On June 8, 2016, the US Department of Treasury's Office of Foreign Asset Control (OFAC) updated its Frequently Asked Questions (FAQs) "to provide further clarity on the scope of the sanctions lifting that occurred on Implementation Day of the [Joint Comprehensive Plan of Action (JCPOA)]".
The updated FAQs address a number of concerns regarding practical application of the sanctions relief provided in the JCPOA. As discussed below, they relate to sanctions relief for (1) financial and banking operations and (2) US entities, citizens or permanent resident aliens (US Persons), which have been authorized to engage in Iran-related transactions pursuant to General License H (GL H).
Financial and Banking Measures
- FAQ C. 15 clarifies that US financial institutions are permitted to open or maintain correspondent accounts and otherwise engage in transactions with non-Iranian financial institutions that have banking relationships with Iranian financial institutions, provided that the Iranian financial institution is not on OFAC's list of Specially Designated Nationals (SDN List).
- FAQ C. 16 explains that US Persons may act as board directors of non-US, non-Iranian entities (including financial institutions) that engage in Iran-related business, provided that such US Persons are "walled off" or "ring-fenced" from the Iran-related business. OFAC recommends that non-US, non-Iranian entities establish a "blanket recusal policy" (as opposed to case-by-case abstentions) to ensure that US Persons directors, managers or employees are not involved in Iran-related business.
Foreign Entities owned or controlled by US Persons
- FAQ K. 14 explains that US parents may alter their policies and procedures, and those of foreign subsidiaries, to allow such foreign subsidiaries to establish a physical presence in Iran.
- FAQ K. 15 notes that foreign entities that are owned or controlled by US Persons are not themselves US Persons, but are nevertheless subject to US-Iran sanctions prohibitions except as authorized by GL H.
- FAQ K. 16 clarifies that foreign entities that are owned or controlled by US Persons may engage in transactions with individuals and entities on the "E.O. 13599 List", which contains the names of individuals and entities previously on the SDN List (and with which US Persons continue to be prohibited from engaging in transactions).
- FAQ K. 17 OFAC has announced its position that interests of multiple US Persons are considered in assessing whether a foreign entity is US-owned or –controlled. According to FAQ K. 17:
As a general matter, an entity established or maintained outside the United States is considered owned or controlled by a U.S. person if, in the aggregate, one or more U.S. persons hold(s) a 50 percent or greater equity interest by vote or value in the entity or if one or more U.S. persons hold(s) a majority of seats on the board of directors of the entity. A determination as to whether one or more U.S. persons otherwise control(s) the actions, policies, or personnel decisions of a foreign entity is a fact-specific, case-by-case determination, but in making such a determination, OFAC would look to the aggregated ownership interests held, and indicia of control exercised, by all relevant U.S. persons.
FAQ K. 17 also states that in circumstances in which a foreign entity is publicly traded or interests in it are otherwise widely disbursed, OFAC would not regard passive shareholdings by US Persons in excess of 50% to constitute US ownership or control.
- FAQ K. 18 clarifies that a US Person that owns or controls a foreign entity may amend its and the foreign entity's policies and procedures to allow the foreign entity to engage in Iran-related transactions authorized under GL H.
- FAQ K. 19 provides that such policies and procedures may be amended more than once, provided that the amendments are not made with the purpose of facilitating a particular Iran-related transaction.
- FAQ K. 20 notes that US Persons involved with US-owned or –controlled foreign entities must be recused or walled off from such entities' Iran-related business activities.
- FAQ K. 21 notes that a US parent company may not be involved in day-to-day operations of a foreign subsidiary that engages in Iran-related business, but the US parent company may nevertheless be involved in such foreign subsidiaries' day-to-day operations as they relate to jurisdictions that are not subject to US sanctions.
- FAQ K. 22 explains that US Persons may receive reports from their owned or controlled foreign entities that contain information about such foreign entities Iran-related transactions, but they may not use such information to influence Iran-related business decisions of the foreign entities.