programs, visit here. To request additional information from OFAC, please call the OFAC hotline at (800) 540-6322 or (202) 622-2490. [08-04-11]

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Questions Regarding Syria

135. Are travel-related transactions permissible under the new Syria Executive order 13582?

Yes. The new Syria Executive order, Executive Order 13582, does not prohibit U.S. persons from engaging in transactions ordinarily incident to travel to or from any country, including importation of accompanied baggage for personal use, maintenance within any country including payment of living expenses and acquisition of goods or services for personal use, and arrangement or facilitation or such travel including nonscheduled air, sea, or land voyages. [08-17-11]

OFAC General License No. 4: Exports or reexports to Syria of items subject to the Export Administration Regulations

136. What does the term "items" cover, and what is meant by items subject to the Export Administration Regulations?

For the purposes of OFAC Syria General License No. 4A, "items subject to the EAR" is defined at § 734.3 of the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730-774.The EAR are administered by the U.S. Department of Commerce, Bureau of Industry and Security ("BIS"). Note that BIS maintains authority to license exports and reexports to persons in Syria whose property and interests have been blocked pursuant to Executive Order 13606 (the “GHRAVITY E.O.”). For further guidance regarding the exportation or reexportation of items to Syria, please consult the EAR. You may also wish to review the BIS Syria Web page or contact BIS by phone at (202) 482-4252. [06-22-12]

137. Regarding OFAC Syria General License No. 4A, will I need a specific license from OFAC to export or reexport food or medicine to the Government of Syria?

The export or reexport of food or medicine that is subject to the EAR to the Government of Syria, other than medicine on the Commerce Control List that has not been licensed by BIS for export or reexport to Syria, does not require a specific license from OFAC.

As set forth in the EAR, which implements the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 ("SAA") and Executive Order 13338 of May 11, 2004, BIS does not require a license for the export or reexport of "EAR99" food and medicine; accordingly, EAR99 food and medicine can be exported or reexported to the Government of Syria on a "NLR" ("No License Required") basis, under the regulations administered by BIS.

Additionally, as set forth in the EAR, a BIS license is required for the export or reexport of medicine that is on the Commerce Control List ("CCL medicine"). If BIS has licensed the export or reexport of CCL medicine to the Government of Syria, no specific OFAC license is required. [06-22-12]

138. Does General License No. 4A authorize U.S. persons to export or reexport from a third country to Syria or the Government of Syria a foreign-made item with either no U.S. content or de minimis U.S. content?

General License No. 4A only applies to items that are subject to the EAR, as set forth in 15 C.F.R. § 734.3. If a foreign-made item located abroad is not subject to the EAR based on the regulations administered by BIS, the exportation or reexportation of such items by U.S. persons to the Government Syria and the reexportation of services incident to an exportation of such items to Syria are not authorized by General License No. 4A. Because Executive Order 13582 generally prohibits U.S. persons from engaging in transactions with the Government of Syria and separately prohibits the exportation, reexportation, sale, or supply, directly or indirectly, by a United States person, wherever located, of any services to Syria, such transactions remain prohibited. [06-22-12]

OFAC Syria General License No. 6: Personal Remittances

140. May I continue to send money to family or friends in Syria?

Yes. General License No. 6 authorizes U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters to process noncommercial, personal remittances to or from Syria, or for or on behalf of an individual ordinarily resident in Syria, provided the funds transfer is not by, to, or through the Government of Syria or any other person whose property and interests in property are blocked. [06-22-12]

141. May I send personal remittances through the Commercial Bank of Syria, the Syrian-Lebanese Commercial Bank, or the Syria International Islamic Bank (SIIB) to family or friends in Syria?

No. General License No. 6 does not authorize any transactions involving the Commercial Bank of Syria, the Syrian Lebanese Commercial Bank, or the SIIB. On August 10, 2011, pursuant to Executive Order 13382, the U.S. Department of the Treasury designated the Commercial Bank of Syria for its involvement in proliferation activities, and also designated its subsidiary, the Syrian-Lebanese Commercial Bank. On May 30, 2012, the Department of the Treasury also designated the SIIB pursuant to the same authority. Accordingly, the use of these financial institutions is not authorized by General License No. 6. [06-22-12]

General License No. 11: Authorizing Services in Support of Nongovernmental Organizations’ Activities in Syria

205. Who is authorized to send money to support certain nongovernmental organizations’ activities?

U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters are authorized to process transfers of funds to or from Syria on behalf of U.S. and third-country nongovernmental organizations (NGOs), in support of the not-for-profit activities described in General License No. 11. These not-for-profit activities include: (1) activities to support humanitarian projects to meet basic human needs in Syria, including, but not limited to, drought relief, assistance to refugees, internally displaced persons, and conflict victims, food and medicine distribution, and the provision of health services; (2) activities to support democracy building in Syria, including, but not limited to, rule of law, citizen participation, government accountability, and civil society development projects; (3) activities to support education in Syria, including, but not limited to, combating illiteracy, increasing access to education, and assisting education reform projects; and (4) activities to support non-commercial development projects directly benefiting the Syrian people, including, but not limited to, preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance. Except for limited transactions with the Government of Syria, General License No. 11 does not authorize the transfer of funds to the Government of Syria or other blocked persons. [06-22-12]

206. As an individual, may I transfer funds directly to Syria in support of authorized NGO activities under General License No. 11?

No. Only U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters are authorized to process such transfers of funds, and only on behalf of U.S or third-country NGOs. Although individuals may not transfer funds directly to Syria in support of authorized NGO activities under General License No. 11, please note that, pursuant to General License No. 6, individuals may send noncommercial, personal remittances to individuals in Syria provided that, among other things, the Government of Syria is not involved. However, General License No. 6 provides that “noncommercial, personal remittances” do not include charitable donations of funds to or for the benefit of any entity or funds transfers for use in supporting or operating a business. Please see General License No. 6 for further details.

If you wish to donate funds in support of humanitarian work in Syria, you may do so by transferring funds to an NGO to support its work in Syria. If you wish to send a charitable donation directly to Syria, you must apply for specific authorization to transmit such funds. [06-22-12]

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Questions Regarding the Central Bank of South Sudan

142. Is the new Bank of South Sudan still considered to be part of or linked to the Central Bank of Sudan or the Government of Sudan?

No. Since the independence of the new Republic of South Sudan on July 9, 2011, the former Bank of Southern Sudan, sometimes referred to as the Bank of South Sudan, has been established as the new central bank of the Republic of South Sudan. It is no longer a subsidiary of or linked to the Bank of Sudan, and no longer considered to be the Government of Sudan under the Sudanese Sanctions Regulations, 31 C.F.R. Part 538. U.S. persons may deal in property and interests in property of the Bank of South Sudan so long as those dealings do not otherwise violate the Sudanese Sanctions Regulations or other U.S. laws. [07-09-11]

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Questions Regarding Activities in the Republic of South Sudan

143. Can I export equipment for use in South Sudan’s oil sector?

Yes. Such exports, if prohibited by the SSR, are authorized by the new GL for activities relating to the Republic of South Sudan’s petroleum or petrochemical industries. That GL authorizes exports to the oil sector in the Republic of South Sudan that otherwise would be prohibited, whether because they relate to the petroleum or petrochemical industries in Sudan or involve dealing in Government of Sudan (GOS) property or are transshipped through Sudan. Certain types of equipment, such as dual use items, are also subject to Commerce Department licensing requirements. For more information about those requirements, contact the Foreign Policy Division of the Bureau of Industry and Security (BIS) at 202-482-4252, or visit www.bis.doc.gov. [12-08-11]

144. Can I transship equipment through Sudan to use in South Sudan?

Yes. The transshipment of equipment, whether oil-related or not, through Sudan to or from South Sudan is now authorized. [12-08-11]

145. Do I need any additional authorization from OFAC to engage in particular activities related to South Sudan’s oil sector, such as paying pipeline or port fees?

No. To the extent that they are prohibited by the Sudanese Sanctions Regulations, all activities and transactions relating to the petroleum and petrochemical industries in the Republic of South Sudan are authorized, including but not limited to the transshipment of goods, technology, and services to or from the Republic of South Sudan through Sudan; exploration; development; production; field auditing services; oilfield services; activities related to oil and gas pipelines; investment; payment to the Government of Sudan or to entities owned or controlled by the Government of Sudan of pipeline, port, and other fees; and downstream activities such as refining, sale, and transport of petroleum from the Republic of South Sudan, except for the refining in Sudan of petroleum from the Republic of South Sudan. [12-08-11]

146. Can I participate in the refining of Southern Sudanese crude oil in refineries located in Sudan?

No. Refining in Sudan of petroleum from the Republic of South Sudan continues to be prohibited. [12-08-11]

147. Does this mean I can do business in Sudan’s oil sector now?

No. All activities and transactions relating to the petroleum and petrochemical industries in Sudan continue to be prohibited, unless otherwise authorized. [12-08-11]

148. Can I use a bank that is owned by the Government of Sudan to facilitate a payment for oil-related activities in South Sudan?

All financial transactions ordinarily incident to the activities authorized by both the oil and the transshipment general licenses also are authorized, including but not limited to financial transactions with a depository institution owned or controlled by the Government of Sudan (GOS) or located in Sudan, provided that any transaction between a U.S. depository institution and a depository institution owned or controlled by the GOS must first transit through a depository institution that is not owned or controlled by the GOS. [12-08-11]

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Questions Regarding CISADA (Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010)

149. What activities by foreign financial institutions can subject them to CISADA sanctions?

As described in the Iranian Financial Sanctions Regulations, the sanctionable activities of a foreign financial institution are:
• Facilitating the efforts of the Government of Iran (GOI) to acquire or develop Weapons of Mass Destruction (WMD) or delivery systems for WMD or to provide support for terrorist organizations or acts of international terrorism;
• Facilitating the activities of a person subject to financial sanctions pursuant to UNSCRs 1737, 1747, 1803, or 1929, or any other Security Council resolution that imposes sanctions with respect to Iran;
• Engaging in money laundering, or facilitating efforts by the Central Bank of Iran or any other Iranian financial institution, to carry out either of the facilitating activities described above; or
• Facilitating a significant transaction or transactions or providing significant financial services for: (i) the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to the International Emergency Economic Powers Act (IEEPA), or (ii) a financial institution whose property and interests in property are blocked pursuant to IEEPA in connection with Iran’s proliferation of WMD, Iran’s proliferation of delivery systems for WMD, or Iran’s support for international terrorism.

150. Where can I find a list of Islamic Revolutionary Guard Corps (IRGC) affiliates and Iran-linked financial institutions “blocked pursuant to IEEPA”?

The list of blocked IRGC affiliates and blocked Iran-linked financial institutions is dynamic and is based on the identity of “designated” persons, which refers both to natural persons (i.e., individuals) and legal persons (such as corporations and other entities). The most recent list of designated persons – which includes most, but not all, blocked entities* – can be found at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/ default.aspx. The listings of designated IRGC entities will be followed by the tag [IRGC]; those of designated Iran-linked financial institutions will have the tag [IFSR].

*Under Department of the Treasury regulations, designated persons are those that are named on the list. All interests in property of such persons are blocked, and such persons are considered to have an interest in all property and entities in which they own, directly or indirectly, a 50 percent or greater interest. As a result, such property and entities are also blocked, even if they do not themselves appear on the list.

151. How do the IFSR define “U.S. financial institutions”?

The Iranian Financial Sanctions Regulations define “U.S. financial institutions” to include: depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of these entities. Covered institutions include those branches, offices, and agencies of foreign financial institutions that are located in the United States.

