OFAC, in order that non-English speakers cannot claim to not understand the CISADA regulations, has helpfully provided a number of foreign translations… as do I, below.
Links:
CISADA translated into Russian
CISADA translated into Spanish
Category Archives: CISADA
CISADA
OFAC’s CISADA FAQ
149. What activities by foreign financial institutions can subject them to CISADA sanctions?As described in the Iranian Financial Sanctions Regulations, the sanctionable activities of a foreign financial institution are:• Facilitating the efforts of the Government of Iran (GOI) to acquire or develop Weapons of Mass Destruction (WMD) or delivery systems for WMD or to provide support for terrorist organizations or acts of international terrorism;• Facilitating the activities of a person subject to financial sanctions pursuant to UNSCRs 1737, 1747, 1803, or 1929, or any other Security Council resolution that imposes sanctions with respect to Iran;• Engaging in money laundering, or facilitating efforts by the Central Bank of Iran or any other Iranian financial institution, to carry out either of the facilitating activities described above; or• Facilitating a significant transaction or transactions or providing significant financial services for: (i) the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to the International Emergency Economic Powers Act (IEEPA), or (ii) a financial institution whose property and interests in property are blocked pursuant to IEEPA in connection with Iran’s proliferation of WMD, Iran’s proliferation of delivery systems for WMD, or Iran’s support for international terrorism.
150. Where can I find a list of Islamic Revolutionary Guard Corps (IRGC) affiliates and Iran-linked financial institutions “blocked pursuant to IEEPA”?
The list of blocked IRGC affiliates and blocked Iran-linked financial institutions is dynamic and is based on the identity of “designated” persons, which refers both to natural persons (i.e., individuals) and legal persons (such as corporations and other entities). The most recent list of designated persons – which includes most, but not all, blocked entities* – can be found at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/ default.aspx. The listings of designated IRGC entities will be followed by the tag [IRGC]; those of designated Iran-linked financial institutions will have the tag [IFSR].
*Under Department of the Treasury regulations, designated persons are those that are named on the list. All interests in property of such persons are blocked, and such persons are considered to have an interest in all property and entities in which they own, directly or indirectly, a 50 percent or greater interest. As a result, such property and entities are also blocked, even if they do not themselves appear on the list.
151. How do the IFSR define “U.S. financial institutions”?
The Iranian Financial Sanctions Regulations define “U.S. financial institutions” to include: depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of these entities. Covered institutions include those branches, offices, and agencies of foreign financial institutions that are located in the United States.
152. How do the Iranian Financial Sanctions Regulations define “foreign financial institutions”?
The Iranian Financial Sanctions Regulations define “foreign financial institutions” to include foreign depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of these entities.
153. How do the Iranian Financial Sanctions Regulations (IFSR) define the term “knowingly”?
The term “knowingly” as used in the IFSR means that a person has actual knowledge or should have known of specific conduct, a circumstance, or a result. In other words, the IFSR could be implicated if the Treasury Department finds that a foreign financial institution knew or should have known that it engaged in one or more of the sanctionable activities.
154. How does the Treasury Department determine whether a transaction or financial service is “significant” for purposes of the Iranian Financial Sanctions Regulations?
As set out in the Iranian Financial Sanctions Regulations, in determining whether a transaction or financial service is “significant,” the Treasury Department may consider: (1) the size, number, frequency, and nature of the transaction(s); (2) the level of awareness of management of the transaction(s) and whether or not the transaction(s) are a part of a pattern of conduct; (3) the nexus between the foreign financial institution involved in the transaction(s) and a blocked Islamic Revolutionary Guard Corps individual or entity or blocked Iran-linked financial institution; (4) the impact of the transaction(s) on the goals of CISADA; (5) whether the transaction(s) involved any deceptive practices; and (6) other factors the Treasury Department deems relevant on a case-by-case basis.
155. When are the prohibitions and strict conditions on foreign financial institutions’ correspondent accounts or payable-through accounts in the United States effective?
