The Office of Foreign Assets Control (OFAC) of the United States Treasury recently concluded a settlement agreement with two Singaporean companies, CSE Global Ltd. and CSE TransTel Pte. Ltd., calling for the two companies to pay $12 million for purported violations of the U.S. sanctions program against Iran (officially called the Iran Transactions Regulations). The two entities are not owned or controlled from the U.S., and utilized a non-U.S. bank for the transactions. However, OFAC appears to have reasoned that the U.S. dollars that were used to pay various Iranian customers and middlemen came from U.S. financial institutions. As such, OFAC considered the transactions to be in violation of U.S. law.
OFAC's publicly available settlement agreement with the Singaporean companies makes it clear that OFAC considered the entities' violation of their own letter of undertaking to the bank, in which they promised not to violate U.S. sanctions law, to be especially worthy of punishment. A second fact not mentioned in the OFAC documents, but worth noting, is the presence of CSE Global's subsidiaries in the U.S. market, which likely prompted CSE Global's willingness to settle with the American authorities.
Even for companies that utilize non-U.S. banks, the possibility of U.S. banks' involvement in U.S. dollar transactions is very high, since banks usually maintain foreign currency in accounts with "corresponding" banks in the country of that currency's issuance. While the charges in the CSE Global case have not yet been tested in the U.S. courts, OFAC's position appears to be based upon the involvement of U.S. financial institutions in illegal transactions involving Iranian buyers.
Based upon this recent development, Masuda Funai is advising its overseas-based clients to avoid using U.S. banks and U.S. currency in any transactions with Iran, Cuba, or any other country subject to blanket U.S. sanctions. There are certain circumstances in which non-U.S. entities are able to transact such business, but as the CSE Global case demonstrates, even under those circumstances, the use of U.S. currency can trigger still violations of U.S. sanctions law.