152. How do the Iranian Financial Sanctions Regulations define “foreign financial institutions”?

The Iranian Financial Sanctions Regulations define “foreign financial institutions” to include foreign depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of these entities.

153. How do the Iranian Financial Sanctions Regulations (IFSR) define the term “knowingly”?

The term “knowingly” as used in the IFSR means that a person has actual knowledge or should have known of specific conduct, a circumstance, or a result. In other words, the IFSR could be implicated if the Treasury Department finds that a foreign financial institution knew or should have known that it engaged in one or more of the sanctionable activities.

154. How does the Treasury Department determine whether a transaction or financial service is “significant” for purposes of the Iranian Financial Sanctions Regulations?

As set out in the Iranian Financial Sanctions Regulations, in determining whether a transaction or financial service is “significant,” the Treasury Department may consider: (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) other factors the Treasury Department deems relevant on a case-by-case basis.

155. When are the prohibitions and strict conditions on foreign financial institutions’ correspondent accounts or payable-through accounts in the United States effective?

A finding by the Treasury Department that a foreign financial institution knowingly engages in one or more of the sanctionable activities is necessary before the Treasury Department can prohibit or impose strict conditions on the opening or maintaining in the United States of correspondent accounts or payable-through accounts for that foreign financial institution.

156. How will U.S. and foreign financial institutions know that the Treasury Department has made such a finding?

As a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding. If the Treasury Department decides to impose strict condition(s), the Treasury Department will issue an order or a regulation that sets out the strict condition(s) to be imposed on the U.S. correspondent accounts or U.S. payable-through accounts of the relevant foreign financial institution and publish the order or regulation in the Federal Register. The Federal Register is available at www.gpo.gov/fdsys/. If the Treasury Department decides to prohibit the opening or maintaining of U.S. correspondent accounts or U.S. payable-through accounts for a foreign financial institution, the Treasury Department will add the name of the foreign financial institution to the Appendix to the Iranian Financial Sanctions Regulations and publish it in the Federal Register.

157. How will the Treasury Department enforce the Iranian Financial Sanctions Regulations (IFSR) with respect to U.S. entities?

Any U.S. person who violates the correspondent account provisions of the IFSR may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, and criminal penalties for willful violations of up to $1 million and 20 years in prison. A U.S. financial institution may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, if any person that it owns or controls violates the IFSR prohibition on engaging in any transaction with or benefitting the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to IEEPA, and if the U.S. financial institution knew or should have known that the person violated the Iranian Financial Sanctions Regulations.

158. Can the application of any part(s) of the Iranian Financial Sanctions Regulations be waived by the Department of the Treasury?

CISADA provides for a waiver of the sanctions under the Iranian Financial Sanctions Regulations if the Secretary of the Treasury determines that a waiver is necessary to the national interest of the United States.

159. Where can I find the text of the Iranian Financial Sanctions Regulations?

The text of the Iranian Financial Sanctions Regulations can be found at: www.treasury.gov/resource-center/sanctions/Programs/Documents/ fr75_49836.pdf.

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Executive Order 13599 (Blocking Property of the Government of Iran and Iranian Financial Institutions)

On February 5, 2012, the President signed Executive Order 13599 to implement section 1245(c) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”) and to take additional steps with respect to Iran. Effective as of 12:01 a.m. eastern standard time on February 6, 2012, the order blocks all property and interests in property of the Government of Iran (including the Central Bank of Iran), all Iranian financial institutions, and all persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to the order. [02-06-2012]

160. Section 1 of E.O. 13599 blocks all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, that are in the United States, that come within the United States, or that come within the possession or control of U.S. persons (including overseas branches). Can you provide further clarification about this provision of E.O. 13599?

E.O. 13599 requires U.S. persons to block (i.e., freeze) all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions, which also includes the Central Bank of Iran. This means that all individuals and entities that meet the definition of “Government of Iran” (“GOI”) as defined by section 7(d) of the new E.O. as well as all Iranian financial institutions (whether or not they meet the definition of the GOI) are now blocked. Previously, under the Iranian Transactions Regulations, 31 C.F.R. part 560 (the “ITR”), financial institutions and other U.S. persons were prohibited from engaging in transactions with the GOI. Under those prior rules, U.S. financial institutions receiving instructions to execute transactions involving these entities were not required to block the transactions, but were instead required to reject those instructions rather than carry them out, unless the transactions were exempt, authorized, or not prohibited by OFAC. The Executive Order defines an “Iranian financial institution” as a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the aforementioned entities.

As a result, transactions involving entities bearing the [IRAN] tag on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) will now need to be blocked unless exempt or authorized by OFAC. Going forward, the [IRAN] tag will connote that a person or entity meets the definition of the term “GOI” or “Iranian Financial Institution”. OFAC will continue to update the SDN List and may add, delete, or edit entries as appropriate.

E.O. 13599 blocks the property and interests in property of any individual or entity that comes within its definition of the term “Government of Iran” regardless of whether it is listed on the SDN List, and similarly it blocks the property and interests in property of all Iranian financial institutions as defined in the order regardless of whether the Iranian financial institution is listed on the SDN List.

E.O. 13599 builds upon the prohibitions in the ITR, which remain in effect.

Please note, pursuant to OFAC guidance, even when an entity does not itself appear on the SDN List or otherwise meet the definition of the GOI or an Iranian financial institution, the property and interests in property of that entity are blocked if the entity is owned, directly or indirectly, 50% or more by a person whose property and interests in property are blocked pursuant to an Executive Order or regulations administered by OFAC. [02-06-2012]

161. If all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of all Iranian financial institutions are blocked, can I conduct transactions involving the Government of Iran that have been previously authorized by OFAC?

Generally yes. Under new General License A, almost all transactions that are authorized under existing general licenses issued pursuant to the ITR or under existing OFAC specific licenses will continue to be authorized under the authority of E.O. 13599. However, transactions previously authorized under one existing ITR general license are not authorized pursuant to E.O. 13599. Specifically, the closing of accounts of the Government of Iran or an Iranian financial institution and the lump sum transfer of the balances to an account outside of the United States, which is authorized by sections 560.517(a)(3) & (b)(2) of the ITR, is not authorized by General License A, and, therefore, those transactions are prohibited by E.O. 13599 and the accounts must be blocked. In addition, General License A does not authorize any payments from blocked funds or debits to blocked accounts, with a limited exception for payments from funds or debits to accounts blocked under the Iranian Assets Control Regulations (the hostage crisis blocking program that began in 1979) that are authorized by specific licenses issued by OFAC.

New General License B authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances, to or from Iran, or for or on behalf of individuals ordinarily resident in Iran who are not included in the term “Government of Iran”, provided that such funds transactions are not made by, to, or through a financial institution blocked pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. part 544 (the “WMDPSR”), or the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594 (the “GTSR”), or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599.

Transactions not previously authorized by OFAC that involve property or interests in property of the Government of Iran, including the Central Bank of Iran, or of Iranian financial institutions must be blocked. [02-06-2012]

162. Are U.S. persons still required to comply with the Iranian Transactions Regulations?

Yes. E.O. 13599 builds upon the prohibitions of the ITR, and the prohibitions of the ITR remain in effect. [02-06-2012]

163. What are the differences and similarities between E.O. 13599 and the Iranian Transactions Regulations?

The ITR prohibit virtually all direct or indirect transactions involving Iran or the Government of Iran by U.S. persons or with a nexus to the United States, unless otherwise authorized by OFAC or exempted by statute, but they do not contain blocking provisions. E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, including the Central Bank of Iran, and of Iranian financial institutions, which also includes the Central Bank of Iran, unless it relates to a transaction that is exempted by statute or authorized by OFAC.

To illustrate the difference between how a transaction would be treated under the ITR and the new E.O., imagine a commercial wire transfer being processed through the U.S. financial system by order of a third-country, non-U.S. company for credit to a third-country financial institution in favor of a correspondent account it maintains for an Iranian financial institution. The transaction is not exempt or authorized by a general or specific license, and the Iranian bank is not blocked pursuant to the GTSR or the WMDPSR. Previously, under the ITR, any U.S. financial institution handling the transaction would have needed to reject the payment because allowing it to be processed would constitute a prohibited exportation of services to Iran. With the new E.O. in place, the U.S. financial institution would be required to block (“freeze”) that transaction. [02-06-2012]

164. The Iranian Transactions Regulations authorize U.S. depository institutions and U.S. registered brokers or dealers in securities to process transfers of funds to or from Iran if the transfer is a non-commercial, personal remittance. Are U.S. depository institutions and U.S. registered brokers or dealers in securities still authorized to process such payments to or from a Government of Iran-owned bank that is not otherwise designated pursuant to another part of 31 C.F.R. Chapter V?

General License B under E.O. 13599 authorizes U.S. depository institutions and U.S. registered brokers or dealers in securities to process noncommercial, personal remittances to or from Iran provided that the payment is not made by, to, or through a financial institution designated by OFAC under the WMDPSR, or the GTSR, or a person whose property and interests in property are blocked pursuant to any other part of 31 C.F.R. chapter V, or any Executive order, except an Iranian financial institution whose property and interests in property are blocked solely pursuant to E.O. 13599. Exempt or authorized transactions to or from Iran may also be processed subject to the above conditions.

Such transactions must be processed through a third country, as U.S. banks are prohibited from operating correspondent accounts for Iranian banks. The transactions may involve the use of blocked Iranian financial institutions as long as the Iranian financial institution is blocked solely pursuant to E.O. 13599 (and not pursuant to any other Executive order or part of 31 C.F.R. chapter V) and there is a third-country, non-U.S. financial institution as an intermediary between the U.S. financial institution and the Iranian financial institution. [02-06-2012]

165. To what extent are U.S. persons expected to conduct enhanced due diligence to determine if transactions contain a Government of Iran interest?

E.O. 13599 requires U.S. persons to block all property and interests in property of the Government of Iran, unless otherwise exempt or authorized by OFAC.

Please contact the OFAC Hotline at 202-622-2490 or 1-800-540-6322, or by email at OFAC_Feedback@treasury.gov, for guidance regarding entities that you suspect are owned or controlled by the Government of Iran that do not appear on the SDN List. As a general matter, OFAC expects financial institutions to conduct due diligence on their own direct customers (including, for example, their ownership structure) to confirm that those customers are not persons whose property and interests in property are blocked.

With regard to other types of transactions where a financial institution is acting solely as an intermediary and fails to block transactions involving a sanctions target, OFAC will consider the totality of the circumstances surrounding the bank’s processing of the transaction to determine what, if any, regulatory response is appropriate. [02-06-2012]

166. OFAC’s SDN List contains a list of entities identified by OFAC as being the Government of Iran. Should U.S. persons now block the property and interests in property of those entities?

Yes, U.S. persons should now block the property and interests in property of the Government of Iran entities appearing on the SDN List, unless OFAC has authorized the underlying transaction or the transaction is exempt. [02-06-2012]

167. OFAC has granted my company a license under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) and the ITR. Can I continue to conduct the licensed transaction?

Under General License A issued pursuant to E.O. 13599, transactions authorized under existing specific licenses issued pursuant to TSRA and the ITR are authorized under E.O. 13599 until the specific license expires, per the terms of the license. [02-06-2012]

168. OFAC has issued me a (non-TSRA) specific license related to Iran, or the Government of Iran. Can I continue to conduct the licensed transactions?

