Business Crimes Bulletin ® Volume 23, Number 10 •  June 2016 ‘Implementation Day’ Marks Rollback of Significant Nuclear-Related Sanctions on Iran By Lisa A. Prager, Betty (JCPOA). Thus, Jan. 16, 2016 was sanctions” on Iran: 1) as applied to Santangelo, Gary Stein, Peter H. “Implementation Day” under the non-U.S.

persons and entities; and White, Lara Covington, Seetha JCPOA. As a result of Iran verifiably 2) with respect to the eight busi- Ramachandran, Michael P. Court meeting its nuclear commitments, ness categories listed below.

These and Matthew J. Moses the United States lifted certain sanc- secondary sanctions applied even O tions primarily applicable to non- to non-U.S. entities that were not n Jan.

16, 2016, Secre- U.S. persons, including owned or controlled by a U.S. per- tary of State John Kerry entities owned or controlled by U.S.

son and that were outside OFAC’s confirmed Inter- persons, as discussed below. In ad- jurisdiction. Although such enti- national Atomic Energy Agency’s dition, the United States removed ties could not be penalized in an (IAEA) determination that Iran im- over 400 individuals and entities enforcement action, they faced plemented its key nuclear-related from the U.S.

Department of the other sanctions such as being de- measures as described in the Joint Treasury’s Office of Foreign Assets nied access to the U.S. financial Comprehensive Control (OFAC) Specially Designat- system. Under the JCPOA, non-U.S. ed Nationals and Blocked Persons persons, including U.S.-owned or List (SDN List), the Foreign Sanc- -controlled foreign entities, are tions Evaders List (FSE List) and/or now eligible to participate in trans- the Non-SDN Iran Sanctions Act List actions or activities subject to the (NS-ISA List). sanctions lifting under the JCPOA Plan the of Action Lisa A.

Prager, Betty Santangelo, Gary Stein, Peter H. White, Lara Covington, Seetha Ramachandran, Michael P. Court and Matthew J. Moses are all attorneys at Schulte Roth & Zabel LLP.

This information has been prepared by Schulte Roth & Zabel LLP for general informational purposes only. It does not constitute legal advice, and is presented without any representation or warranty as to its accuracy, completeness or timeliness. Secondary Sanctions in foreign Certain Sectors only to the extent that the transactions or activities are exempt from regulation or authorized by OFAC. The U.S. government rolled back Specifically, the United States lifted certain nuclear-related “secondary the following eight categories of .

LJN’s Business Crimes June 2016 secondary sanctions as related to volving persons on the SDN List. or -controlled foreign entities to Iran: Transactions involving such per- 1. Financial and banking- sons remain prohibited after Im- related activities; ance or re-insurance; 3. Energy and petrochemicals; 4. Shipping, shipbuilding and 5. Gold and other precious certain limitations. or industries. The limitations to OFAC’s Iran sanctions program General License H, however, are originally applied for the most substantial. Among other things, General License H does not au- entities, and not to foreign sub- thorize transactions involving: sidiaries of U.S.

companies. The metals; to ed to specific economic sectors General License H part only to U.S. persons and port operators; subject This authorization is not limit- plementation Day. 2. Underwriting services, insur- engage in transactions with Iran, 6. Graphite, metals and soft- program was subsequently ex- 1. the director or indirect exportation, reexportation, ware for integrating indus- panded such that, by 2012, a for- sale or supply of goods, eign entity owned or controlled technology, or services from 7. Automotive sector; and by a U.S.

person was prohibited the United States, unless 8. Sanctions on associated ser- from knowingly engaging in any otherwise licensed by OFAC; vices for each of the catego- transaction, directly or indirectly, 2. any transfer of funds to, from, with the Government of Iran or through the U.S. financial trial processes; ries above. Accordingly, for example, a (GOI) or any person subject to Swiss corporation may purchase, the jurisdiction of the GOI to the sell, transport or market petro- same extent as a U.S. person.

For system; 3. any individuals on the SDN List or the FSE List; products this purpose, a foreign entity is 4. any activity prohibited by, or and natural gas from Iran, includ- deemed owned or controlled by otherwise requiring a license ing transactions with the National a U.S. person if the U.S. person: under, the Export Adminis- Iranian Oil Company (NIOC).

A 1) holds a 50% or greater equity tration Regulations or with a Swiss subsidiary of a U.S. com- interest by vote or value in the person on the Bureau of In- pany may also engage in trans- entity; 2) holds a majority of seats dustry and Security’s Denied actions with Iran’s energy sector, on the board of directors of the Persons or Entity Lists; leum, petrochemical provided the U.S. parent is not entity; or 3) otherwise controls 5. any military, paramilitary, involved in the Iran-related op- the actions, policies or personnel intelligence or law enforce- erations or decision-making, as decisions of the entity. ment entity of the GOI, or explained further below. The The secondary sanctions relief to does not apply to transactions in- now JCPOA, General authorizes pursuant License H, U.S.-owned any official, agent, or affiliate, thereof; 6. sanctionable activity, pursu- .

