On June 24, 2019, the President issued Executive Order 13876, “Imposing Sanctions With Respect To Iran” (“EO 13876”), which specifically imposes sanctions on the Supreme Leader of Iran (currently, Ayatollah Khamenei) and the Supreme Leader’s Office (“SLO”), authorizes the future designation of persons appointed by, or providing support to, the SLO, and designates certain additional senior Iranian Revolutionary Guard (“IRGC”) commanders. While a politically significant and symbolic move, by itself this latest action is unlikely to have much practical impact, except to increase the risk, yet again, of secondary sanctions for non-US parties (particularly financial institutions) that engage in transactions with the targeted parties.
According to remarks from the President and White House statement, EO 13876 is a part of the Trump Administration’s overall efforts to put financial pressure on the Iranian regime, as well as a response to Iran’s “escalated aggression towards the United States in recent days.” The White House specifically pointed to recent escalations, including the attack on a US drone operating over international waters as well as Iran’s announcement that it will be increasing its stockpile of enriched uranium. A similar statement on EO 13876 from the Treasury Department is also available here and from State Department is available here.
Beyond the Leader and SLO designations, EO 13876 authorizes the US Government to designate as a Specially Designated National (“SDN”) any person or entity that meets the following criteria:
- individuals appointed by the Leader or the SLO as a state official of Iran, or as the head of any entity located in Iran, or a non-Iranian entity owned/controlled by one or more Iranian entities;
- individuals appointed by any of the foregoing;
- parties that materially assist, sponsor, or provide financial, material, or technological support for, or goods or services in support of any person designated as an SDN pursuant to EO 13876;
- parties owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, any person designated as an SDN pursuant to EO 13876; or
- members of the board of directors or a senior executive officer of any party designated as an SDN pursuant to EO 13876.
Non-US financial institutions face additional risks because EO 13876 also authorizes the imposition of sanctions (i.e., restrictions or prohibitions on US correspondent accounts and payable-through accounts) on non-US financial institutions that knowingly conduct or facilitate any “significant” financial transaction for or on behalf of any of the above SDNs. The US Treasury Department’s Office of Foreign Assets Control (“OFAC”) has previously advised via the issuance of FAQ 671 that it will adopt the multi-factor definition of “significant” set out at 31 C.F.R § 561.404, which includes the size, number, and frequency of the transactions and their impact on US sanctions program objectives.
Concurrent with EO 13876 and the SDN designation of the Leader, OFAC added eight senior commanders of the IRGC to the Specially Designated Nationals and Blocked Persons List (“SDN List”), and amended the IRGC’s entry on the SDN List to include a citation to EO 13876. The statement from the US Treasury Department explained that these individuals are in charge of the IRGC’s naval command off Iran’s southern provinces around where the attack on the US drone took place, as well as contribute to Iran’s destabilizing presence in Syria.