Under General License A issued pursuant to E.O. 13599, transactions authorized by (non-TSRA) specific licenses issued prior to the issuance of E.O. 13599 and issued pursuant to any part of 31 C.F.R. chapter V are also authorized under E.O. 13599. As set forth in General License A, in most cases these new authorizations under E.O. 13599 are in effect until theexpiration date of the individual specific license, or, if the specific license has no expiration date, until April 6, 2012. [02-06-2012]

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Questions Related to the NDAA (Section 1245 of the National Defense Authorization Act for Fiscal Year 2012)

On December 31, 2011, the President signed into law the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”). Section 1245 of this statute requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the Central Bank of Iran (“CBI”). It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI. Although the sanctions on foreign financial institutions authorized by section 1245 are similar to the financial sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (22 U.S.C. 8513(c)) (“CISADA”) (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the two statutes. [02-14-2012]

169. What is the NDAA?

On December 31, 2011, the President signed into law the NDAA. Section 1245 of the NDAA requires the President to block the property and interests in property subject to U.S. jurisdiction of all Iranian financial institutions, including the CBI. It also aims to reduce Iranian oil revenues and discourage transactions with the CBI by providing for sanctions on foreign financial institutions that knowingly conduct or facilitate certain significant financial transactions with the CBI. [02-14-2012]

170. What activities can trigger sanctions on a foreign financial institution under the NDAA?

For private financial institutions, the Act mandates that the President sanction those institutions that are found to knowingly conduct or facilitate any significant transactions with a U.S.-designated Iranian financial institution or with the CBI – whether for the purchase of petroleum or otherwise – unless the transaction is for the sale of food, medicine, or medical devices to Iran. For all transactions with the CBI other than petroleum purchases, this provision takes effect on February 29, 2012, i.e., 60 days after the enactment of the Act. The timing of the petroleum purchase sanctions is discussed immediately below.

Private financial institutions and all other foreign financial institutions – including central banks or foreign state-owned or -controlled banks – potentially face sanctions under the NDAA if they knowingly conduct or facilitate significant financial transactions for the purchase of Iranian petroleum or petroleum products with a U.S.-designated Iranian financial institution or with the CBI after the provision takes effect as early as June 28, 2012, i.e., 180 days after enactment.* This NDAA provision may be held in abeyance beyond June 28, 2012, depending on the President’s determination on the availability and price of alternative supplies. Foreign central and foreign state-owned or -controlled banks are also subject to these sanctions if the transactions are for the sale of petroleum or petroleum products to Iran and they occur after June 28, 2012.

All foreign financial institutions, including private and state-owned institutions, remain subject to section 104(c) of CISADA, which calls for sanctions on foreign financial institutions that are found to have knowingly engaged in facilitating significant transactions for specific Iranian-linked individuals and entities. (See CISADA: The New U.S. Sanctions on Iran, available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/CISADA_english.pdf.) [02-14-2012]

*Irrespective of the timeframes set forth in the NDAA, any foreign financial institution that knowingly facilitates significant transactions with any U.S.-designated Iranian financial institution would still be subject to CISADA.

171. Does the NDAA repeal or amend Section 104(c) of CISADA?

No. Any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for a U.S.-designated, Iranian-linked financial institution can be sanctioned under section 104(c) of CISADA and section 561.201 of the Iranian Financial Sanctions Regulations (“IFSR”) even if those transactions are not sanctionable under section 1245(d) of the NDAA. Though the NDAA imposes sanctions on foreign financial institutions similar to financial sanctions under CISADA and the IFSR (i.e., prohibiting and/or imposing strict conditions on opening or maintaining correspondent accounts or payable-through accounts in the United States), there are differences in the scope and operation of the statutes. [02-14-2012]

172. How does Executive Order 13599, “Blocking Property of the Government of Iran and Iranian Financial Institutions,” and the blocking of all Iranian financial institutions affect the financial sanctions provisions in CISADA? Do CISADA sanctions now apply to financial transactions with any Iranian financial institution?

CISADA applies to transactions with only those Iranian financial institutions that are designated in connection with Iran’s WMD or terrorism activities and are denoted on OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN list) with the [IFSR] tag. While E.O. 13599 does block the property of all Iranian financial institutions, that action is not grounded in the authorities that relate to counterproliferation or counterterrorism, and therefore does not implicate CISADA. [02-14-2012]

173. Are there any exceptions to the sanctions provisions in the NDAA?

Yes. The NDAA includes an exception that prohibits the President from imposing sanctions “with respect to any person for conducting or facilitating a transaction for the sale of food, medicine, or medical devices to Iran.” [02-14-2012]

174. What are definitions for the following NDAA terms: “significant financial transaction,” “knowingly,” “owned or controlled by the government of a foreign country,” “food, medicine, and medical devices,” “foreign financial institution,” “Iranian financial institution,” “significantly reduced,” and “whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”?

“significant financial transaction”

The IFSR, which implement section 104(c) of CISADA, identify factors to be used in determining what is significant (as it relates to transactions) in 31 C.F.R § 561.404, which allows the Secretary of the Treasury to consider the “totality of the facts and circumstances” while providing a list of seven broad factors that can play a role in the determination, including: (1) the size, number, and frequency of transactions; (2) the nature of the transaction(s); (3) the level of awareness of management and whether the transaction(s) are part of a pattern of conduct; (4) the nexus between the transaction(s) and a blocked person; (5) the impact of the transaction(s) on statutory objectives; (6) whether the transaction(s) involve deceptive practices; and (7) such other factors that the Secretary deems relevant on a case-by-case basis. Treasury anticipates closely modeling the definition of “significant” for NDAA purposes on the IFSR.

We anticipate utilizing a broad definition of “financial transaction” that encompasses “any transfer of value involving a financial institution.” The term “transaction” includes, but is not limited to, the following:

The holding of nostro, vostro, or loro accounts for or with the Central Bank of Iran or designated banks, such as Bank Melli Iran and/or Bank Saderat Iran, including any of their branches or subsidiaries worldwide (collectively the “Listed Parties”);

The provision of trade finance and/or letter of credit services for or with Listed Parties;

The provision of guarantees or similar instruments for or with Listed Parties;

The provision of investment products or instruments for Listed Parties and/or the participation with Listed Parties in investments;

The receipt or origination of wire transfers on behalf of or involving Listed Parties;

The acceptance of commercial paper (both retail and wholesale) drawn on Listed Parties, and the clearance of such paper (including, but not limited to, checks and similar drafts);

The receipt or origination of ACH or ATM transactions with Listed Parties; and/or

Any other transactions for or on behalf of, directly or indirectly, Listed Parties and/or with Listed Parties serving as correspondents, respondents, or beneficiaries. That would include transactions where the Listed Parties do not appear on the face of the transaction but where the transaction is undertaken with knowledge of the involvement of a Listed Party based on a relationship that exists through a third party such as a money exchange or trading house.

“knowingly”

The IFSR defines “knowingly” with respect to conduct, a circumstance, or a result, to mean that an entity or individual had actual knowledge, or should have known, about the conduct, the circumstance, or the result. 31 C.F.R. § 561.314. Treasury anticipates closely modeling the definition of this term on the IFSR.

“owned or controlled by the government of a foreign country”

The Iranian Transactions Regulations (“ITR”) define “an entity owned or controlled by the Government of Iran” in section 560.313. Borrowing from that definition, a financial institution “owned or controlled by the government of a foreign country” would be deemed to include a financial institution in which a foreign government owns a 50% or greater interest or which is otherwise controlled by a foreign government. Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR definition.

“food, medicine, and medical devices”

“Food”: The October 2011 general license for the ITR and the Sudanese Sanctions Regulations (“SSR”) authorizing certain food exports to Iran and Sudan defines “food” as “items that are intended to be consumed by and provide nutrition to humans or animals in Iran – including vitamins and minerals, food additives and supplements, and bottled drinking water – and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals in Iran.” The regulations also specify that food does not include alcoholic beverages, cigarettes, gum, or fertilizer. Treasury anticipates closely modeling the definition of this term under the NDAA on this license definition.

“Medicine”: ITR section 560.530(e)(2) states that: “For the purposes of this part, the term medicine has the same meaning given the term ‘drug’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).” Similarly, under the Trade Sanctions Reform and Export Act (“TSRA”), 22 U.S.C. 7201(5), “[t]he term ‘medicine’ has the meaning given the term "drug" in section 321 of title 21.” Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“Medical Devices”: ITR section 560.530(e)(3) states that: “For the purposes of this part, the term medical device has the meaning given the term ‘device’ in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321) but does not include any item listed on the Commerce Control List in the Export Administration Regulations, 15 CFR part 774, supplement no. 1 (excluding items classified as EAR 99).” Similarly, under TSRA, 22 U.S.C. 7201(4), “[t]he term "medical device" has the meaning given the term ‘device’ in section 321 of title 21.” Treasury anticipates closely modeling the definition of this term under the NDAA on the ITR and TSRA.

“foreign financial institution”

“Foreign financial institution” is defined in section 1245 of the NDAA with reference to section 104(i) of CISADA (22 U.S.C. § 8513(i)). As further defined in the IFSR, a “foreign financial institution” is “any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent. It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing.” 31 C.F.R. § 561.308. It does not include “the international financial institutions identified in 22 U.S.C. 262r(c)(2), the International Fund for Agricultural Development, or the North American Development Bank.” 31 C.F.R. § 561.308. Treasury anticipates closely modeling the definition of this term under the NDAA on the IFSR.

“Iranian financial institution”

This term is defined in E.O. 13599 as: “a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the foregoing.” Such financial institutions include, but are not limited to, any foreign entity that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or credits, or purchasing or selling foreign exchange, securities, or commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent. It includes but is not limited to depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of the foregoing.

“significantly reduced”

The Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of Energy, and the Director of National Intelligence, will make determinations as to whether any country has significantly reduced the volume of Iranian crude oil purchases. Any determinations will be preceded by a process of rigorous due diligence. The Secretary of State intends to consider relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran, including the quantity and percentage of the reduction in purchases of Iranian crude oil over the relevant period, termination of contracts for future delivery of Iranian crude oil, and other actions that demonstrate a commitment to substantially decrease such purchases.

“whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient”

The President will make a determination, based on the reports required by subparagraph (A) of Section 1245(d)(4) of the NDAA, as to whether the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient to permit purchasers of petroleum and petroleum products from Iran to reduce significantly in volume their purchases from Iran. [02-14-2012]

175. What is the scope of “petroleum products” under the law?

As defined by the U.S. Energy Information Administration (EIA), petroleum products include unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. In keeping with the EIA’s standard definition, petroleum products do not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels. [02-14-2012]

176. If oil is being provided as payment for an outstanding debt, is such a transfer considered a “financial transaction”?

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]

177. If the CBI is involved in providing settlement services for a transaction, or is otherwise acting solely as an intermediary in a transaction between a non-designated Iranian bank and a foreign financial institution, is the foreign financial institution deemed to be engaging in a transaction with the CBI?

Section 1245 targets any significant transactions “with” the CBI; a transaction involving the CBI in an intermediary role would likely be viewed as a transaction “with” the CBI. [02-14-2012]

178. Are barter trades involving the CBI considered “financial transactions” under Section 1245?

If a transfer involves a financial institution it would likely be considered a financial transaction. [02-14-2012]

179. Does the definition of “significant financial transaction” exclude the passive holding of CBI reserves? Is the U.S. willing to give assurances that this will not be a basis for sanctions?

