Crackdown on Sanction Violations: What It Means for Iranian Americans

Check with the authorities before Grandmom sends those nuts -- no joke.

[ Q&A ] If you're an Iranian American and you haven't heard of OFAC, you will soon according to Erich Ferrari, U.S. trade sanctions expert, white collar federal criminal defense attorney, and author of The Iranian Transactions Regulations Practice Guide: A Guide to Navigating the Complex World of U.S. Trade Sanctions against Iran.

OFAC, the Office of Foreign Assets Control of the Treasury Department, is ratcheting up prosecution of Iranian Americans who continue to violate American law by conducting commercial transactions with Iran, Ferrari warned a crowd of more than 100 at the Santa Monica Public Library on Monday at the National Iranian American Council's 2011 OFAC Update. These violations include transactions as simple as selling family property back in the homeland to traveling to Iran for cosmetic surgery.

Salman Borhani, one of NIAC's three representatives who helped organize the event and an attorney himself, felt that due to the "convoluted nature" of many sanctions laws there appeared to be "high interest" in information regarding this serious matter among many Iranian Americans.

I emailed Ferrari some questions the day after the information session regarding the nature of these laws.

What is the reason for renewed emphasis given that most of these sanctions were put into place in 1995 under President Clinton, and that according to you, the "genesis" of these laws started with President Reagan in 1987?

I can't say what the reasons are for the increase in enforcement of these sanctions. As a private attorney, I try not to speculate as to what the motivation driving certain actions is. I merely approach sanctions from a practical standpoint and try to help those people impacted by the sanctions understand how they are impacted and advise them of what they can do to stay out of trouble.

You encourage people to file for a Request for Interpretive Guidance if they are unsure if the transaction they are engaging in is breaking the law, or file a Voluntary Self-Disclosure form after they unknowingly broke the law. How many people will do this, do you believe, considering Iranians have been doing some form of business for three decades with relative ease?

Naturally, many people will not do this because they are scared of the consequences. I can understand that position. I only suggest these courses of actions for those who seek to be in full compliance with U.S. law related to trade sanctions against Iran. Everyone has their own choice to make in determining what actions they are comfortable with.

What will it take for the Iranian American community to change their habits regarding these matters?

I believe it is already happening. I believe a lot of the violations that occur or have occurred are due to a lack of understanding about what sanctions entail. Due to some recent criminal convictions for violations of the Iran sanctions, many Iranian Americans are becoming aware that they could face consequences for violating Iran sanctions and as a result are beginning to change their habits. Of course, some people will carry on as they always have. As I have said before this is everyone's own choice to make.

Can you describe what havaleh and saraaf are and how they relate to sanctions laws?

Havaleh (Hawala) is an informal money exchange system which utilizes brokers to transmit money between parties. For example, if someone were to provide funds to a havaleh broker in Iran for a remittance to someone in the U.S., that havaleh broker would call his counterpart in the U.S. and have the counterpart provide the funds to the beneficiary. The two brokers would keep a tab of how much is owed. Because these activities do not utilize a U.S. depository institution, they do not fall under the general license found at 31 C.F.R. 560.516, therefore these activities are prohibited by Iran sanctions.

Saraaf is the use of a money exchange house. These exchange houses also serve as remittance forwarders who will forward the money to a U.S. depository institution. As such, their use is not necessarily prohibited. However, use of saraafis is risky because they mask the identity of the true original remitter and as such can cause a U.S. bank to file a suspicious activity report which in turn could prompt an OFAC investigation.

You mentioned "facilitation" numerous times and talked about the dangers of it. Can you describe what that is in relation to sanctions laws?

Facilitation is when a U.S. person carries out some act or directs some act to be carried out which allows two foreign persons to engage in an activity that would be prohibited had a U.S. person been involved. Therefore, such activities as signing over a power of attorney for a transaction to be carried out in Iran between two Iranian parties would be considered facilitation. This is just one example; there are many activities which can fall under a facilitation liability theory.