LJN’s Business Crimes June 2016 ant to Executive Orders, re- advice and counseling on the non-U.S. persons may apply for lated to Iran’s proliferation of new or revised operating poli- a specific license authorizing cerweapons of mass destruction, cies and procedures, provided tain transactions related to the sale and their delivery means, these services do not facilitate of commercial aircraft and related including ballistic missiles, illegal transactions. parts and services to Iran, provided international terrorism, Syria, those transactions do not involve Yemen, or Iran’s commission of human rights Furthermore, General License H authorizes U.S. persons to SDNs. Individuals and entities, on abuses make available certain “Autho- against its citizens; and a case-by-case basis, may be issued rized Business Support Systems.” a license allowing them to: 1) ex- 7. any nuclear activity involving This includes any automated and port, re-export, sell, lease or transIran that is inconsistent with globally integrated computer, ac- fer to Iran commercial passenger the JCPOA. counting, email, telecommunica- aircraft for exclusively civil aviation OFAC’s General License H also tions or other business support end-use; 2) export, re-export, sell, authorizes U.S.

persons (e.g., se- system, platform, database, ap- lease or transfer to Iran spare parts nior management) to establish plication or server broadly avail- and components for commercial or alter corporate policies to the able to, and in general use by, passenger aircraft; and 3) provide extent necessary to allow U.S.- the U.S. parent company’s glob- associated services, including war- owned or -controlled foreign en- al organization. For example, a ranty, maintenance and repair sertities to engage in transactions “sales lead database” on a U.S.

vices and safety-related inspections involving Iran that would other- server that is broadly available for commercial passenger aviation. wise be prohibited. U.S. persons, to, and in general use by, the U.S.

Cargo aircraft, state aircraft, unhowever, may not be involved parent company’s non-U.S. enti- manned aerial vehicles, military air- in the Iran-related day-to-day ties would be considered “glob- craft, and aircraft used for general operations of a U.S.-owned or ally integrated” for the purposes aviation or aerial work are not eli- -controlled foreign entity, in- of this license. cluding by approving, financing, facilitating or guaranteeing any Iran-related transaction by the Licensed Activities gible for licensing under the SLP. for U.S. Persons foreign entity, regardless of the Aircraft Parts business sector of the activity. In Imports of IranianOrigin Carpets and Foodstuffs In addition, effective Jan.

16, 2016, Simultaneous with Implementa- Iranian-origin carpets and foodstuffs, addition, General License H au- tion Day, OFAC issued a Statement including pistachios and caviar, may thorizes U.S. person employees of Licensing Policy (SLP) establish- be imported into the United States ing a favorable licensing policy without prior written authorization. consultants to provide training, regime through which U.S. and This general license covers: 1) car- and outside legal counsel and .

LJN’s Business Crimes June 2016 pets and other textile floor coverings Powers and their delivery means, includ- and carpets used as wall hangings Act (IEEPA) provides for a maxi- ing ballistic missiles. On Jan. 17, that are classified under Chapter mum civil penalty of the greater 2016, the day after Implementa- 57 or Heading 9706.00.0060 of the Emergency Economic of $250,000 or twice the amount tion Day, OFAC added 11 entities Harmonized Tariff Schedule of the of the transaction that is the basis and individuals to the SDN List United States; and 2) foodstuffs in- of the violation. Each prohibited for their involvement in procuring tended for human consumption that transaction is viewed as a separate goods for Iran’s ballistic missile are classified under Chapters 2-23 of violation.

For criminal violations, program. Finally, on Jan. 20, 2016, the Harmonized Tariff Schedule of which involve a willful violation or FinCEN, one of the U.S.

Depart- the United States. However, U.S. per- willful attempt to violate Iranian ment of the Treasury’s lead agen- sons remain prohibited from paying sanctions regulations, IEEPA pro- cies in the fight against money Iranian companies for these imports vides for a maximum penalty of $1 laundering, called on U.S.

financial by crediting or debiting an Iranian million, imprisonment of 20 years, institutions to “give special attenaccount. Therefore, payment mecha- or both. Proceeds derived from an tion to business relationships and nisms under this general license typ- transactions with Iran” because of IEEPA offense are also subject to ically involve a third-country bank or forfeiture. money service business to finance the purchase from a third country. Civil and Criminal the risk of terrorist financing. Sanctions in Place After Imple- mentation Day —❖— Companies that want to engage Penalties in new business involving Iran OFAC may take a variety of en- must continue to exercise cauforcement actions for sanctions violations, including tion.

Iran remains designated as imposing a state sponsor of terrorism, and civil monetary penalties and mak- the JCPOA does not alter that desing criminal referrals to appro- ignation. Indeed, the rollback of priate law enforcement agencies sanctions described above can for investigation and/or prosecu- be “snapped back” if Iran fails tion. The penalties for such viola- to comply with the JCPOA going tions can be substantial and vary forward.

Moreover, the U.S. gov- based on the sanctions program ernment continues to enforce and other factors. For violations sanctions against persons and enof many of the Iranian sanctions tities involved in the proliferation regulations, the International of weapons of mass destruction Reprinted with permission from the June 2016 edition of the Law Journal Newsletters.

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