A finding by the Treasury Department that a foreign financial institution knowingly engages in one or more of the sanctionable activities is necessary before the Treasury Department can prohibit or impose strict conditions on the opening or maintaining in the United States of correspondent accounts or payable-through accounts for that foreign financial institution.
156. How will U.S. and foreign financial institutions know that the Treasury Department has made such a finding?
As a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding. If the Treasury Department decides to impose strict condition(s), the Treasury Department will issue an order or a regulation that sets out the strict condition(s) to be imposed on the U.S. correspondent accounts or U.S. payable-through accounts of the relevant foreign financial institution and publish the order or regulation in the Federal Register. The Federal Register is available at http://www.gpo.gov/fdsys/. If the Treasury Department decides to prohibit the opening or maintaining of U.S. correspondent accounts or U.S. payable-through accounts for a foreign financial institution, the Treasury Department will add the name of the foreign financial institution to the Appendix to the Iranian Financial Sanctions Regulations and publish it in the Federal Register.
157. How will the Treasury Department enforce the Iranian Financial Sanctions Regulations (IFSR) with respect to U.S. entities?
Any U.S. person who violates the correspondent account provisions of the IFSR may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, and criminal penalties for willful violations of up to $1 million and 20 years in prison. A U.S. financial institution may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, if any person that it owns or controls violates the IFSR prohibition on engaging in any transaction with or benefitting the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to IEEPA, and if the U.S. financial institution knew or should have known that the person violated the Iranian Financial Sanctions Regulations.
158. Can the application of any part(s) of the Iranian Financial Sanctions Regulations be waived by the Department of the Treasury?
CISADA provides for a waiver of the sanctions under the Iranian Financial Sanctions Regulations if the Secretary of the Treasury determines that a waiver is necessary to the national interest of the United States.
159. Where can I find the text of the Iranian Financial Sanctions Regulations?
The text of the Iranian Financial Sanctions Regulations can be found at:www.treasury.gov/resource-center/sanctions/Programs/Documents/ fr75_49836.pdf.
OFAC’s CISADA FAQ
149. What activities by foreign financial institutions can subject them to CISADA sanctions?As described in the Iranian Financial Sanctions Regulations, the sanctionable activities of a foreign financial institution are:• Facilitating the efforts of the Government of Iran (GOI) to acquire or develop Weapons of Mass Destruction (WMD) or delivery systems for WMD or to provide support for terrorist organizations or acts of international terrorism;• Facilitating the activities of a person subject to financial sanctions pursuant to UNSCRs 1737, 1747, 1803, or 1929, or any other Security Council resolution that imposes sanctions with respect to Iran;• Engaging in money laundering, or facilitating efforts by the Central Bank of Iran or any other Iranian financial institution, to carry out either of the facilitating activities described above; or• Facilitating a significant transaction or transactions or providing significant financial services for: (i) the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to the International Emergency Economic Powers Act (IEEPA), or (ii) a financial institution whose property and interests in property are blocked pursuant to IEEPA in connection with Iran’s proliferation of WMD, Iran’s proliferation of delivery systems for WMD, or Iran’s support for international terrorism.
150. Where can I find a list of Islamic Revolutionary Guard Corps (IRGC) affiliates and Iran-linked financial institutions “blocked pursuant to IEEPA”?
The list of blocked IRGC affiliates and blocked Iran-linked financial institutions is dynamic and is based on the identity of “designated” persons, which refers both to natural persons (i.e., individuals) and legal persons (such as corporations and other entities). The most recent list of designated persons – which includes most, but not all, blocked entities* – can be found at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/ default.aspx. The listings of designated IRGC entities will be followed by the tag [IRGC]; those of designated Iran-linked financial institutions will have the tag [IFSR].
*Under Department of the Treasury regulations, designated persons are those that are named on the list. All interests in property of such persons are blocked, and such persons are considered to have an interest in all property and entities in which they own, directly or indirectly, a 50 percent or greater interest. As a result, such property and entities are also blocked, even if they do not themselves appear on the list.
