President Obama has issued an Executive Order (E.O. 13608, May 1, 2012) aimed at foreign individuals and entities that have evaded US economic sanctions on Iran and Syria. This marks a further expansion of recent efforts by the Administration to target non-US persons and entities that undermine US sanctions law.
The order authorizes the US Department of the Treasury (Treasury) to publicly identify foreign individuals and entities that have violated, attempted to violate, conspired to violate, or caused a violation of US sanctions against Iran or Syria, or that have facilitated deceptive transactions for or on behalf of any person subject to these sanctions. In addition, foreign persons and entities owned or controlled by, or acting on behalf of, another party that has engaged in these activities may also be identified. In a Fact Sheet dated May 1, Treasury notes that this authority gives it “the capability to publicly identify foreign individuals and entities that have engaged in these evasive and deceptive practices, and generally bar access to the US financial and commercial systems.”
The order operates by prohibiting US persons (including citizens and residents of the United States, individuals and entities located in the United States, and entities organized under US law) from dealing with foreign persons and entities identified as evaders of sanctions against Iran and Syria. US persons will be unable to provide to or procure from a named foreign sanctions evader (FSE) any goods or services, including financial services, without a license from Treasury’s Office of Foreign Assets Control, unless the transaction is otherwise exempt under the existing sanctions regulations. This prohibition against dealings with an FSE is not limited to transactions involving Iran and Syria, but extends to all transactions with the FSE.
US financial institutions must reject any wire transfer involving an FSE and restrict accounts belonging to an FSE. Treasury has not yet identified or listed any FSEs, but notably no prior notice or civil enforcement action is required before Treasury designates a person as an FSE. Foreign businesses and financial institutions will need to be transparent in dealing with US persons if transactions involve Iran or Syria so as not to be found to be facilitating deceptive practices.