This will be a case-by-case determination and will require specifics on what “passive holding” entails. As a general matter, we would likely not view the holding of reserves as sanctionable in the following circumstances: the accounts are frozen or restricted, under which the CBI would be allowed to maintain accounts that it had already opened as of December 31, 2011, but would otherwise be unable to direct the disposition of those funds, with ordinary commercial interest payments and routine roll-overs of time deposits under pre-existing instructions being the only new transactions. [02-14-2012]

180. Are payments made under contracts existing prior to the date of enactment of the NDAA statute (December 31, 2011) exempted from the definition of “significant transactions”?

No general exception will be provided for payments arising out of pre-existing contracts. The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above. [02-14-2012]

181. Will the U.S. refrain from sanctioning foreign financial institutions that receive funds from the CBI to repay loans? What if these loans were granted for projects that might be subject to the food, medicine, and medical device exemptions under the NDAA?

As noted, no general exception will be provided for payments arising out of pre-existing contracts. The assessment of whether such payments are “significant” will be done on a case-by-case basis in line with the criteria discussed above. Regarding payments for food, medicine, and medical devices, the NDAA does not allow sanctions based on transactions for the sale of food, medicine, or medical devices to Iran. Payments related to the export of broader humanitarian items would be dealt with in our analysis of what constitutes a “significant financial transaction” and would be considered on a case-by-case basis.[02-14-2012]

182. Is there a difference between entities that have been designated by the United States Government for illicit conduct, such as proliferation of weapons of mass destruction or support for terrorism, and those that are being blocked under E.O. 13599? How can I tell which entities appear on the SDN List for which reasons?

Both blocked and designated entities appear on the SDN List.

“Blocked” persons, in the context of E.O. 13599, appear on the SDN List due to the United States Government’s identification of these entities as the Government of Iran and/or as an Iranian financial institution. Such entities are identified on the SDN List with the tag [IRAN]. For example, Bank Keshavarzi is a Government of Iran owned Iranian financial institution and is identified with the [IRAN] tag. Additionally, the National Iranian Oil Company (NIOC) is a non-financial institution that has been identified as the Government of Iran and bears the [IRAN] tag.

“Designated” persons appear on the SDN List due to the United States Government’s having determined that they meet the criteria set forth in any of a number of other Executive Orders concerning, for example, assisting Iran’s weapons of mass destruction development, or aiding international terrorism and designating them for such activities. Such entities are identified on the SDN List with various tags other than [IRAN], such as [NPWMD] or [SDGT]. For example, Islamic Republic of Iran Shipping Lines is listed as: “IRISL [NPWMD].”

Note that many entries on the SDN List have more than one tag. For example: Bank Saderat Iran has three tags: [SDGT], indicating that it has been sanctioned for providing services to terrorism; [IRAN], indicating that it is the Government of Iran; and [IFSR], referring to the Iranian Financial Sanctions Regulations to signal to third country financial institutions that engage with entities with this tag that they risk sanctions under CISADA. [02-14-2012]

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Questions Related Executive Order 13606 (the GHRAVITY E.O.)

On April 22, 2012, the President signed Executive Order 13606 Blocking The Property And Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (the “GHRAVITY E.O.”). Effective 12:01 a.m. eastern daylight time on April 23, 2012, the GHRAVITY E.O. blocks all property and interests in property of persons listed in its Annex, and all persons determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, to meet the criteria in the order. [04-23-2012]

183. Why did the President issue the GHRAVITY E.O.?

The GHRAVITY E.O. follows prior Executive orders issued by the President in response to the commission of human rights abuses by the Governments of Iran and Syria. With the GHRAVITY E.O., the President recognized that the commission of serious human rights abuses against the people of Iran and Syria by their governments, facilitated by computer and network disruption, monitoring, and tracking by those governments, threatens the national security and foreign policy of the United States. The GHRAVITY E.O. targets this activity in order to deter and disrupt such abuses. [04-23-2012]

184. What does the GHRAVITY E.O. do?

The GHRAVITY E.O. blocks (i.e., freezes) the property and interests in property of, among others, any person determined by the Secretary of the Treasury, in consultation with or at the recommendation of the Secretary of State, (1) to have operated, or to have directed the operation of, information and communications technology that facilitates computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria; or (2) to have sold, leased, or otherwise provided, directly or indirectly, goods, services, or technology to Iran or Syria likely to be used to facilitate such activities.

U.S. persons in possession of property or interests in property belonging to persons listed in the Annex to the GHRAVITY E.O., or designated in the future by Treasury under the E.O., are obligated to block the property and report the blocking to OFAC within 10 days of blocking. Entities that are 50% or more owned by persons blocked by the GHRAVITY E.O. are also blocked, regardless of whether such entities appear on the Annex or OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN list”). [04-23-2012]

185. What type of activities does the GHRAVITY E.O. target?

The GHRAVITY E.O. targets the provision and use of information and communications technology to facilitate computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria. It is not intended to block exports of technology that enable the Syrian and Iranian people to freely communicate among themselves and with the outside world.

“Information and communications technology” means any hardware, software, or other product or service primarily intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display, including via the Internet. [04-23-2012]

186. How do I know that a person has been designated under the GHRAVITY E.O.?

Persons designated under the GHRAVITY E.O. appear on the publicly available SDN list bearing the [HRIT] tag. U.S. persons are obligated to block property involving the persons bearing the tag [HRIT] on the SDN list, unless the transaction is exempt or otherwise authorized by OFAC. [04-23-2012]

187. Does the GHRAVITY E.O. prohibit me from exporting technology to companies that do business with Iran or Syria?

This E.O. does not generally prohibit transactions involving persons that do business with Iran or Syria, unless the person has been designated pursuant to this order. You should consult with the Department of Commerce’s Bureau of Industry and Security (BIS) regarding exports to companies that do business with Syria. [04-23-2012]

188. If I am a non-U.S. company that exports information and communications technology to Iran or Syria, will I be designated under the GHRAVITY E.O.?

The measures in this order are designed primarily to address the need to prevent entities located in whole or in part in Iran and Syria from facilitating or committing serious human rights abuses. These measures are not designed to prevent the provision of information and communications technology necessary to enable the Iranian and Syrian people to freely communicate with each other and the outside world. That said, those providing communications technology to Iran or Syria that has the potential to facilitate computer or network disruption, monitoring, or tracking should exercise great caution given Iran and Syria’s use of this technology to assist in the commission of serious human rights abuses. [04-23-2012]

189. Would I need authorization from OFAC or BIS if I wanted to export goods or technology to persons blocked under the GHRAVITY E.O.?

Yes. For more information regarding exports of goods or technology to persons blocked under the GHRAVITY E.O., please contact OFAC or BIS. [04-23-2012]

190. Are existing licenses issued by the U.S. Government involving persons designated under the GHRAVITY E.O. still valid?

U.S. persons who have been issued licenses involving persons designated under the GHRAVITY E.O. should check with the issuing agency regarding the validity of their licenses. [04-23-2012]

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Questions Regarding Executive Order 13608 (Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria)

191. What does Executive Order 13608 “Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria” do?

This Executive Order gives Treasury new authorities. First, it strengthens Treasury’s ability to address behavior by foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions on Syria or Iran. This E.O. also gives Treasury the authority to impose sanctions on foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions.

Transactions by U.S. persons or within the United States involving persons sanctioned under this authority are prohibited, effectively cutting the listed persons off from the U.S. marketplace and financial system. By cutting off access to the U.S. marketplace and financial system to such sanctions evaders, Executive Order 13608 provides Treasury with a powerful tool to prevent and deter such behavior and to hold such persons accountable and to convince them to change their behavior. Publicly identifying such persons will also allow U.S. persons to avoid unwittingly engaging in transactions with identified foreign persons that may expose U.S. persons to the risk of sanctions violations. [05-01-2012]

192. Why was this authority needed?

Executive Order 13608. expands Treasury’s ability to address the behavior of foreign persons determined to have violated or attempted to violate U.S. sanctions on Syria or Iran, or to have facilitated deceptive transactions on behalf of persons subject to those sanctions, where the foreign person had no physical, financial, or other presence in the United States and did not submit to U.S. administrative proceedings. Treasury may use this authority where it appears that a foreign person violated U.S. sanctions on Iran or Syria but may not meet criteria for designation under existing Executive Orders. Executive Order 13608 will provide a means through which Treasury can limit the risk to U.S. commercial and financial systems posed by foreign persons determined to have violated U.S. sanctions on Iran or Syria, or to have engaged in deceptive transactions for or on behalf of persons subject to U.S. sanctions on Iran or Syria.

Such a listing under Executive Order 13608. also provides Treasury with the capability to put the world on notice as to such foreign persons’ activity and the risk of similar future activity. Such identification will help prevent U.S. persons from unwittingly engaging in transactions with foreign persons that may pose a risk of sanctions violations. [05-01-2012]

193. What are the repercussions of an individual or entity being identified under Executive Order 13608?

If an individual or entity is made subject to sanctions under this authority, U.S. persons generally may no longer provide to or procure from such individual or entity any goods, services, or technology. From a practical standpoint, it means that the sanctioned individual or entity will be cut off from the U.S. commercial and financial systems. [05-01-2012]

194. Are U.S. persons required to block the property of individuals and entities identified under Executive Order 13608?

No. Identifications or listings under Executive Order 13608. do not block any assets. However, a U.S. person may not provide or procure goods or services, including financial services, or technology to or from a listed person without authorization from OFAC, unless the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act (e.g., certain travel-related transactions). [05-01-2012]

195. I am a financial institution. What do I do if I receive a wire transfer involving a listed party?

A U.S. financial institution must reject any wire transfer involving a listed person and file a report with OFAC within 10 days. [05-01-2012]

196. I am a financial institution and I hold an account for a listed person. What do I do with the funds?

The account is not blocked; however, it is restricted and you cannot allow it to be operated without authorization from OFAC. [05-01-2012]

197. What are U.S. persons obligated to do with property of a person listed under Executive Order 13608?

Property of a listed person is not blocked, but U.S. persons must have authorization from OFAC to provide or procure such property to or from a listed person, or to provide or procure services to or from a listed person in connection with such property. Additionally, wire transfers involving the assets of an Executive Order 13608-listed person must be rejected. [05-01-2012]

198. May a U.S. person deal with an Executive Order 13608-listed person so long as the dealing does not involve Iran or Syria?

No. U.S. persons are prohibited from all transactions or dealings described in Executive Order 13608 with persons listed under Executive Order 13608., unless authorized by OFAC or where the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]

199. How is an identification or listing under Executive Order 13608 different from a designation?

Like a designation, a U.S. person is prohibited, unless authorized by OFAC or if the underlying transaction is exempt from regulation under the International Emergency Economic Powers Act, from dealing with an identified or listed person. Unlike a blocking designation, the property and the interests in property of a person listed under Executive Order 13608 are not blocked. [05-01-2012]

200. How is this different from lists maintained by the Department of Commerce?

Treasury’s authority under Executive Order 13608 has some similarities to Commerce’s authority under the Export Administration Regulations (“EAR”). Commerce may impose denial orders on persons (both foreign and U.S.) who have committed violations of the EAR or present an imminent risk of committing a violation. These individuals or organizations are listed on Commerce’s Denied Persons List. It is prohibited to deal with Denied Persons in any export transaction involving items (commodities, software, and technology) subject to the EAR. Treasury’s authority under Executive Order 13608 complements Commerce’s authority by addressing at least two types of sanctions violations that are outside the scope of the EAR. Specifically, Treasury may prohibit the provision of services (in addition to goods and technology) to or from identified or listed persons and Treasury may prohibit transactions or dealings involving goods and technology that are not subject to the EAR. However, unlike Commerce’s authority, Treasury’s authority to sanction or list an individual or entity under Executive Order 13608 may be implemented only with respect to foreign individuals or entities. [05-01-2012]

201. May a U.S. person deal with a person listed under Executive Order 13608 in a transaction that was previously licensed by OFAC?

