Lifting of certain US sanctions on Iran – impact on investigations

Tehran skyline at night, Tehran, Iran

Global Investigations Insights Series

Global Investigations Insights

Since the easing of certain US sanctions on Iran earlier this year, companies have continued considering potential avenues for operating in or with Iran.  Subsequent guidance from the US Department of Treasury's Office of Foreign Assets Control (OFAC) has provided some direction, both in helping companies evaluate their ability to operate in the market, as well as underscoring the obligation to internally investigate and address potential improper conduct. 

Importantly, regulatory and enforcement officials have urged caution, for both US and non-US persons with regard to this market, notably because:

  • The primary sanctions laws are still in place, and so activity regarding Iran still requires a general or specific license
  • OFAC has not removed all Iranians and Iranian persons from its sanction lists
  • US persons are very limited in what they can do to facilitate the Iran operations of foreign subsidiaries
  • There are a number of secondary sanctions that remain applicable to non-US persons dealing with Iran
  • Feasibility of sending/receiving payments remains difficult, regardless of whether the financial institution involved is US-based or non-US based
  • Secondary sanctions which were altered in part to address Iran's cooperation in nuclear weapons agreements may be subject to change depending on whether Iran continues to be in compliance with the terms of those agreements, as well as subject to potential US political changes resulting from the November 2016 elections.
  • A number of areas where other countries or multinational bodies have different sanctions rules are complicating efforts to determine how to operate as a practical matter in Iran, and there may be some conflicts between what is allowed by US law and other laws.

Many companies considering entry into Iran are taking a conservative and slow approach, given the issues above. Moreover, OFAC has urged patience as  it works to publish guidance and address questions.  It published some guidance in June 2016, particularly as to General License H, which permits entities owned or controlled by a US person to engage in certain transactions involving Iran, and which permits US companies to establish or alter policies or procedures to allow these foreign entities to engage in transactions involving Iran.  That guidance clarified that senior management and US persons may receive information from the foreign entity engaged in transactions involving Iran, but it recommended blanket recusal policies for US persons to keep them from engaging in or directing activities concerning Iran, as case-by-case recusals for US persons may be construed as a form of facilitation.

Additional guidance published in October 2016 notes that General License H authorizes US companies to change operating policies and procedures multiple times to enable foreign entities to engage in certain transactions involving Iran, but such changes may not be implemented for the sake of facilitating a particular transaction involving Iran.

As companies explore and implement changes to policies and procedures designed to establish foreign entities to engage in transactions involving Iran, it is essential that they implement and follow robust sanctions and export controls policies. Where potential issues are identified, early reporting and disclosure to OFAC can be beneficial for companies.  Internal investigation – consistent with what is permitted by US law – is also an important consideration of that disclosure and reporting, especially given the recent sanctions changes.

For more information about investigations obligations and issues in this area, please contact either of the authors.