OFAC Frequently Asked Questions (FAQ) and Answers

Disclaimer: The following is intended for general information only and not legal or tax advice.

1. What is OFAC and what does it do?

The Office of Foreign Assets Control (OFAC) is a division of the U.S. Department of the Treasury responsible for administering and enforcing U.S. economic and trade sanctions against targeted countries and individuals, including Iran. OFAC regulates specific transactions and has the authority to issue licenses for certain otherwise prohibited activities. In cases of serious violations, OFAC may refer matters to the Department of Justice for criminal prosecution.

2. Who is considered a “U.S. Person” under OFAC regulations?

A “U.S. Person” includes:

U.S. citizens
U.S. lawful permanent residents (green card holders)
Individuals physically residing in the United States
U.S. legal entities (e.g., corporations, LLCs)

3. What is an OFAC license?

An OFAC license is an official authorization to engage in a transaction that would otherwise be prohibited. There are two types:

(a) Specific License

A specific license is a written authorization granted to an individual or entity to engage in a particular transaction. Each request must be submitted in writing—there is no official form. Legal counsel typically drafts a custom request.

(b) General License

A general license authorizes a class of transactions without the need to apply individually. Ensure your transaction clearly falls within the scope of an applicable general license supported by a legal opinion.

4. Who needs an OFAC specific license?

You will likely need a specific OFAC license for activities such as:

Selling property acquired or built after becoming a U.S. person
Selling income-producing or commercial property
Winding down a business in Iran
Closing bank accounts in Iran
Purchasing property in Iran
Hiring an attorney or agent for litigation in Iran (with some exceptions)
Conducting business or self-employment in Iran
Employment in Iran (subject to exceptions for certain institutions like the World Bank or IMF)

⚠️ Transactions involving items 1, 2, 3, 4, 5, 6, and 9 may also require Voluntary Self-Disclosure (VSD) to OFAC.

5. Is income from an OFAC-licensed transaction taxable?

Yes. While an OFAC license permits the transaction, it does not exempt it from U.S. tax obligations. Such income remains subject to all applicable U.S. tax laws.

6. What transactions are covered by a general license?

Examples of transactions generally permitted under OFAC regulations include:

Exporting U.S.-approved medicine and most medical devices to Iran
Transferring gift or inheritance funds from Iran
Selling inherited property in Iran and transferring proceeds to the U.S.
Selling property acquired before becoming a U.S. person

⚠️ Consultation with an experienced Iran OFAC attorney and a Bank Secrecy Act (BSA) expert is strongly recommended, even when a general license may apply.

7. Are gift or inheritance funds from Iran taxable?

Cash gifts or inheritance from a non-resident alien (such as an Iranian citizen) are generally not taxable in the U.S. However, depending on the amounts in a calendar year, the recipient must file an informational report with the IRS and Financial Crimes Enforcement Network (FinCEN).

8. Why might my money be frozen or seized?

Transactions involving Iran are subject to increased scrutiny by U.S. authorities including OFAC, the Financial Crimes Enforcement Network (FinCEN), and the IRS Criminal Investigation Division (CID). U.S. banks may freeze or reject transfers they deem suspicious, especially under the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) provisions. These institutions are required to file Suspicious Activity Reports (SARs) when they detect potentially unlawful transfers.

Funds may be returned to the originating country, and in some cases, a client’s other U.S. bank accounts or credit cards may be frozen. Resolving such issues can be costly, time-consuming, and disruptive.

Legal Support for Iran OFAC Matters

Dual-Licensed Attorney and CPA

Zaher Fallahi, Farsi Speaking OFAC Attorney, CPA, licensed in both California and Washington, D.C. He provides nationwide counsel on matters involving OFAC compliance and IRS laws and regulations as follows:

Iran OFAC specific license applications
Iran OFAC general license and interpretive guidance
Defense in OFAC violation matters
OFAC and BSA/AML-compliant money transfers from Iran
Tax implications of OFAC-related transactions
Foreign gifts and informational tax filings

Contact Us for a Confidential Consultation- Persian Speaking OFAC Lawyer:
📞 Toll-Free: 1-877-687-7558
📞 Los Angeles: (310) 719-1040
📞 Orange County: (714) 546-4272
📧 Email: taxattorney@zfcpa.com

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3 months ago

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1 year ago

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1 year ago

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