151. How do the IFSR define “U.S. financial institutions”?
The Iranian Financial Sanctions Regulations define “U.S. financial institutions” to include: depository institutions, banks, savings banks, money service businesses, trust companies, insurance companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of these entities. Covered institutions include those branches, offices, and agencies of foreign financial institutions that are located in the United States.
152. How do the Iranian Financial Sanctions Regulations define “foreign financial institutions”?
The Iranian Financial Sanctions Regulations define “foreign financial institutions” to include foreign depository institutions, banks, savings banks, money service businesses, trust companies, securities brokers and dealers, commodities exchanges, clearing corporations, investment companies, employee benefit plans, and holding companies, affiliates, or subsidiaries of any of these entities.
153. How do the Iranian Financial Sanctions Regulations (IFSR) define the term “knowingly”?
The term “knowingly” as used in the IFSR means that a person has actual knowledge or should have known of specific conduct, a circumstance, or a result. In other words, the IFSR could be implicated if the Treasury Department finds that a foreign financial institution knew or should have known that it engaged in one or more of the sanctionable activities.
154. How does the Treasury Department determine whether a transaction or financial service is “significant” for purposes of the Iranian Financial Sanctions Regulations?
As set out in the Iranian Financial Sanctions Regulations, in determining whether a transaction or financial service is “significant,” the Treasury Department may consider: (1) the size, number, frequency, and nature of the transaction(s); (2) the level of awareness of management of the transaction(s) and whether or not the transaction(s) are a part of a pattern of conduct; (3) the nexus between the foreign financial institution involved in the transaction(s) and a blocked Islamic Revolutionary Guard Corps individual or entity or blocked Iran-linked financial institution; (4) the impact of the transaction(s) on the goals of CISADA; (5) whether the transaction(s) involved any deceptive practices; and (6) other factors the Treasury Department deems relevant on a case-by-case basis.
155. When are the prohibitions and strict conditions on foreign financial institutions’ correspondent accounts or payable-through accounts in the United States effective?
A finding by the Treasury Department that a foreign financial institution knowingly engages in one or more of the sanctionable activities is necessary before the Treasury Department can prohibit or impose strict conditions on the opening or maintaining in the United States of correspondent accounts or payable-through accounts for that foreign financial institution.
156. How will U.S. and foreign financial institutions know that the Treasury Department has made such a finding?
As a general matter, the Treasury Department will reach out to foreign financial institutions to inquire about their conduct before making a finding. If the Treasury Department decides to impose strict condition(s), the Treasury Department will issue an order or a regulation that sets out the strict condition(s) to be imposed on the U.S. correspondent accounts or U.S. payable-through accounts of the relevant foreign financial institution and publish the order or regulation in the Federal Register. The Federal Register is available at http://www.gpo.gov/fdsys/. If the Treasury Department decides to prohibit the opening or maintaining of U.S. correspondent accounts or U.S. payable-through accounts for a foreign financial institution, the Treasury Department will add the name of the foreign financial institution to the Appendix to the Iranian Financial Sanctions Regulations and publish it in the Federal Register.
157. How will the Treasury Department enforce the Iranian Financial Sanctions Regulations (IFSR) with respect to U.S. entities?
Any U.S. person who violates the correspondent account provisions of the IFSR may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, and criminal penalties for willful violations of up to $1 million and 20 years in prison. A U.S. financial institution may be subject to civil penalties of up to the greater of $250,000 or twice the transaction value, if any person that it owns or controls violates the IFSR prohibition on engaging in any transaction with or benefitting the Islamic Revolutionary Guard Corps or any of its agents or affiliates whose property and interests in property are blocked pursuant to IEEPA, and if the U.S. financial institution knew or should have known that the person violated the Iranian Financial Sanctions Regulations.
158. Can the application of any part(s) of the Iranian Financial Sanctions Regulations be waived by the Department of the Treasury?
CISADA provides for a waiver of the sanctions under the Iranian Financial Sanctions Regulations if the Secretary of the Treasury determines that a waiver is necessary to the national interest of the United States.
