US banks caught in Iran sanctions Catch-22

ID : N-3635 Date : 2018/12/06 - 10:32

(Persia Digest) - U.S. banks are pushing for changes to the Treasury Department’s Iran sanctions language to allow them to avoid a conflict between European Union law and the stringent financial penalties aimed at Iran and businesses that work with it.

Colin Wilhelm writes in the Washington Examiner that the banks' concern comes from a side effect of the Trump administration’s decision to withdraw from the Iran deal without coordinating an agreement with the EU. Because European companies continue to do business under terms of the deal with Iran, U.S. banks now face a mandate to seize any assets of those companies, under the terms of the sanctions.

However, recent changes to EU law make it illegal for banks to seize assets for the purposes of U.S. sanctions on Iran, causing U.S. banks to fear they could be subject to major lawsuits in Europe unless granted a license from the Treasury Department to follow the letter of both EU and U.S. law.

“They could be sued and sued successfully in the EU,” said Hal Eren, a former senior sanctions adviser at the Office of Foreign Assets Control, or OFAC, the office responsible for sanctions policy and enforcement at the Treasury Department.

As an August analysis from the international law firm Gibson Dunn noted, “These two actions appear to place multinational companies in an impossible bind between the inconsistent demands (and rhetoric) of powerful regulators.”

The conflict has prompted banks to lobby for the ability to reject new transactions from companies or individuals that fall under new Iran sanctions guidance issued by OFAC.

The Bankers Association of Finance and Trade, a subsidiary association of the American Bankers Association that represents banks involved in international transactions, has spearheaded the effort. Starting in August, the ABA, BAFT, and the Clearing House — a bank-owned payments network whose policy advocacy association is now known as the Bank Policy Institute, began pressing sanctions enforcers at Treasury for leeway to reject transactions that would fall under Iran sanctions rather than being forced to seize clients' property and assets.

Spokespeople for the American Bankers Association and Bank Policy Institute declined to comment and declined to make available their correspondence with Treasury, which is referenced publicly on BAFT’s website.


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A Treasury spokesperson said via email that Treasury does not comment on specific sanctions exemption requests but that “Treasury has made it clear that we intend to strictly enforce sanctions in the Iran program as part of our maximum pressure campaign to change the behavior of the Iranian regime.”

BAFT’s website refers to an Aug. 1 meeting at Treasury, which it says also included six member banks, and on Aug. 10 called for other banks concerned about Treasury’s guidance and legal conflict in the EU to voice their concerns on the matter. The association sent another letter to OFAC on Nov. 14 asking to be able to reject Iranian transactions, which they believe would leave them less vulnerable to legal repercussions in the EU than if they were to seize it. Though summarized on the association’s website, the correspondence is available only to BAFT members.

Treasury might ultimately issue licenses in the future. One possibility, Eren said, would be for Treasury to issue licenses as a last resort when companies or individuals with assets frozen by U.S. banks under the sanctions go to court. If a plaintiff wins, that would not only damage the bank financially but defeat the purpose of preventing money from flowing to companies or individuals with ties to Iran’s economy, as plaintiffs would be due not only their frozen assets but interest and damages — an outcome U.S. officials might seek to prevent.

“Yes [a lawsuit] would have the aim and motivation of defeating U.S. sanctions,” said Eren. “And, of course, the U.S. government may not concede to that.”

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