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Understanding the Iranian OFAC Regulations-I

Posted by: Zaher Fallahi
Posted On: Feb 27, 2017

Legal and tax implication of bringing money from Iran

 

What do the Iranian OFAC Regulations Prohibit

The Iranian Transactions & Sanctions Regulations, Title 31 C.F.R. Part 560 (the “ITSR”), of Office of Foreign Office Assets Control (OFAC) Regulations, generally prohibit the exportation, re-exportation, sale, or supply of any goods, technology, or services directly or indirectly, from US or by a US person, wherever located, to Iran, or the Government of Iran. OFAC Regulations also prohibit US persons (defined below), wherever located, from engaging in any transaction or dealing in or related to goods or services of Iranian origin, or owned or controlled by the Government of Iran, or goods or technology or services for exportation, re-exportation, sale or supply, directly or indirectly, to Iran or the Government of Iran.

 

OFAC issues specific licenses for conducting transactions in Iran, and enforces the US economic sanctions laws against violators such as terrorists and narcotics traffickers. Depending on the severity of violations, OFAC may refer perpetrators to the Department of Justice for criminal prosecution.

 

Employment in Iran is prohibited, unless authorized by OFAC specific license, unless exempted by law. Examples would be employment at the United Nations related organizations such as World Bank and International Monetary Fund. Self-employment in Iran such as practice of law, medicine, engineering, consulting, software development, real estate development, construction, opening banks even in bank not listed on the US blacklist, dealing in the stock market, hiring lawyers to litigate on your behalf, among others, by a US person requires OFAC specific license.

 

Exceptions to Iranian OFAC Regulations

Importation of the following goods or services from Iran into the United States, exceptions:

1) Gifts valued at $100 or less;

2) Information and informational materials;

3) Household and personal effects, of persons arriving in the United States, that were actually used abroad by the importer or by other family members arriving from the same foreign household, that are not intended for any other person or for sale, and that are not otherwise prohibited from importation;

4) Accompanied baggage for personal use normally incident to travel; and,

5) See below Iranian Nuclear Deal for other authorizations; Persian Rugs, Foodstuffs and Civilian Airplanes, and General License H.

 

To whom Iranian OFAC Regulations apply?

The Iranian OFAC Regulations apply to:

 

1- U.S. citizens;

2- US resident aliens (green card holders);

3- Entities established under US laws;

4- Individuals living in the U.S. under visas; and,

5- Persons having access to US high technology, sanctioned by the Department of Commerce.

 

 

Iran Nuclear Deal (BARJAM) effective January 16, 2016

The highlights of the sanctions relief as they relate to US persons are as follows:

 

1- They do not apply US persons, and apply to Non U.S. persons, such as European and Asian countries, except as otherwise stated herein below;

 

2- U.S. persons and, may request specific authorization to engage in transferring US commercial passenger aircraft and related parts and services to Iran exclusively for commercial passenger aviation purposes.

 

3- Iranian-origin carpets and foodstuffs, including pistachios and caviar, may be imported into the United States under the general license.

 

4- General Licenses H authorizes certain transactions relating to foreign entities owned or controlled by a US person, to do business with Iran, provided that no US origin goods and services are involved. This provision has been modified since January 16, 2016.

 

What is an OFAC license?

A license is an OFAC authorization to engage in an otherwise prohibited transaction under the law. There are two types of licenses: (I) general license and (II) specific license.

 

OFAC General License

An OFAC general license authorizes particular types of transactions for a class of persons without requiring an OFAC license. Examples would be transfer of non-commercial family remittances such as inheritance or gift from Iran. Notwithstanding this provision, consultation with OFAC attorney is recommended.

  

Gift and Inheritance From Iran

Inheritance is a property received from a decedent’s estate. If your folks live in the US, property you receive from them in Iran is not inheritance, because they are still alive and the property they give you is considered “gift“. Gift is something of value given to you without consideration. Although, there are exceptions to the rule, generally gifts or inheritances are received from a close relative or loved one, not from a stranger or neighbor.

 

What is OFAC Specific License?

An OFAC specific license is a written document, authorizing a particular person to engage in a particular transaction pursuant to a written license request, generally for two years. There is no OFAC License application to be filed with OFAC.

 

Persons using OFAC general license or OFAC specific license are advised to ensure that all Licenses terms and conditions are strictly adhered to.

 

Iranian Property Documentation

Obtain sufficient documents to substantiate the character of property if required by OFAC, Financial Crimes Enforcement Network (FinCen), IRS Criminal Investigation Division (CID), and other government authorities that may be interested in the true character of your incoming money, under the circumstances.

 

The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a legislation passed by the United States Congress in1970 that requires US financial institutions to collaborate with the US government in cases of suspected money laundering and fraud. Therefore, the US banks and financial institutions are cautious about their own security, and strive to prevent any potentially illegal funds being transferred through them. This section of the bank must issue a “Suspicious Activity Report (SAR)” when they discern a suspicion. From time to time, these financial institutions reject the incoming funds and return them to the country where they came from.

 

Who needs an OFAC License?

Transactions not covered under the OFAC General License, not excepted by law, may require an OFAC specific license. The following are some transactions in Iran that require OFAC Specific License:

 

1) Selling property acquired after becoming a US person;

2) Selling property constructed or developed after becoming a US person;

3) Selling income producing property;

4) Selling other commercial property;

5) Winding down a business;

6) Closing a bank account (except for new comers within a few months of obtaining green card);

7) Purchasing property;

8) Hiring legal counsel or agent to litigate a case;

9) Conducting your own business (self-employment);

10) Employment, exceptions; UN related (World Bank, International Monetary Fund; etc.); and,

11) Items 2,3,4,5, and 6, may require simultaneous OFAC Voluntary Self Disclosure (VSD).

 

To be continued………………II

 

Zaher Fallahi, Iranian OFAC Attorney, CPA, advises Iranian-American clients on the legal and tax implication of the Iranian OFAC Regulations, and may be reached at [email protected], (310) 719-1040 or (714) 546-4272.