What are SDN banks and why should Iranian Americans be concerned about them? Which Iranian banks are SDN banks and which are not?

Specially Designated National (SDN) banks are those banking institutions that have been specifically identified by OFAC for blocking. There are a number of these banks in Iran. To determine whether a bank is an SDN bank you can check the OFAC SDN List here.

You encourage Iranians to apply for an OFAC license from large transactions such as selling one's home to cosmetic surgery performed in Iran to applying for an Iranian divorce. What is the process of applying for an OFAC license?

An OFAC specific license application takes the form of a letter to OFAC's licensing division. In that letter you detail to OFAC who is involved in the transaction, what the proposed transaction consists of, and how any funds transfer related to the transaction will be carried out. For more tips on filing an OFAC specific license you can see an article I wrote here.

Are there transactions that do not require an OFAC license?

Yes, there are a number of transactions that do not require an OFAC license. For example, travel to Iran and all transactions incidental to that travel do not require an OFAC license. Also, non-commercial family remittances, such as bringing over inheritance money, do not require an OFAC license. There are a number of other activities which do not require an OFAC license. If you are unsure if your transaction requires an OFAC license, then you should check with a lawyer who practices in this field to make a determination.

You mentioned that more times than not, OFAC will grant a license because at the very least, it allows them to monitor and observe what types of transactions are taking place. Can you discuss this?

This is only speculation on my part. I do not have evidence to support this. I only made this comment to state that it makes sense for OFAC and the U.S. government to authorize transactions related to Iran so that they can watch the movement of funds in and out of Iran. Since part of OFAC's mission is to prevent access to the U.S. financial system of targeted countries then it would make sense for them to utilize licensing as method to monitor the transactions occurring between Iran and the U.S. I have never worked for OFAC or the U.S. government so I cannot say that this is actually their reasoning for licensing transactions.

Are these sanctions just affecting people with considerable wealth? Is this mainly a rich person's issue?

While OFAC is more likely to be alerted to large transactions or a high volume of transactions, there is no written policy that says that the transaction must involve a high dollar amount or wealthy individuals to be investigated by OFAC. I have represented wealthy businessmen and low-income college students alike. They both had OFAC issues arise, so I do not believe it is only an issue for the rich.

Legally speaking, do you foresee a decrease in the enforcement of sanctions legislation or even the removal of specific sanctions legislation for any given reason? Or do you believe as time goes by there will be more laws and more enforcement of these laws?

Again, I am only a private attorney and do not know what position the U.S. government or OFAC will take in the future. The trend in recent years has been towards increased enforcement and prohibition, however, I don't know if this will continue.

For those of us who have a difficult time understanding how sanctions are being applied, are there countries which have been, or are currently, sanctioned, in a similar fashion?

Yes, Cuba has been sanctioned in a similar manner for a much longer time. Cuba's sanction program is more restrictive than the Iran sanctions. For example, those seeking to travel to Cuba need a license to do so and those licenses are only given out in certain circumstances. Sudan is another country which has country-based sanctions imposed upon it. There are a number of OFAC sanctions programs -- sanctions are not only for Iran and/or Iranian Americans, they affect many people from many backgrounds.

Some may believe that the maximum fines of $250,000 or maximum 20 years in prison for people who violate some of the more serious sanctions are scare tactics and that in reality business will go on as usual. What would you say to that?

I can only say that those penalties are what the U.S. government is allowed to impose if a violation occurs. Whether or not such severe penalties will be imposed or not is at the discretion of the U.S. government. My job is only to inform clients and people in the community of what the law says.

If my grandmother wants to send me pistachios, is this still okay?

That answer will be based on the facts, however, due to the revocation of the general license for Iranian-origin food stuffs last year, I would be careful as it may be deemed a violation of the importation ban. At a minimum you should contact OFAC prior to her sending the pistachios.

related | Iran Primer: Timeline of U.S. Sanctions

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