No. U.S. persons cannot have any dealings with a person identified or listed under this Executive Order absent specific authorization from OFAC pursuant to the Executive Order 13608, unless the transaction is exempt from regulation under the International Emergency Economic Powers Act. [05-01-2012]

202. What if the transaction is already underway?

If a transaction is underway at the time of a listing, a U.S. person must cease dealing with the listed person and the U.S. person is prohibited from engaging in transactions or dealings in or related to any goods, services, or technology to or from the listed person, unless the transaction is exempt under the International Emergency Economic Powers Act, or until such time that OFAC authorizes the transactions pursuant to the Executive Order 13608 Additionally, if the transaction underway involves a wire transfer, a U.S. financial institution must reject it and file a report with OFAC within 10 days.

Like all of its programs, OFAC has the authority under Executive Order 13608 to license transactions that are consistent with U.S. foreign policy. [05-01-2012]

203. Can a U.S. person use a listed person to facilitate personal remittances to or from Iran or Syria?

No. Without specific authorization from OFAC, U.S. persons cannot use a listed person to process personal remittances. [05-01-2012]

204. Will Treasury pursue an enforcement action before identifying or listing a person pursuant to Executive Order 13608?

The authorities granted under this Executive Order are in addition to current authorities that Treasury has to pursue an enforcement action for violations of U.S. law, and Treasury is not required to pursue a civil enforcement action prior to identifying or listing a person pursuant to Executive Order 13608 [05-01-2012]

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Questions Related to Treasury CISADA Findings Against Elaf Islamic Bank and Bank of Kunlun

207. What were the criteria for this finding? How many other institutions were you looking at and why did you decide to take action against Elaf Islamic Bank and Bank of Kunlun?

Based on information made available to the Treasury Department, the Department has found that Iraq’s Elaf Islamic Bank and China’s Bank of Kunlun have knowingly facilitated significant transactions for various Iranian-linked banks designated by the United States under our WMD or terrorism authorities.

Upon finding that Elaf Islamic Bank and Bank of Kunlun were knowingly engaged in these activities that are sanctionable under CISADA, the Secretary of the Treasury has prohibited U.S. banks from opening or maintaining correspondent accounts or payable-through accounts in the United States for Elaf Islamic Bank and Bank of Kunlun – effectively cutting off Elaf Islamic Bank’s and Bank of Kunlun’s direct access to the U.S. financial system.

Since CISADA was signed into law in July 2010, Treasury has engaged with over 120 financial institutions and bank regulators in more than 60 countries all over the world to brief them on the financial provisions of CISADA, and, in cases where we had specific concerns, has shared information about those concerns.

This global engagement campaign has proven highly successful, as we have seen the overwhelming majority of financial institutions with which we have engaged change their business practices – even close any correspondent accounts with U.S. designated Iranian banks – to ensure that their access to the U.S. financial system is not put at risk.

Today’s action against Elaf Islamic Bank and Bank of Kunlun is in response to both banks’ ongoing relationships with U.S.-designated Iranian banks.

208. How are you defining “significant” transactions and financial services?

In determining whether transactions or financial services are significant, the Secretary of the Treasury may consider a number of factors related to the transactions or services, including, but not limited to: size, number, and frequency; type, complexity and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern of practice or is an isolated event; the ultimate economic benefit conferred upon the designated person(s); and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.

Elaf Islamic Bank

As of December 2010, Elaf Islamic Bank held assets of approximately $170 million U.S. dollars. The facilitation of tens of millions of U.S. dollar transactions with a U.S. designated Iranian bank over the past year is significant.

Bank of Kunlun

Bank of Kunlun has provided hundreds of millions of dollars’ worth of services to U.S. designated Iranian banks. These financial services include maintaining accounts, transferring payments, and serving as the paying bank for letters of credit opened by U.S. designated Iranian banks. The facilitation of hundreds of millions of U.S. dollars worth of transactions with U.S. designated Iranian banks over the past year is significant.

In 2012, after Treasury designated Bank Tejarat, Bank of Kunlun transferred hundreds of payments totaling approximately $100 million dollars for accounts it holds for Bank Tejarat and made a payment for an IRGC affiliate pursuant to a letter of credit opened by Bank Tejarat.

209. What happens to the correspondent and payable-through accounts held by Elaf Islamic Bank and Bank of Kunlun in the United States?

To our knowledge, neither Elaf Islamic Bank nor Bank of Kunlun currently holds correspondent accounts with U.S. financial institutions.

Today’s action will prohibit financial institutions in the United States from opening or maintaining correspondent or payable-through accounts for Bank of Kunlun or Elaf Islamic Bank.

210. What are the consequences for a U.S. financial institution that maintains or opens a new correspondent or payable-through account for Elaf Islamic Bank or Bank of Kunlun?

A U.S. financial institution that maintains or opens a correspondent or payable-through account for Elaf Islamic Bank or Bank of Kunlun is subject to civil penalties in the amount of up to $250,000 or twice the value of the transaction, whichever is greater.

Criminal penalties of up to $1 million can be imposed for willful violations, and individuals who willfully violate the prohibition can face up to 20 years in prison.

211. If a foreign financial institution continues to do business with Elaf Islamic Bank or Bank of Kunlun, could that lead to a CISADA finding against the other institution?

Any foreign financial institution that knowingly facilitates significant transactions on behalf of designated Iranian banks – whether directly or indirectly – may face CISADA sanctions. OFAC defines “knowingly” in this context as meaning the financial institution knew or should have known of the conduct, circumstance, or result. Elaf Islamic Bank and Bank of Kunlun have demonstrated their willingness to move hundreds of millions dollars on behalf of designated Iranian banks. Accordingly, we would expect heightened due diligence in any dealings with Elaf Islamic Bank or Bank of Kunlun.

212. Does this finding affect Elaf Islamic Bank’s or Bank of Kunlun’s branches or subsidiaries around the world? Does this finding affect any holding companies?

The prohibitions implemented as a result of today’s action apply to Elaf Islamic Bank and all of its offices, and to Bank of Kunlun and all of its offices, around the world.

213. Are United States financial institutions that do not hold correspondent or payable-through accounts for Elaf Islamic Bank or Bank of Kunlun required to block or reject transactions that otherwise involve Elaf Islamic Bank or Bank of Kunlun?

No. U.S. financial institutions are not required to block or reject financial or trade transactions that involve Elaf Islamic Bank or Bank of Kunlun.

That said, we would expect heightened due diligence in any dealings with Elaf Islamic Bank or Bank of Kunlun given their demonstrated willingness to facilitate transactions on behalf of Iranian banks designated by well over a dozen countries worldwide.

214. What is the licensing process for U.S. financial institutions that need to conduct transactions in order to close correspondent or payable-through accounts with a foreign financial institution sanctioned pursuant to CISADA?

Treasury regulations provide a 10-day period in which U.S. financial institutions are authorized to engage in the transactions necessary to close an affected account. If a U.S. financial institution that is in the process of closing an affected account seeks to engage in transactions beyond those already authorized, Treasury may issue specific licenses on a case-by-case basis.

215. What is the difference, in practical effect, between this and a designation under one of your other authorities, like E.O. 13382?

Today’s CISADA finding prohibits the opening or maintaining of correspondent accounts or payable-through accounts in the United States for Elaf Islamic Bank and Bank of Kunlun. This action does not require the immediate freezing of any assets that Elaf Islamic Bank or Bank of Kunlun may hold within U.S. jurisdiction.

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Questions Related to Executive Order 13622, “Authorizing Additional Sanctions With Respect to Iran”

On July 30, 2012, the President signed Executive Order 13622 to authorize additional sanctions with respect to Iran. Effective as of 12:01 a.m. Eastern Standard Time on July 31, 2012, the order provides additional sanctions authorities to the Secretary of the Treasury and the Secretary of State. The order builds, in part, on prior authorities set forth in the National Defense Authorization Act for Fiscal Year 2012 (“NDAA”) and in the Iran Sanctions Act (“ISA”).

216. What does E.O. 13622 “Authorizing Additional Sanctions With Respect to Iran” do?

Executive Order 13622 imposes new sanctions against the Iranian energy and petrochemical sectors.

E.O. 13622 authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated any significant financial transaction with the National Iranian Oil Company (“NIOC”) or Naftiran Intertade Company (“NICO”) (except for sales of refined petroleum products to NIOC or NICO that are below the dollar threshold that could trigger sanctions under ISA). It also provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petroleum or petroleum products from Iran through any channel, with the aim of deterring Iran or any other country or institution from establishing workaround payment mechanisms for the purchase of Iranian oil to circumvent the NDAA oil sanctions. The existing exception rules under the NDAA apply to these new sanctions. Thus, countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil will be excepted from this new measure as well.

In addition, E.O. 13622 provides new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petrochemical products from Iran.

Finally, E.O. 13622 provides authority for the Secretary of the Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of:

• NIOC, NICO, or the Central Bank of Iran (“CBI”), or
• the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

Additionally, E.O. 13622 grants the Secretary of State, in consultation with the Secretary of the Treasury and other cabinet officials, new powers to impose a range of sanctions on individuals or entities determined to knowingly engage in significant transactions for the purchase or acquisition of petroleum, petroleum products or petrochemical products from Iran. Individuals or entities determined to meet such criteria will be subject to the same sanctions that may be imposed under ISA.

217. Why was this authority needed?

E.O. 13622 further strengthens the Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not captured under the sanctions previously implemented against the CBI. The E.O. also addresses concerns that the Government of Iran is utilizing sales of petrochemical products to replace revenue lost as a result of previously enacted sanctions. In addition, the E.O. provides additional authority to combat and deter the use of non-bank intermediaries to conduct petroleum and petrochemical trade, provide support to or for the CBI, NIOC or NICO, or procure U.S. bank notes or precious metals for the Government of Iran.

218. What constitutes a “significant” financial transaction under the new E.O. 13622? Is there a certain dollar threshold?

Treasury expects to apply the same framework under section 1 of E.O. 13622 that it has applied under section 1245 of the NDAA and section 104 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). Under that framework, in determining whether transactions are significant, the Secretary of the Treasury may consider a number of factors related to the transaction or services, including, but not limited to: size, number, and frequency; type, complexity, and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern or practice or an isolated event; the ultimate economic benefit conferred upon the sanctions target; and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.

219. Does E.O. 13622 mean that Iranian trade partners should no longer buy petroleum products from Iran? How will this affect exports of Iranian oil?

These new measures further strengthen the existing comprehensive Iran sanctions framework by deterring work-around financial transactions involving NIOC or NICO that were not being captured under the sanctions previously implemented against the CBI. Iranian trade partners can continue to buy petroleum and petroleum products from Iran without risking sanctions under this E.O. if they have received a significant reduction exception under the NDAA. However, in jurisdictions that do not have a significant reduction exception, the purchase of petroleum or petroleum products and significant dealings with NIOC or NICO may be subject to sanctions under this E.O.

220. Does E.O. 13622 mean you are designating NIOC and NICO? Can countries that have been excepted from NDAA sanctions still purchase oil through these companies without facing sanctions?

