Treasury has made a Direction under the CTA that has the effect of cutting off all financial ties with Iranian banks. The Direction applies to all financial and credit institutions operating in the UK financial sector, and all their branches. So it covers all entities covered by the Money Laundering Regulations, and also insurers. It applies to transactions and business relationships with the following “designated persons”:
- all banks incorporated in Iran;
- all subsidiaries and branches of banks incorporated in Iran; wherever they may be; and
- the Central Bank of Iran.
The Direction bans any participation in any transaction or business relationship with any designated person unless Treasury grants a licence. The Direction goes wider than existing financial sanctions that stem from EU measures, which institutions must also continue to comply with. Specifically, the Direction effectively bans insurance for any Iranian entity. Treasury has issued six general licences, and institutions can apply for licences covering both the CTA and EU restrictions, but may have to apply for new CTA licences where transfers of funds under current licences have not yet occurred. Treasury notes the Direction is not a trade ban on trade with Iranian companies, but exporters will no longer be able to use UK credit or financial institutions to make or receive payments to or from Iranian banks, nor will UK institutions be able to enter into new letter of credit arrangements with Iranian banks. Treasury says it will consider applications for licences to allow payment under transactions entered into before the Direction took effect. (Source: Treasury Explains New Iran Restrictions)