159. Where can I find the text of the Iranian Financial Sanctions Regulations?
The text of the Iranian Financial Sanctions Regulations can be found at:www.treasury.gov/resource-center/sanctions/Programs/Documents/ fr75_49836.pdf.
OFAC’s FAQ on Bank of Kunlun CISADA Finding
Based on information made available to the Treasury Department, the Department has found that China’s Bank of Kunlun has knowingly facilitated significant transactions for various Iranian-linked banks designated by the United States under our WMD or terrorism authorities.
Upon finding that Bank of Kunlun was knowingly engaged in these activities that are sanctionable under CISADA, the Secretary of the Treasury has prohibited U.S. banks from opening or maintaining correspondent accounts or payable-through accounts in the United States for Bank of Kunlun – effectively cutting off Bank of Kunlun’s direct access to the U.S. financial system.
Since CISADA was signed into law in July 2010, Treasury has engaged with over 120 financial institutions and bank regulators in more than 60 countries all over the world to brief them on the financial provisions of CISADA, and, in cases where we had specific concerns, has shared information about those concerns.
This global engagement campaign has proven highly successful, as we have seen the overwhelming majority of financial institutions with which we have engaged change their business practices – even close any correspondent accounts with U.S. designated Iranian banks – to ensure that their access to the U.S. financial system is not put at risk.
The July 31, 2012 action against Bank of Kunlun was in response to its ongoing relationships with U.S.-designated Iranian banks.
Note: The Treasury Department had also made a CISADA finding against Iraq’s Elaf Islamic Bank on July 31, 2012. On May 17, 2013, Elaf Islamic Bank was delisted and its name was removed from the Part 561 List. [05-17-2013]
208. How are you defining “significant” transactions and financial services?
In determining whether transactions or financial services are significant, the Secretary of the Treasury may consider a number of factors related to the transactions or services, including, but not limited to: size, number, and frequency; type, complexity and commercial purpose; the level of awareness or involvement by the bank’s management; whether the activity or payment illustrates a pattern of practice or is an isolated event; the ultimate economic benefit conferred upon the designated person(s); and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.
Bank of Kunlun
Bank of Kunlun has provided hundreds of millions of dollars’ worth of services to U.S. designated Iranian banks. These financial services include maintaining accounts, transferring payments, and serving as the paying bank for letters of credit opened by U.S. designated Iranian banks. The facilitation of hundreds of millions of U.S. dollars worth of transactions with U.S. designated Iranian banks over the past year is significant.
In 2012, after Treasury designated Bank Tejarat, Bank of Kunlun transferred hundreds of payments totaling approximately $100 million dollars for accounts it holds for Bank Tejarat and made a payment for an IRGC affiliate pursuant to a letter of credit opened by Bank Tejarat. [05-17-2013]
209. What happens to the correspondent and payable-through accounts held by Bank of Kunlun in the United States?
To our knowledge, Bank of Kunlun does not currently hold correspondent accounts with U.S. financial institutions.
The July 31, 2012 action prohibits financial institutions in the United States from opening or maintaining correspondent or payable-through accounts for Bank of Kunlun. [05-17-2013]
210. What are the consequences for a U.S. financial institution that maintains or opens a new correspondent or payable-through account for Bank of Kunlun?
A U.S. financial institution that maintains or opens a correspondent or payable-through account for Bank of Kunlun is subject to civil penalties in the amount of up to $250,000 or twice the value of the transaction, whichever is greater.
Criminal penalties of up to $1 million can be imposed for willful violations, and individuals who willfully violate the prohibition can face up to 20 years in prison. [05-17-2013]
211. If a foreign financial institution continues to do business with Bank of Kunlun, could that lead to a CISADA finding against the other institution?
Any foreign financial institution that knowingly facilitates significant transactions on behalf of designated Iranian banks – whether directly or indirectly – may face CISADA sanctions. OFAC defines “knowingly” in this context as meaning the financial institution knew or should have known of the conduct, circumstance, or result. Bank of Kunlun has demonstrated its willingness to move hundreds of millions dollars on behalf of designated Iranian banks. Accordingly, we would expect heightened due diligence in any dealings with Bank of Kunlun. [05-17-2013]
212. Does this finding affect Bank of Kunlun’s branches or subsidiaries around the world? Does this finding affect any holding companies?