All property and interests in property of NIOC and NICO subject to U.S. jurisdiction are already blocked pursuant to E.O. 13599 and U.S. persons are prohibited from all dealings with these entities. This new E.O. 13622 provides authority to sanction foreign financial institutions that knowingly conduct or facilitate any significant financial transaction with NIOC or NICO. Financial institutions in countries that have received a significant reduction exception are not subject to these sanctions for petroleum purchase transactions with NIOC and NICO while the exemption is in effect.

221. E.O. 13622 targets transactions between foreign financial institutions and NIOC or NICO. What about a NIOC or NICO subsidiary? Are transactions with those entities also sanctionable under this E.O.?

Yes. E.O. 13622 defines these terms to include any entity owned or controlled by, or operating for or on behalf, these entities.

222. Does E.O. 13622 make sanctionable activities related to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey, given that NICO reportedly has a 10 percent stake in the project?

No. The relevant provisions of E.O. 13622 do not apply to transactions involving the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey.

223. Are barter arrangements or other non-cash trade transactions involving petroleum, petroleum products, or petrochemical products originating from Iran sanctionable under the terms of the new E.O. 13622?

Yes. To the extent a financial institution is involved, that financial institution could be sanctioned under E.O. 13622 for a barter arrangement related to the purchase or acquisition of petroleum, petroleum products, or petrochemical products from Iran. In addition, barter transactions knowingly conducted with NIOC, NICO, or the CBI also could result in sanctions – regardless of whether a financial institution is involved – to the extent that those transactions constitute material support for, or services to, NIOC, NICO, or the CBI.

224. What are the definitions of “petroleum products” and “petrochemical products”?

The term “petroleum products” includes unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of: crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. The term does not include natural gas, liquefied natural gas, biofuels, methanol, and other non-petroleum fuels.

The term “petrochemical products” includes any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea.

Questions Related to Humanitarian Assistance to Syria

The United States government is working with the international community to provide urgently needed humanitarian assistance to the Syrian people while applying comprehensive sanctions against the Government of Syria and targeted sanctions on key individuals and entities supporting the Assad regime, in order to continue pressuring the Syrian government to stop its human rights abuses and other illicit activities. The following frequently asked questions provide an overview of the U.S. Department of the Treasury’s Syria sanctions program and guidance to the public on sending remittances, goods and services, and charitable assistance to Syria.

For additional Treasury guidance on protecting charitable donations from abuse, please view this document or visit this website: www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/Treasury%20Charity%20FAQs%206-4-2010%20FINAL.pdf. Additional questions may be directed to Treasury’s Office of Foreign Assets Control (OFAC) hotline at (800) 540-6322 or (202) 622-2490.

225. Why does the United States have sanctions against Syria and what does that mean for me?

The United States has sanctioned the Syrian government, including the Central Bank of Syria, senior Syrian government officials, and individuals and entities supporting the Assad regime and/or responsible for human rights abuses in Syria, in order to reinforce the President’s call that Bashar al-Assad step down and to disrupt the Assad regime’s ability to finance its campaign of violence against the Syrian people. In addition, Treasury has sanctioned the Commercial Bank of Syria and a number of other entities under Executive Order 13382, an authority that targets proliferators of weapons of mass destruction (WMD) and their supporters. Over the years Treasury has applied a broad range of sanctions using several different authorities and Executive orders (E.O.s), including counter-terrorism (E.O. 13224), human rights abuses (E.O. 13572), and non-proliferation (E.O. 13382). The United States has also prohibited the exportation of services to Syria, and there have long been legal restrictions on what goods U.S. persons can export to Syria.

These sanctions mean that U.S. persons are not permitted to do business with individuals or entities on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) [link to list], or with any entity 50 percent or more owned by an Specially Designated National (SDN), unless exempt or authorized by OFAC through a general or specific license.

226. How can I help the Syrian people while making sure to abide by the U.S. sanctions?

Recognizing that the Syrian people need many critical services and goods, OFAC has issued several general licenses that, among other things, allow all U.S. persons to send non-commercial, personal remittances to Syrian persons without needing to apply to OFAC for a separate or specific license. Moreover, U.S. persons may donate humanitarian goods like food and medicine to people in Syria, as long as such donations are consistent with Commerce and OFAC regulations. See http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx#syr.

Finally, OFAC has also issued a general license to allow nongovernmental organizations (NGOs) to engage in not-for-profit activities in Syria in support of humanitarian projects, democracy-building, education, and non-commercial development projects directly benefitting the Syrian people. Copies of all OFAC general licenses issued for Syria can be found here: www.treasury.gov/resource-center/sanctions/Programs/Pages/syria.aspx. For any activities that fall outside of these general licenses, specific authorization from OFAC would be required, unless the transactions fall within a small category that are exempt from regulation by statute.

As mentioned above, one of the goals of the U.S. sanctions on Syria is to reinforce the President’s call for Bashar al-Assad to step down and to disrupt the Assad regime’s ability to finance its campaign of violence against the Syrian people. OFAC can issue a specific license to authorize particular transactions that may otherwise be prohibited by the sanctions, as long as those transactions are in the foreign policy interests of the United States. For example, specific licenses may be issued on a case-by case basis to authorize charitable donations of funds that would otherwise be prohibited by the Syrian sanctions regime.

227. May I continue to send money to family or friends in Syria?

Yes. OFAC General License No. 6 authorizes U.S. depository institutions, including banks, and U.S.-registered money transmitters, to process non-commercial, personal remittances to or from Syria, or for or on behalf of an individual ordinarily resident in Syria, provided the funds transfer is not by, to, or through the Government of Syria or any other person designated or otherwise blocked by OFAC. Such transactions do not require further authorization from OFAC. If banks or other institutions have questions about processing remittances, they can contact OFAC’s Sanctions Compliance and Evaluation Division via the OFAC hotline at (800) 540-6322 or (202) 622-2490.

228. May I send personal remittances through the Commercial Bank of Syria, the Syrian-Lebanese Commercial Bank, or the Syria International Islamic Bank (SIIB) to family or friends in Syria?

No. General License No. 6 does not authorize any transactions involving individuals or entities designated under E.O. 13382, which targets proliferators of weapons of mass destruction and their supporters, including the Commercial Bank of Syria, the Syrian Lebanese Commercial Bank, and the SIIB. On August 10, 2011, under Executive Order 13382, the Department of the Treasury designated the Commercial Bank of Syria for its involvement in proliferation activities, and also designated its subsidiary, the Syrian-Lebanese Commercial Bank. On May 30, 2012, the Department of the Treasury also designated the SIIB. Therefore, the use of these financial institutions is not authorized by General License No. 6.

229. Do I need a specific license from OFAC to send U.S.-origin food or medicine to Syria?

No. You may send U.S.-origin food or medicine to Syria without a specific license from OFAC. The Department of Commerce, Bureau of Industry and Security (“BIS”), which maintains jurisdiction over the export of most items to Syria, does not require a license for the export of U.S.-origin food and most medicine to Syria. For further guidance regarding the exportation of items to Syria, including a list of such items, please review the BIS Syria Web page, http://www.bis.doc.gov/policiesandregulations/syriaguidance8_07_09.htm or contact BIS by phone at (202) 482-4252.

230. Can I give donations to NGOs to help the Syrian people?

Yes. U.S. persons can give a charitable donation to U.S. or third-country NGOs, but U.S. persons cannot send such a donation directly to Syria or a Syrian entity without a specific license in order to try to protect the donations from being misused. U.S. depository institutions, including banks, and U.S.-registered money transmitters, are allowed to process transfers of funds to or from Syria on behalf of U.S. NGOs and third-country NGOs in support of the not-for-profit activities described in OFAC General License No. 11.*

These not-for-profit activities include: (1) activities to support humanitarian projects to meet basic human needs in Syria, including drought relief, assistance to refugees, internally displaced persons, and conflict victims, food and medicine distribution, and the provision of health services; (2) activities to support democracy building in Syria, including rule of law, citizen participation, government accountability, and civil society development projects; (3) activities to support education in Syria, including combating illiteracy, increasing access to education, and assisting education reform projects; and (4) activities to support non-commercial development projects directly benefiting the Syrian people, including preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance.

General License No. 11 does not authorize transactions with the Government of Syria or other blocked persons, except for limited transactions with the Government of Syria that are necessary for the above-described not-for-profit activities, such as payment of taxes and other fees.

*For guidance on specific questions with respect to charitable donations, NGOs, and the scope of General License No. 11, please reach out to OFAC. Contact information may be found here: www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx#fragment-7

231. Can U.S. NGOs deliver humanitarian assistance directly to Syria?

Yes. U.S. NGOs may provide services to Syria in support of humanitarian projects in Syria without the need for a specific license from OFAC because this activity is covered under OFAC General License No. 11. However, other U.S. government authorities, including the BIS export requirements, may apply to the delivery of humanitarian assistance to Syria. For further guidance, please review the BIS Syria Web page http://www.bis.doc.gov/policiesandregulations/syriaguidance8_07_09.htm or contact BIS or contact BIS by phone at (202) 482-4252.

NGOs considering entering Syria to conduct assistance operations should be aware that areas of Syria are extremely unstable and dangerous, and should review the State Department’s Travel Warning for Syria http://travel.state.gov/travel/cis_pa_tw/cis/cis_1035.html.

U.S. persons should exercise caution not to engage in prohibited transactions with the Syrian Government or any individual or entity on OFAC’s SDN list.

232. As an individual, can I send financial donations directly to Syria in support of charitable activities under General License No. 11?

No. Without a specific license, U.S. persons are not permitted to transfer financial donations directly to Syria or to NGOs in Syria. Therefore, if you wish to donate funds in support of humanitarian work in Syria, you may do so by giving funds to U.S. or third-country NGOs to support not-for-profit activities in Syria, per General License No. 11 and as described above.

If you still wish to send a charitable donation directly to Syria or to a Syrian NGO, you may apply to OFAC for specific authorization to transmit such funds. You should provide as much information as possible about how the funds would be transferred, the recipients, and the end use of the funds. Although General License No. 6 does not authorize charitable donations, as mentioned above non-commercial, personal remittances can be sent to Syria under GL No. 6.

Questions Related to Determination Pursuant to Section 312 of the Iran Threat Reduction and Syria Human Rights Act of 2012

Section 312 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA) requires the Secretary of the Treasury, no later than 45 days after the date of the enactment of ITRSHRA, to determine whether the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) is an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (IRGC), and to report to Congress on these determinations and the reasons for them. On September 24, 2012, the Department of the Treasury made a determination that NIOC is an agent or affiliate of the IRGC. Based on the information currently available, Treasury is not able to determine at this time whether NITC is an agent or affiliate of the IRGC.

233. Isn’t NIOC already subject to sanctions?

Yes. Executive Order 13622 provides for sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant financial transactions with NIOC (except for sales of refined petroleum products to NIOC that fall below the dollar threshold that could trigger sanctions under the Iran Sanctions Act). Executive Order 13622 also provides authority for the Secretary of the Treasury to block the property and interests in property of persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC (as well as other specified entities). Note, however, that these sanctions are not applicable to certain transactions related to the Shah Deniz pipeline project, in which NIOC has a minority stake, under Executive Order 13622. In addition, NIOC was already blocked as an entity of the Government of Iran under Executive Order 13599, which was issued pursuant to the International Emergency Economic Powers Act (IEEPA), as amended, among other authorities. Nevertheless, as described below, the determination that NIOC is an agent or affiliate of the IRGC carries consequences.

