The current economic and political instability in Iran is causing many Iranian-Americans to sell properties in Iran they did not liquidate before moving to the United States, be it offices, farmland, factories, or even former family homes. A number of others are going through Iranian courts to reclaim properties that were seized by the government after the revolution. What most Iranian-Americans unfortunately do not know is that U.S. laws require U.S. persons (as defined by the applicable regulations) to obtain a specific license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to engage in transactions related to the sale of their personal property in Iran. Many of them also do not know that they cannot invest in Iran, or that the definition of investment under the applicable law covers more activities than they may think. Additionally, OFAC regulations do not stop there.
What most Iranian-Americans unfortunately do not know is that U.S. laws require U.S. persons (as defined by the applicable regulations) to obtain a specific license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to engage in transactions related to the sale of their personal property in Iran.
U.S. sanctions against Iran are very strict and comprehensive. Most day to day activities are regulated by OFAC, which is tasked with enforcing the Iranian Transactions Regulations (ITR), a body of regulations governing the trade in goods, services, and technology between the United States and Iran. The ITR is very comprehensive – it addresses commercial, personal, charitable, and other activities.
The ITR applies to generally all “United States persons,” as that term is defined by the ITR. You are a U.S. person under the ITR if you are a U.S. citizen or Permanent Resident (Green Card holder) regardless of whether you live in the United States, and you are also a U.S. person if you are a non-U.S. citizen or non-Permanent Resident merely physically present in the United States. Therefore, regardless of your Iranian or possibly any third country citizenship (e.g., Canada), you are still a U.S. person under the ITR if you meet the above definition.
To illustrate the breadth of U.S. sanctions, let’s first test your basic knowledge of U.S. sanctions on Iran.
True or False?
1. Iranian-Americans do not need a license to sell properties or hire a lawyer to reclaim confiscated properties in Iran.
FALSE. U.S. laws prohibit U.S. persons from engaging in certain transactions such as selling or brokering in Iran unless the transactions are licensed or otherwise authorized. As an example, a U.S. citizen traveling to Iran to sell his or her house should first obtain a specific license from OFAC. Otherwise, he or she will violate U.S. laws not only by selling the property, but also by hiring a lawyer or realtor in Iran to help him or her in the sale. The reason is that such a transaction involves dealing in goods and services of Iranian origin (in this case, the house and the services of the lawyer or realtor). This is also applicable for the sale of household appliances and other property (e.g., cars, jewelry, home furnishings, etc.). The same law also applies if one tries to reclaim property seized by the Iranian government. Hiring a lawyer to pursue claims in Iranian courts requires a license for the same reasons listed above. One can apply for a specific license from OFAC authorizing the transaction and related activities, so there may not necessarily be a need for multiple applications or licenses.
2. Iranian-Americans are allowed to buy real estate in Iran for personal use.
MOST PROBABLY FALSE. The law is a bit unclear on this. What is clear is that U.S. sanctions on Iran prohibit new investment in Iran by U.S. persons. Most “purchases” are also prohibited. OFAC recently announced that it fined an individual $30,000 for investing in a family catering business in Iran. The facts were not provided in detail, but it was noteworthy that OFAC imposed an arguably high amount for behavior it considered “non-egregious.” If the home is for personal use (e.g., a vacation home for you and your family), OFAC might potentially authorize such a transaction on the grounds that it might not be considered “investment,” but it is absolutely imperative not to do anything unless and until you have written confirmation from OFAC (e.g., a license or a letter) that your transaction is authorized. Buying investment property would certainly violate the ITR unless otherwise authorized.
3. Iranian-Americans can deposit money in banks in Iran.
FALSE. Opening a bank account in Iran and depositing funds in it can constitute “new investment,” which is generally prohibited under the ITR. Therefore, as attractive as offers of high interest or foreign currency accounts in Iranian banks may be, opening an account in Iran and depositing funds therein is completely against U.S. laws absent prior written authorization from OFAC, even if the money is deposited in a private Iranian bank!
4. “Havaleh” through individuals is a great way to transfer money between the United States and Iran.
FALSE. The U.S. government is increasingly cracking down on this way of informal money transfer, in part because it opens the door to money laundering and the financing of illicit activities. OFAC encourages ordinary citizens sending personal funds to send such money from private, non-sanctioned banks in Iran to certain non-Iranian, non-U.S. banks in third countries that will send the funds on to the United States. People have been criminally charged for acting as Havalehdars, and beneficiaries have been questioned as well. Do not do it.
1. What are the penalties?
OFAC has certain discretion in the actions it takes against parties violating its regulations on Iran. The fines for violating these regulations can be hefty. Broadly speaking, OFAC’s civil penalties for violations of the ITR can reach up to the greater of $250,000 or twice the value of the transaction, depending on the facts. Furthermore, some cases can be referred for criminal investigations, depending on a number of factors.
2. But I’m an Iranian Citizen. What does U.S. law have to do with this?
Again, if you meet the ITR’s definition of “U.S. Person,” it is irrelevant whether you hold an Iranian or any other passport. You are a U.S. person under the applicable regulations.
3. I need to sell my property in Iran or hire a lawyer in Iran to reclaim my property. What should I do?
Very simple – apply for a specific license from OFAC. There is no real application form per se, in other words, there needs to be a written submission. After receiving the license, it will be advisable to submit an affidavit to your bank declaring the purpose of the transfer – the last thing you want is for the bank to mistakenly reject an incoming wire – your money will be returned to the sender and you may receive an Administrative Subpoena from OFAC. You must also take certain precautions, including ensuring that the money does not pass through any sanctioned entities (e.g., Bank Saderat, Bank Melli, and others). OFAC generally maintains a favorable licensing policy on activities related to the liquidation of personal assets in Iran and it usually does not take much time to receive a license, so make sure you take the legal route. A lawyer experienced in this field can help guide you with this process, including the preparation of a license application and affidavit, as well as providing you with related advice.
4. OK, so it appears that I may have violated the law. What now?
You should consult a lawyer who is experienced in this area. He or she can determine if a violation has occurred. If indeed a violation did take place, one can sometimes (depending on the circumstances) mitigate any penalties by making what is called a Voluntary Self-Disclosure. OFAC will examine your Voluntary Self Disclosure and may ask for more information. It will consequently make a determination as to the type of enforcement action it takes.
The U.S. sanctions regime currently in place against Iran is much broader than the topics discussed in this short article. There are many other activities which fall under the scope of U.S. laws, such as restrictions on trade with Iran, charitable giving to Iran, as well as export control laws regulating the movement of certain goods and know-how to Iran (and certain Iranians with respect to the latter).
Please contact Farhad R. Alavi at +1 (202) 686-4859 or firstname.lastname@example.org should you have any questions.
© 2011, BHFA Law Group, PLLC
This document and its content are solely intended for informational purposes and should not be interpreted as constituting legal advice. You should consult with legal counsel with regard to all topics and issues discussed herein.