The prohibitions implemented as a result of today’s action apply to Bank of Kunlun and all of its offices, around the world. [05-17-2013]
213. Are United States financial institutions that do not hold correspondent or payable-through accounts for Bank of Kunlun required to block or reject transactions that otherwise involve Bank of Kunlun?
No. U.S. financial institutions are not required to block or reject financial or trade transactions that involve Bank of Kunlun.
That said, we would expect heightened due diligence in any dealings with Bank of Kunlun given its demonstrated willingness to facilitate transactions on behalf of Iranian banks designated by well over a dozen countries worldwide. [05-17-2013]
214. What is the licensing process for U.S. financial institutions that need to conduct transactions in order to close correspondent or payable-through accounts with a foreign financial institution sanctioned pursuant to CISADA?
Treasury regulations provide a 10-day period in which U.S. financial institutions are authorized to engage in the transactions necessary to close an affected account. If a U.S. financial institution that is in the process of closing an affected account seeks to engage in transactions beyond those already authorized, Treasury may issue specific licenses on a case-by-case basis. [05-17-2013]
215. What is the difference, in practical effect, between this and a designation under one of your other authorities, like E.O. 13382?
The July 31, 2012 CISADA finding prohibits the opening or maintaining of correspondent accounts or payable-through accounts in the United States for Bank of Kunlun. This action does not require the immediate freezing of any assets that Bank of Kunlun may hold within U.S. jurisdiction. [05-17-2013]
Regulatory Spotlight: IFCA Section 1249, Sanctions against Diversion of Goods
Section 1249 is different than the previous IFCA sections reviewed so far. Instead of specifying sanctions actions and to whom they apply, Section 1249 amends CISADA.
The amendments allows the President to sanction persons who have diverted goods (including agricultural commodities, food, medicine and medical devices) intended for the Iranian people, or misappropriated funds from the sale or resale of such goods – or have participated in corrupt practices relating to these. He also has to issue a list of these individuals to to the appropriate Congressional committees (some of which can be classified).
The sanctions are those authorized under CISADA, which includes denial of travel visas, as well as the asset-freezing and other provisions under IEEPA.
Next: Section 1250, which covers waivers for exceptional circumstances which prevent significant reductions in Iranian petroleum purchases
CISADA: Who gets sanctioned?
A previous post covered the range of sanctions that can be imposed under CISADA. However, what causes those sanctions to be imposed?
The President imposes 3 or more of the available sanctions on a person if:
- makes a single investment of $20 million or more (or a combination of investments of $5 million or more each adding up to at least $20 million over a 12-month period) that “directly and significantly” enhances Iran's development of its petroleum resources, or
- provides (through sale, lease or other means) goods, services, information, technology or support, either a single transaction valued at $1 million or more, or multiple transactions over 12 months that add up to a market value of $5 million or more that “directly and significantly” helps Iran maintain or expand Iran's domestic petroleum production. The statute specifies that these goods, services, etc. include those for construction, modernization or repair of Iran's oil refineries, or
- provides refined petroleum products, either a single transaction valued at $1 million or more, or multiple transactions over a 12-month period that add up to a total market value of $5 million or more, or
- provides (through sale, lease or other means) goods, services, information, technology or support, either a single transaction valued at $1 million or more, or multiple transactions over 12 months that add up to a market value of $5 million or more that “directly and significantly” helps Iran improve its ability to import refined petroleum. The statute specifies that these goods, services, etc. include financing or brokerage services, providing ships or shipping services, or
- provides (through export, transfer or other means) goods, services, technology or other items that would “contribute materially” to Iran's capacity to gain weapons of mass destruction (chemical, biological and/or nuclear), “acquire or develop destabilizing” conventional weapons (based on the type or through sheer numbers)
As in other regulations, insurance providers can be exempted from sanctions if they can demonstrate that they perform appropriate due dlligence on its customers and other involved parties.