234. What is the effect of the NIOC determination? Are there CISADA implications?

As a result of this ITRSHRA section 312 determination, NIOC now is also a person described under section 104(c)(2)(E)(i) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) as an agent or affiliate of the IRGC whose property or interests in property are blocked pursuant to IEEPA. This means that foreign financial institutions determined to knowingly facilitate significant transactions or provide significant financial services for NIOC are exposed to CISADA sanctions, including prohibitions or the imposition of strict conditions on the opening or maintaining of correspondent or payable-through accounts in the United States.

In addition, section 302 of ITRSHRA requires sanctions on foreign persons determined to have knowingly provided certain material support to, or engaged in significant transactions with, the IRGC or its officials, agents, or affiliates whose property or interest in property are blocked. Consequently, foreign persons that knowingly engage in significant transactions with NIOC after the September 24, 2012 determination could be exposed to sanctions.

An “IRGC” identifier will be added to NIOC’s entry on the Specially Designated Nationals and Blocked Persons List available on OFAC’s website.

As noted below, the potential application of sanctions under section 104(c)(2)(E)(i) of CISADA and section 302 of ITRSHRA is affected by whether the country with primary jurisdiction has received a significant reduction exception from the Secretary of State.

235. What are the implications for petroleum purchase transactions involving NIOC by financial institutions and entities in countries that have received a significant reduction exception from the Secretary of State?

Significant transactions, financial services, or material support involving NIOC for the purchase of Iranian petroleum or petroleum products by a foreign financial institution or entity based in a country that has received a significant reduction exception from the Secretary of State do not carry potential sanctions consequences – under CISADA, sections 302 and 312 of ITRSHRA, section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), or sections 1 and 2 of Executive Order 13622. Sections 302 and 312 of ITRSHRA authorize the President not to impose sanctions for the purchase of petroleum or petroleum products from Iran if an exception under subsection 1245(d)(4)(D) of the NDAA applies to the country with primary jurisdiction over the foreign financial institution at the time of the transactions or the provision of services. Notwithstanding the foregoing, any significant transaction for other sanctioned entities (such as Iranian designated banks or other persons described in section 104(c)(2)(E) of CISADA) may result in sanctions, regardless of whether the transaction is for the purchase of petroleum or petroleum products and involves NIOC.

236. Does the determination regarding NITC mean that there is no affiliation between NITC and the IRGC?

This statement means only that, based on the currently available information, Treasury is not able to determine at this time that NITC is an agent or affiliate of the IRGC.

237. How does the effect of this determination compare to the effect of section 1(a) of Executive Order 13622 as to transactions with NIOC?

The effect of the determination is similar to the effect of Executive Order 13622 section 1(a), which provides for prohibitions on the opening of and prohibitions or strict conditions on maintaining correspondent accounts or payable-through accounts in the United States for foreign financial institutions determined by the Secretary of the Treasury, in consultation with the Secretary of State, to have knowingly conducted or facilitated significant financial transactions with NIOC. Executive Order 13622 likewise contains an exception that covers transactions with NIOC conducted or facilitated by foreign financial institutions based in NDAA-excepted jurisdictions. A significant difference between these authorities is that the NDAA exception in ITRSHRA section 312 is limited to transactions or financial services for the purchase of petroleum or petroleum products from Iran.

Questions Related to Section 4 of Executive Order Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran

An Executive Order of October 9, 2012, “Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran,” (the “Order”) implements certain statutory requirements of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “TRA”), including amendments to the Iran Sanctions Act and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. Specifically, the Order implements the requirements of Sections 204, 402, and 403 of the TRA. In addition, consistent with Section 218 of the TRA, Section 4 of the Order prohibits foreign subsidiaries (defined below) of United States persons from knowingly violating the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of the Order, and provides for civil penalties on the U.S. parent company for any such violations.

238. What is the new prohibition on foreign subsidiaries of U.S. persons, and how does it work?

Section 4 of the Order prohibits an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “foreign subsidiary”) from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if that transaction would be prohibited by certain Executive orders prohibiting trade and other dealings with, and investment in, Iran and blocking the Government of Iran and Iranian financial institutions, or any regulation issued pursuant to the foregoing, if the transaction were engaged in by a United States person or in the United States. Civil penalties for the foreign subsidiary’s violation shall be applied to the U.S. parent company to the same extent that they would apply to a U.S. person for the same conduct.

239. Are foreign subsidiaries of U.S. companies covered under OFAC general licenses and/or permitted to apply for specific licenses from OFAC?

To the extent a transaction is exempt from the prohibitions of the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of the Order, or is authorized by a general license issued pursuant to these authorities if engaged in by a U.S. person, it would not be prohibited for a foreign subsidiary (as defined above) to engage in the transaction, provided that it satisfies all the conditions and requirements of the exemption or general license. Similarly, if the transaction is one for which a U.S. person might apply for a specific license — for example, the exportation of medical devices to Iran — a foreign subsidiary or its U.S. parent may apply for a specific license for the foreign subsidiary to engage in the transaction. Note: Whether a U.S. parent company’s specific license covers transactions by its foreign subsidiary that are otherwise prohibited by section 4 of the Order will depend on the terms of that license and the scope of the authorized activities.

240. Is there a wind-down or safe harbor provision in Section 4 of the Order?

Consistent with Section 218(d) of the TRA, Subsection 4(c) of the Order provides that civil penalties shall not apply if the U.S. person divests or terminates its business with the foreign subsidiary (as defined above) not later than February 6, 2013.

Questions Related to the Iranian Transactions and Sanctions Regulations and the Statement of Licensing Procedure on Support Of Human Rights-, Humanitarian-, and Democracy-Related Activities With Respect to Iran

The Office of Foreign Assets Control ("OFAC") issued a final rule in the Federal Register on October 22, 2012, changing the heading of the Iranian Transactions Regulations, 31 C.F.R. part 560 (the "ITR"), to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the "ITSR"), and amending the renamed ITSR to implement Executive Order ("E.O.") 13599 (other than section 11) and sections 1245(c) and (d)(1)(B) of the National Defense Authorization Act for Fiscal Year 2012 (the "NDAA"). These new regulations implement the blocking of the Government of Iran and all Iranian financial institutions pursuant to E.O. 13599 and the NDAA.

OFAC is adding numerous new sections to the ITSR, including prohibitions, definitions, interpretations, and licensing provisions. OFAC also is revising many existing sections of the ITSR in order to take account of the new government-wide blocking as well as the blocking of all Iranian financial institutions. Due to the extensive nature of these and other amendments described below, OFAC is reissuing the ITSR in their entirety.

In addition, OFAC is publishing on the Iran section of its Web site a Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran. The Statement of Licensing Procedure reflects procedures established pursuant to the Iran Threat Reduction and Syria Human Rights Act of 2012 (the "TRA"), which was signed into law by the President on August 10, 2012.

241. What are the major changes that the ITSR implement in superseding the ITR?

The ITSR block the property and interests in property of the Government of Iran and all Iranian financial institutions that come within the possession or control of any U.S. person, including any foreign branch, and prohibit all U.S. persons from dealing with any property interests whatsoever, present, future, or contingent, of persons identified as already blocked pursuant to E.O. 13599 and the NDAA.

OFAC is adding section 560.211 to the ITSR to implement the blocking prohibitions set forth in E.O. 13599 and the NDAA. New sections 560.212 through 560.214 are being added to set forth certain consequences and requirements that stem from the blocking prohibitions, including, inter alia, the requirement to hold blocked funds in interest-bearing accounts. New paragraphs (e) and (f) are being added to section 560.210 to incorporate two exemptions from the blocking prohibitions that are set forth in E.O. 13599. These exemptions concern the official business of the Federal Government and the property and interests in property of the Government of Iran that were blocked pursuant to Executive Order 12170 of November 14, 1979.

242. The ITSR includes revisions to the ITR pertaining to the transfer of funds to or from Iran. Accordingly, how may I transfer funds to or from Iran that arise from, and are ordinarily incident and necessary to give effect to, an underlying transaction that is authorized under the ITSR?

The ITSR authorize United States depository institutions to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account. See 31 CFR 560.516(a).

In addition, the ITSR authorize United States registered brokers or dealers in securities to process transfers of funds to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, if the transfer arises from, and is ordinarily incident and necessary to give effect to, an underlying transaction that has been authorized by a specific or general license issued pursuant to, or set forth in, the ITSR and does not involve debiting or crediting an Iranian account. See 31 CFR 560.516(b).

The authorizations set forth in section 560.516 of the ITSR do not allow a U.S. person who is authorized to engage in the underlying transaction to deal directly with money service businesses (MSBs) or hawalas, wherever located. However, these authorizations do not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.516 of the ITSR.

243. How can I send personal remittances to or from Iran under the ITSR?

The ITSR authorize the transfer of funds that are noncommercial and personal in nature to or from Iran or for or on behalf of an individual ordinarily resident in Iran, other than an individual whose property and interests in property are blocked pursuant to § 560.211, subject to certain restrictions and limitations. See 31 CFR 560.550. Such transfers must be processed by a United States depository institution or a United States registered broker or dealer in securities and not by any other U.S. person. The personal remittances general license does not permit a U.S. person to deal directly with money service businesses (MSBs) or hawalas, wherever located. However, this general license does not preclude United States depository institutions or United States registered brokers or dealers in securities from engaging or dealing with third-country MSBs or hawalas in the processing of the authorized transfers pursuant to section 560.550 of the ITSR.

The hand-carrying of certain noncommercial, personal remittances is also authorized, provided that the individual who is a U.S. person is hand-carrying the funds on his or her behalf, but not on behalf of another person. See 31 CFR 560.550.

244. What effect will the ITSR have on Iranian-Americans and the people of Iran?

The ITSR include several general licenses that newly authorize, or continue to authorize, activities that are otherwise prohibited by the regulations. Categories of activities affected by these changes include, among other things, visa-related transactions, journalistic activities in Iran, the sale of real property in Iran and the transfer of related proceeds to the United States, educational activities (including certain exchange programs), participation in conferences, and the exportation and reexportation of medicine and basic medical supplies to Iran.

245. What does the Statement of Licensing Procedure on Support of Human Rights-, Humanitarian-, and Democracy-Related Activities with Respect to Iran do?

The Statement of Licensing Procedure reflects procedures established pursuant to section 413 of the TRA. These procedures stipulate that, as of the effective date of the TRA, license determinations for complete requests for authorization under this policy shall be made not later than 90 days after receipt by OFAC, with certain exceptions. The Statement of Licensing Policy applies to applications submitted by the following categories of U.S. persons seeking to engage in certain human rights-, humanitarian-, and democracy-related activities with respect to Iran: (1) entities receiving funds from the Department of State to engage in the proposed activity; (2) the Broadcasting Board of Governors; and (3) other appropriate agencies of the United States Government. The ITSR also include separate statements of licensing policy related to the sharing of information over the Internet in Iran and the support of democracy and human rights in Iran and academic and cultural exchange programs.

Questions Relating to the Implementation of Section 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012

On August 10, 2012, the President signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, Public Law 112-158 (“TRA”). Section 504 of the TRA amends section 1245(d)(4)(D) of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (“NDAA”), which the President signed into law on December 31, 2011. The section 504 amendments to the NDAA take effect February 6, 2013. Regulations that revise the Iranian Financial Sanctions Regulations, 31 CFR Part 561 (“IFSR”), to implement section 504 of the TRA and Executive Order (“E.O.”) 13622 will be issued shortly.

