On May 1, 2012, the US Treasury Department's Office of Foreign Assets Control ("OFAC") announced a new Executive Order1 ("the EO") that broadens the scope of US sanctions against Iran and Syria to prohibit certain transactions with "foreign sanctions evaders."
This expansion of US restrictions on Iran and Syria comes amid a broader push by the US to enhance economic pressure on those countries and further isolate them from international markets. US law has long prohibited most direct commercial relationships between the US and Iran, and imposed heavy restrictions on a wide range of commerce between the US and Syria. Accordingly, the main thrust of recent developments in US sanctions concerning Iran and Syria is to prevent third parties from providing Iran and Syria with goods, services, or technology. As a general matter, US sanctions seek to force third parties to choose between doing business with the US (and the rest of the world) or doing business with Iran or Syria. To that end, the EO expands US sanctions by targeting foreign persons who are involved in sanctions evasion, but who do not have any personal, financial, or other presence in the US, and who do not meet the criteria for designation under other existing Executive Orders.
The EO authorizes the Treasury Secretary, in consultation with the Secretary of State, to publicly identify and impose certain sanctions upon foreign persons who violate, attempt to violate, conspire to violate, or cause a violation of US sanctions against Iran and Syria, as well as foreign persons who facilitate "deceptive transactions for or on behalf of any person" subject to US sanctions regarding Iran or Syria. ("Deceptive transactions" are those in which "the identity of any person subject to United States sanctions concerning Iran or Syria is withheld or obscured from other participants in the transaction or any relevant regulatory authorities.") As with other US sanctions programs, the EO also authorizes identifications of, and the imposition of restrictions on, persons owned or controlled by "foreign sanctions evaders," or persons who act or purport to act on behalf of "foreign sanctions evaders."
Foreign sanctions evaders will generally be prohibited from any commercial or financial interaction with the US or with US persons. "US Persons" include any US citizen, permanent resident alien, or person actually in the United States, or any entity organized under the laws of the US or any US jurisdiction, including foreign branches. Under the EO, US Persons may not transfer any funds, goods, or services, by, to, or for the benefit of any foreign sanctions evaders. Nor may US persons receive any funds, goods, or services from foreign sanctions evaders.
The assets of foreign sanctions evaders are not subject to freezing/blocking under the EO. However, US financial institutions must reject and report to OFAC within 10 days any transactions involving a foreign sanctions evader. US financial institutions that currently hold accounts for foreign sanctions evaders may not allow the operation of such accounts without authorization from OFAC. Similarly, in the absence of OFAC authorization, US persons holding property of a foreign sanctions evader may not convey that property to or from a foreign sanctions evader, or provide services to or from a foreign sanctions evader in connection with that property.
Additionally, the EO prohibits foreign sanctions evaders from receiving a visa for entry into the United States.
To view the Executive Order and OFAC's press release and Frequently Asked Questions explaining the EO, visit the Treasury website.