On Nov. 6, 2008, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury revoked its “U-Turn” license authorizing certain funds transfers involving Iran, further restricting Iran’s access to the U.S. financial system. This action became effective upon its publication in the Federal Register on Nov. 10.

The “U-Turn” license authorized U.S. depository institutions to process certain funds transfers to or from Iran, or for the direct or indirect benefit of persons in Iran or the Government of Iran, provided such payments were initiated by order of a non-Iranian, non-U.S. bank from its correspondent account in a U.S. bank to a correspondent account held by a U.S. bank for another non-Iranian, non-U.S. bank. As a result of this action, U.S. depository institutions are no longer allowed to process these U-Turn transfers involving Iran, thereby precluding transfers which were designed to clear transactions in U.S. dollars for the direct or indirect benefit of Iranian banks, other persons in Iran, or the Iranian Government.

The revocation of this license will not affect a U.S. depository institution’s ability to process a funds transfer where the underlying transaction is (a) authorized by OFAC through a specific or general license, (b) not otherwise prohibited by the Iranian Transactions Regulations (“ITR”), or (c) exempt from the ITR. For example, payments related to the following types of transactions would not be prohibited:

  • Transactions that OFAC has authorized by general or specific license, such as over-flights of Iranian airspace; legal services; intellectual property protection; and sales of agricultural products, medicine, and medical devices to Iran; 
  • A non-commercial remittance to or from Iran (e.g., a family remittance not related to a family-owned enterprise), which is not prohibited under the ITR; 
  • Transactions that are exempt from the ITR, such as the exportation to Iran or importation from Iran of information and informational materials; travel-related remittances; and shipments of donated of articles, such as food and medicine, to relieve human suffering.