Additionally, if someone is sanctioned because of activity related to nuclear technology or delivery systems, licenses or approvals for exports, transfers or retransfers for any nuclear-related goods and services (“material, facilities, components or other goods, services or technology) to that person's home country will no longer be granted. So, even though the person may not be a part of the government, the whole country gets cut off from those goods and services. However, an exception for these sanctions can be granted if the President certifies (in reports to Congress) that the government does not know about the activity of the person, has taken remedial action to prevent a future occurence and has punished the person involved.
The President may, however, grant these otherwise-prohibited individual licenses or approvals if he/she determines it's in the national security interests of the US and reports to the Senate Foreign Relations Committee and the House Foreign Affairs Committee the justification for the exception.
These restrictions on nuclear activities and materials exports and transfers apply in addition to those in the Atomic Energy Act of 1954 and related laws.
In addition to the person performing the prohibited activity, sanctions can also be imposed on:
- successor entities
- persons who control the person performing the prohibited activity, if they knew or should have known that the controlled person performed the prohibited activity
- persons who are owned or controlled by, or have common ownership or control with, the person committing the prohibited activity, if those persons knowlingly participated in the prohibited activities with the other person (the one with common ownership or control, or whom owns or controls these persons)
The President is to publish the list of those sanctioned under CISADA in the Federal Register, as well as those removed from these sanctions. He shall also publish the significant projects in Iran's oil and gas industries.
Here are the exceptions to the imposition of sanctions – it's more than a little involved, so it's a lot easier to just publish the specific section of CISADA:
The President shall not be required to apply or maintain the sanctions undersubsection (a) or (b)(1)–
(1) in the case of procurement of defense articles or defense services–
(A) under existing contracts or subcontracts, including the exercise of options for production quantities to satisfy requirements essential to the national security of the United States;
(B) if the President determines in writing that the person to which the sanctions would otherwise be applied is a sole source supplier of the defense articles or services, that the defense articles or services are essential, and that alternative sources are not readily or reasonably available; or
(C) if the President determines in writing that such articles or services are essential to the national security under defense coproduction agreements;
(2) in the case of procurement, to eligible products, as defined in section 308(4) of the Trade Agreements Act of 1979 (19 U.S.C. 2518(4)), of any foreign country or instrumentality designated under section 301(b) of that Act (19 U.S.C. 2511(b));
(3) to products, technology, or services provided under contracts entered into before the date on which the President publishes in the Federal Register the name of the person on whom the sanctions are to be imposed;
(4) to–
(A) spare parts which are essential to United States products or production;
(B) component parts, but not finished products, essential to United States products or production; or
(C) routine servicing and maintenance of products, to the extent that alternative sources are not readily or reasonably available;
(6) to information and technology essential to United States products or production; or
(7) to medicines, medical supplies, or other humanitarian items.
(and no, I have no idea where item #5 went – it's not in the PDF on the Treasury website)
Regulatory Spotlight: IFCA Section 1248, Islamic Republic of Iran Broadcasting sanctions
Under this section of IFCA, the President has imposed CISADA sanctions (which include denial of travel visas for entry to the US, as well as the standard IEEPA sanctions – IEEPA is mentioned by name in the statute) on the Islamic Republic of Iran Broadcasting and its president, Ezzatollah Zargami, and has added them to the SDN List. The section also notes that the sanctions do not apply to imports of goods (presumably for broadcasting equipment).
Why? From the findings section of the statute:
(1) The Islamic Republic of Iran Broadcasting has contrib- uted to the infringement of individuals’ human rights by broadcasting forced televised confession and show trials.
(2) In March 2012, the European Council imposed sanctions on the President of the Islamic Republic of Iran Broadcasting, Ezzatollah Zargami, for broadcasting forced confessions of detainees and a series of ‘‘show trials’’ in August 2009 and December 2011 that constituted a clear violation of inter- national law with respect to the right to a fair trial and due process.
Next: Section 1249, which covers sanctions on people who divert goods intended for the Iranian people.