OFAC Warns Foreign Banks: Iranian Transactions May Trigger Sanctions Without Prior Notice
OFAC warned foreign banks that dealing with sanctioned Iranian institutions could trigger sanctions at any time without prior notice, and updated FAQ 156.
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The U.S. Department of the Treasury's Office of Foreign Assets Control issued a warning to foreign financial institutions stating that their continued dealings with sanctioned Iranian financial institutions could lead to sanctions being imposed on them at any time without prior notice. This means that foreign banks can no longer rely on an advance grace period to review their portfolios before being placed on sanctions lists.
At the same time, the office updated Frequently Asked Question (FAQ) No. 156 related to Iran, which is one of the explanatory questions relied upon by banks and advisors in reading the scope of U.S. sanctions on Tehran. In practice, these questions serve as an interpretative guide clarifying to banks how regulatory authorities handle suspected transactions.
The Treasury cited recent actions it took, including Banque Misr UAE, whose U.S. correspondent banking connection was cut off, Golden Global Bank in Turkey, and Russia's VTB (VTB Bank PJSC). These examples indicate that the action is not limited to Iranian institutions, but extends to banks in partner countries as well.
A separate sanctions notice was published in the U.S. Federal Register under number 91 FR 63656. This combination of regulatory tools increases the risks of dealing with Iran-linked financial networks for banks in the region, as compliance decisions become stricter and more costly to implement.
What do these terms mean?
OFAC: Office of Foreign Assets Control in the U.S. Department of the Treasury, which is the entity that sets and enforces sanctions lists on individuals, companies, and banks.
Correspondent Banking: A relationship between two banks that enables one to execute dollar transfers through the other, and severing it effectively excludes the bank from international financial transactions.
Federal Register: The official journal in which the U.S. government publishes official rules and decisions, including sanctions notices.
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