Myths about the new OFAC Sanctions

I just got a very funny call from a lady in the Los Angeles area tonight. She asked if it is true that “OFAC has been repealed?” What was more odd was that she had hired somebody to file for an OFAC license on her behalf who did so today (it was not me). Indeed, OFAC did drastically revamp the Iranian Transactions Regulations (renamed the Iranian Transactions and Sanctions Regulations) last week (see the last post on this blog), but OFAC still very much exists and in full force.

The amount of misinformation in the Iranian-American community about US sanctions regulations is purely fantastic. Ironically, it appears this mainly comes from California, which is odd as Southern California has the largest population of Iranians outside Iran, so you’d think that the right word would spread. Here are some basic truths to debunk the myths:

1. The sanctions were not repealed. Indeed, OFAC is still open for business (well not today as Washington was shut down for Hurricane Sandy). OFAC did revise part of the Iran sanctions and created certain general licenses – meaning certain transactions no longer need specific authorization. But this does not mean you can go open a business in Iran, deposit money in a bank in Iran, empty and send your late relative’s Bank Melli bank account and sell whatever assets you have over there. You really need to look at each of your intended transactions and determine whether or not they fall under the exceptions. The laws have simplified some things but they have made certain things harder – there are still ambiguities about the channels by which you send money and very, very fine lines. Also, even if a transaction is exempt, the burden falls on you to take the right steps to make sure everything moves smoothly (arguably easier when you would get a license from OFAC). Make sure you do not get caught up in a mess by taking an overly-brave attitude that is undeserved.

2. There is arguably no such thing as a generic “permit to bring money” allowing you to bring any kind of money from Iran. I don’t know where this comes from but it is a very, very common misunderstanding. You do need a permit to bring certain types of funds, but it is not like the OFAC license equivalent of a blank check.   The focus on the regulations in some part is arguably the transaction(s) involved. The sanctions laws treat different types of money, well, differently. Money that your grandfather left in a vault in his house in Iran is different from money you earned from selling your house in Iran from money that you have earned from the sale of food to Iran. In other words, a “permit to bring $500,000” is arguably, well, likely to be nonsensical, unless you have say, exactly $500,000 in earnings from your family business which you are indirectly related that you want to bring to the U.S. Asking for a permit for $5k or $50k or $500k is a bit silly – it does not allow you to scrape up $500k from multiple sources (parental gift, shares of a business you own, sale of your land, bank interest) – OFAC cares where each dollar comes from and treats each dollar differently.  There are certain times when you do not even need a license from OFAC, and certain cases which you definitely do.

You should check if each type of money needs a license and plan accordingly. If you want to sell your family business, OFAC wants to know that.. Whether the business’ value goes up 500% when you sell it or drops by half (or if something similar happens with the Rial) that is in part irrelevant if you have a license. You do not get a permit to sell a business for what you think it is (or a little extra) – if you are licensed to sell your business and the value at the sale skyrockets, that is fine. You have been authorized to sell your business, not to bring $x to the United States from Iran.

3. Ask an Expert. OFAC regulations are very detailed, intricate and sophisticated. Excepting a break of about 8-9 months, I have been practicing OFAC continually since 2005, yet even I find myself having to review the regulations. The laws change constantly and as I always say, following regulations on the sanctions is not a matter of just a matter of complying with the law and avoiding a fine, it’s also a matter of minimizing your own risk, making sure your money doesn’t get turned back and that your bank account doesn’t get closed. So, in short, be careful, don’t second guess, educate yourself, and beware of rumors and misinformation.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s