254. What does section 504 of the TRA do?

Pursuant to the restrictions already in place under the NDAA, foreign financial institutions (“FFIs”) face restrictions on, or loss of, correspondent and payable-through account access in the United States if they knowingly engage in significant financial transactions with the Central Bank of Iran (“CBI”) or a designated Iranian financial institution, unless an NDAA exception, such as the significant reduction exception, applies. The NDAA significant reduction exception applies if the Secretary of State, in consultation with the Secretary of the Treasury and other agencies, has determined that the country with primary jurisdiction over the FFI has significantly reduced its purchases of Iranian crude oil during a specified period of time.

Effective February 6, 2013, section 504 amends the NDAA in several ways. Most importantly, it narrows the NDAA’s significant reduction exception to (a) exempt from sanctions only transactions that conduct or facilitate bilateral trade in goods or services between the country granted the exception and Iran, and (b) require that funds owed to Iran as a result of the bilateral trade be credited to an account located in the country granted the exception and not be repatriated to Iran. In addition, it -

(i) eliminates the distinction between state-owned or -controlled FFIs (not including foreign central banks) and private FFIs, thereby expanding the scope of sanctionable transactions for state-owned or -controlled FFIs with the CBI or designated Iranian financial institutions; and

(ii) clarifies that countries that have reduced their Iranian crude oil purchases to zero may continue to receive the significant reduction exception.

The sale of agricultural commodities, food, medicine, or medical devices to Iran (the “Humanitarian Exception”) is not impacted by section 504 of the TRA.

The purchase or acquisition of petrochemicals from Iran remain sanctionable activities and are not subject to the significant reduction exception.

255. Do the section 504 modifications restrict any other dealings with Iran?

Yes, the section 504 modifications also narrow the scope of transactions excepted from certain sanctions available under E.O. 13622. Accordingly, FFIs in countries that are determined by the Secretary of State to have significantly reduced their purchases of Iranian crude oil pursuant to the NDAA, that knowingly conduct significant financial transactions with the National Iranian Oil Company (“NIOC”), the Naftiran Intertrade Company (“NICO”), or otherwise for the purchase of petroleum or petroleum products from Iran, are only eligible for the significant reduction exception if the FFIs adhere to the bilateral trade restrictions, credit the funds to an account in the country with primary jurisdiction over the FFI, and do not repatriate the funds to Iran.

Example 1: A FFI in a country which has received a significant reduction exception and with primary jurisdiction over the FFI may facilitate a transaction enabling an oil refinery in that country to purchase crude oil from Iran without having exposure to U.S. correspondent account sanctions, so long as the transaction meets section 504’s bilateral trade requirements, the funds are credited to an account in the FFI in the country with primary jurisdiction over the FFI, and the funds are not repatriated to Iran.

Example 2: If, however, a FFI in a country which has received a significant reduction exception facilitates a third country’s crude oil purchase – even a third country with a significant reduction exception – from Iran, the FFI would have exposure to sanctions because the transaction was not solely for the FFI host country’s purchase of crude oil from Iran.

256. What transactions are impacted by section 504 of the TRA?

Starting February 6, 2013, significant financial transactions* knowingly conducted or facilitated by a FFI –

(i) with the CBI or designated Iranian financial institutions;
(ii) with NIOC or NICO (irrespective of the FFI involved); or
(iii) for the purchase or acquisition of petroleum or petroleum products from Iran (irrespective of the FFI involved);

may be subject to NDAA and/or E.O. 13622 sanctions unless –

(i) the country that has primary jurisdiction over the FFI conducting or facilitating such significant financial transactions has received a significant reduction exception; and
(ii) the significant financial transaction is for bilateral trade only, and any funds owed to Iran as a result of such trade are credited to an account at the FFI in the country that has primary jurisdiction over the FFI and are not repatriated to Iran.

Any FFI that knowingly facilitates significant transactions or provides significant financial services for Iranian-linked individuals or entities designated for activities related to terrorism or the proliferation of weapons of mass destruction pursuant to E.O.s 13224 and 13382 can be sanctioned under section 104(c) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and section 561.201 of the IFSR even if those transactions are not sanctionable under section 1245(d) of the NDAA and section 561.203 of the IFSR.

*These do not include sales relating to the Humanitarian Exception.

257. To which jurisdictions does the significant reduction exception apply?

As of February 6, 2013, 20 jurisdictions have been granted a 180-day significant reduction exception.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on September 14, 2012: Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and the United Kingdom.

The following jurisdictions received their 180-day significant reduction exception to NDAA sanctions on December 7, 2012: China, India, Malaysia, Republic of Korea, Singapore, South Africa, Sri Lanka, Taiwan, and Turkey.

258. What is meant by section 504’s requirement that bilateral trade consist of trade in goods and services between the country with primary jurisdiction over the FFI and Iran?

OFAC interprets bilateral trade between Iran and the country with primary jurisdiction over the FFI to mean trade in only those goods or services originating in (e.g., produced in or substantially transformed in) –

(i) the country with primary jurisdiction over the FFI conducting or facilitating the transaction, or
(ii) Iran (for purposes of the import of Iranian-origin goods or services by the country with primary jurisdiction over the FFI),

and the trade in services cannot include brokering transactions involving goods or services from or to third countries.

Furthermore, the goods or services must be exported and sold directly to either the country with primary jurisdiction over the FFI (in the case of Iranian-origin goods or services), or Iran (in the case of goods or services originating in the country with primary jurisdiction over the FFI).

The Humanitarian Exception is not impacted by section 504’s bilateral trade limitations (see FAQ 265).

259. What can a FFI do with the funds resulting from the import of Iranian-origin goods or services once the funds are credited to an account? Can funds be transferred to other accounts?

Section 504 of the TRA requires that, in order for a sanctionable transaction to fall within the bounds of the significant reduction exception, any funds owed to Iran as a result of the bilateral trade transaction must be credited to an “account located in the country with primary jurisdiction over the [FFI].” For purposes of implementing this requirement, OFAC interprets the “account located in the country with primary jurisdiction over the [FFI]” to be an account in the country with primary jurisdiction over the FFI, and at the same FFI that facilitated the transaction for the importation of goods or services from Iran.

Once the funds are deposited in the FFI, they can be -

(i) used to pay for a purchase by Iran of goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 1); or
(ii) transferred to a SPECIAL PURPOSE ACCOUNT (see FAQ 260) within that same FFI, in the country with primary jurisdiction over the FFI, where the funds may be later debited to purchase goods or services originating in the country with primary jurisdiction over the FFI which are exported and sold directly to Iran, or for the Humanitarian Exception (see Figure 2).

The funds may not be repatriated to Iran.

260. What is a SPECIAL PURPOSE ACCOUNT for purposes of the NDAA’s significant reduction exception?

A SPECIAL PURPOSE ACCOUNT is an account set up with conditions and safeguards that require the account to be used only for bilateral trade in goods or services between Iran and the country with primary jurisdiction over the FFI, and for sales made under the Humanitarian Exception (see FAQ 265). Funds paid as a result of bilateral trade under the NDAA’s significant reduction exception may be transferred to a SPECIAL PURPOSE ACCOUNT, so long as the account is at the same FFI that facilitated or conducted the original transaction, in the country with primary jurisdiction over the FFI.

261. Are there any circumstances in which funds can be transferred to third-country financial institutions?

Transfers on or after February 6, 2013, of funds deposited in the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT to third-country financial institutions are not covered by the NDAA’s significant reduction exception, and create exposure to sanctions for FFIs conducting or facilitating such transfers, unless the transfer is to pay a third-country exporter for sales made pursuant to the Humanitarian Exception (see FAQ 265).

262. Can funds be withdrawn from the RECIPIENT ACCOUNT or a SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, funds withdrawn from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT at the FFI may only be used to pay for bilateral trade or purchases relating to the Humanitarian Exception. Cash withdrawals from the RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT would be deemed to fall outside of the scope of bilateral trade and would expose the FFI to sanctions. Bank checks written on the account may be used only to pay for bilateral trade or purchases relating to the Humanitarian Exception, and are subject to further restrictions set out in FAQ 263 below.

263. Who can receive payments from funds credited to a RECIPIENT ACCOUNT or SPECIAL PURPOSE ACCOUNT?

In order for the NDAA’s significant reduction exception to apply on or after February 6, 2013, the person receiving payment (e.g., the manufacturer or service provider) for goods or services being exported to Iran must be –

(i) a citizen, national, or permanent resident of the country with primary jurisdiction over the FFI maintaining the accounts containing the bilateral trade funds; or
(ii) an entity organized under the laws of the country with primary jurisdiction over the FFI maintaining such accounts.

Furthermore, the person receiving such payment may not be -

(i) the Government of Iran (as defined in 31 CFR Part 561.321) (“GOI”);* or
(ii) a financial institution that appears on the List of Foreign Financial Institutions Subject to Part 561, which is maintained on the Office of Foreign Assets Control’s Web site (www.treasury.gov/ofac).

*The term “Government of Iran” as defined in 31 CFR Part 561.321 includes: (a) The state and the Government of Iran, as well as any political subdivision, agency, or instrumentality thereof; (b) Any entity owned or controlled directly or indirectly by the foregoing; (c) Any person to the extent that such person is, or has been, or to the extent that there is reasonable cause to believe that such person is, or has been, acting or purporting to act directly or indirectly on behalf of any of the foregoing; and (d) Any person or entity identified by the Secretary of the Treasury to be the Government of Iran under 31 CFR Part 560.

264. Can funds be remitted to Iran or the GOI without exposure to sanctions?

No. If funds from the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT are remitted, directly or indirectly, to Iran, or paid to any person that is the GOI, the FFI would be exposed to sanctions.

265. Can the funds be used for sales made under the Humanitarian Exception?

The NDAA generally exempts from sanctions sales made under the Humanitarian Exception (i.e., the sale of agricultural commodities, food, medicine, or medical devices from third countries to Iran). Funds deposited in the RECIPIENT ACCOUNT or the SPECIAL PURPOSE ACCOUNT can be used to pay for sales made pursuant to the Humanitarian Exception.

266. Does the November 8, 2012 designation of NIOC under E.O. 13382 impact the scope of permissible transactions by FFIs in significantly reducing countries?

Yes. On September 24, 2012, NIOC was identified as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corps (“IRGC”) under section 312 of the TRA, and designated on November 8, 2012, under E.O. 13382 for providing services and support to the IRGC. Accordingly, CISADA applies to transactions with NIOC. As a result of these additional sanctions against NIOC, only transactions solely for the purchase of petroleum or petroleum products from NIOC will fall within the scope of the significant reduction exception. A FFI in a significantly reducing country that is found to knowingly conduct or facilitate other types of significant transactions with NIOC (i.e., transactions unrelated to the purchase of petroleum or petroleum products from Iran) would face exposure to CISADA sanctions.

Example 3: If a FFI in a country with a significant reduction exception facilitates a transaction enabling a company in that country to purchase drilling equipment from NIOC, the FFI risks restrictions on, or loss of, correspondent and payable-through account access in the United States, because the transaction was not solely for the purchase of petroleum or petroleum products from Iran.

267. What are definitions for the following NDAA terms: “significant financial transaction,” “knowingly,” “food, medicine, and medical devices,” “foreign financial institution,” and “country with primary jurisdiction over the FFI,”?

These definitions are set out in 31 CFR Part 561.

Last Updated: 2/19/2013 2:39 PM

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