The position in 2009

The Financial Investigation Agency (the FIA) in the British Virgin Islands gave a direction (the BVI 2009 Direction) on 18 December 2009 under section 3 of the Proliferation Financing (Prohibition) Act 2009 (the PFPA). The FIA, in accordance with section 5(1)(b)(iii) of the PFPA, reasonably believed that there was a risk that money laundering activities were being carried on by persons resident or incorporated in the Islamic Republic of Iran (Iran) as a part of their attempt to aid or facilitate the development or production of nuclear weapons and that these activities posed a significant risk to the interests of the BVI or the United Kingdom.

The BVI 2009 Direction was directed at all persons operating in the financial services sector of the BVI as prescribed under section 4 of the PFPA. For convenience, the BVI 2009 Direction is set out below:

“Designated person

This direction is given in relation to transactions or business relationships with the following persons (referred to in the Act [the PFPA] as “designated person”)

  1. Bank Mellat, whose head office is located at No. 327 Talegani Avenue, Tehran 15817 Iran;
  2. Islamic Republic of Iran Shipping Lines (“IRISL”), whose address is No. 37, Aseman Tower, Sayyade Shirazee Square, Pasdaran Avenue, Tehran, Iran;
  3. a branch of Bank Mellat or IRISL.

Direction to cease business

The Agency [i.e. the FIA] directs that, from the effective date of this direction, a relevant person must not-

  1. enter into, or
  2. continue to participate in,

any transaction or business relationship with a designated person.”

The BVI 2009 Direction was replaced in 2010 by equivalent measures. The BVI 2009 Direction replicated similar now-repealed UK legislation issued in the form of the UK Financial Restriction (Iran) Order 2009 (the UK 2009 Order). In contrast, as a matter of BVI law, the BVI 2009 Direction was still in force until 11 August 2016 even though its counterpart direction ie the UK 2009 Order had ceased to have effect some time ago.

On 11 August 2016, the Direction Given by the Financial Investigation Agency (Revocation) Order, 2016 (the Revocation Order) was passed into law. The Revocation Order revoked BVI 2009 Direction and aligned the BVI position with the UK position.

A copy of the Gazetted Revocation Order can be found here.

The position in 2011

The FIA issued a further direction (the BVI 2011 Direction) on 2 December 2011 under the PFPA. The BVI 2011 Direction was issued by the FIA for the same reason as the BVI 2009 Direction as highlighted above.

The BVI 2011 Direction applies to all persons operating in the financial sector in the BVI as prescribed for under section 4 of the PFPA (referred to as “relevant persons”). For convenience, the BVI 2011 Direction is set out below:

“Designated person

This direction is given in relation to transactions or business relationships with the following persons (referred to in the Act [the PFPA] as “designated person”

  1. a credit institution incorporated in Iran;
  2. the Central Bank of Iran, also known as Bank Markazi Jomhouri Islami Iran;
  3. a branch, wherever located, of a person falling within sub-paragraph (a);
  4. a subsidiary, wherever located, of a person falling within sub-paragraph (a).

Direction to cease business

The Agency directs that, from the effective date of this direction, a relevant person must not –

  1. enter into, or
  2. continue to participate in,

any transaction or business relationship with a designated person.”

The BVI 2011 Direction replicates a similar directions made in the UK in 2011 and 2012, namely the Financial Restrictions (Iran) Order 2011 (the UK 2011 Order) and the Financial Restrictions (Iran) Order 2012 (the UK 2012 Order). As a matter of BVI law, the BVI 2011 Direction is still in force even though its counterpart directions ie the UK 2011 and 2012 Orders have been revoked. The UK 2011 Order seems to have inspired the drafting for the BVI 2011 Direction.

The Financial Restrictions (Iran)(Revocation) Order 2013 was made on 29 January 2013, laid before Parliament on 30 January 2013 and brought into force on 31 January 2013 (the UK 2013 Revocation). The Explanatory Note to the UK 2013 Revocation is particularly instructive as it comments that Council Regulation (EU) No 1263/2012 of 21 December 2012 which amended Council Regulation (EU) No 267/2012 (EU Regulation 267) concerning restrictive measures against Iran contained effectively the same prohibition as the UK 2012 Order, and the UK 2012 Order was revoked by the UK 2013 Revocation effective 31 January 2013. In other words, the older UK sanctions and restrictive measures regime instituted during the period from 2009 to 2011 should be superseded by the revised regime formulated by the European Union, in particular under EU Regulation 267.

Inconsistently with the above, the BVI regime preserves, to an extent, the UK sanctions and restrictive measures regime on Iran instituted during the period from 2009 to 2011 in the form of the BVI 2011 Direction. The BVI 2011 Direction is still on the books and, unlike the UK’s position, has not been revoked by the FIA.

Based on recent discussion with the FIA, it is understood that the BVI 2011 Direction is due to be repealed soon and the various legislative processes have commenced to give effect to this. A copy of the Order revoking the BVI 2011 Direction will be published in the BVI Gazette. Once the BVI 2011 Direction is repealed this will further align the BVI with the position in the UK and in keeping with the relaxation of the Iran restrictions discussed more fully below.

The Joint Comprehensive Plan of Action

With the implementation of EU Regulation 267 the EU imposed strict sanctions against Iran and brought the EU’s position more closely in line with the United States of America’s position as regards nuclear proliferation activity. EU Regulation 267 was adopted into BVI law in the Iran (Sanctions)(Overseas Territories) Order 2012 (the OT Order). The OT Order and EU Regulation, despite being amended on numerous occasions, continue to represent the cornerstone of sanctions legislation on Iran in the BVI and EU respectively.

On 14 July 2015, the E3/EU+3 (China, France, Germany, the Russian Federation, the UK and the United States of America, with the High Representative of the European Union for Foreign Affairs and Security Policy) and Iran welcomed the Joint Comprehensive Plan of Action (the JCPOA).

Under the JCPOA, the EU/UK agreed to terminate or relax all provisions of EU Regulation 267 (and consequential domestic measures) that related to nuclear-related economic and financial sanctions, including related designations. As relevant, the following sanctions were relaxed as of “implementation day”:

  • Transfers of funds between EU persons and entities, including financial institutions, and Iranian persons and entities, including financial institutions
  • Banking activities, including the establishment of new correspondence banking relationships and the opening of new branches and subsidiaries of Iranian banks in territories of EU Member States
  • Provision of insurance and reinsurance
  • Supply of specialised financial messaging services, including SWIFT, the Central Bank of Iran and Iranian financial institutions
  • Financial support for trade with Iran (export credit, guarantees or insurance)
  • Commitments for grants, financial assistance and concessional loans to the Government of Iran
  • Transactions in public or public-guaranteed bonds

The JCPOA indicated that the EU will terminate all of the provisions of the Council Regulation 267 implementing all EI proliferation-related sanctions, including related designations, eight years after adoption day or when the International Atomic Energy Agency has reached the broader conclusion that all nuclear material in Iran remains in peaceful activities, whichever is earlier.

Across the EU Member States and other jurisdictions the implementation day of the JCPOA was 16 January 2016. In the BVI the terms of the JCPOA was adopted into the OT Order as of 17 March 2016.