By Charlie Lyons
After determining that Iran was noncompliant with international agreements aimed at reducing their nuclear capabilities, the United States began to economically isolate Iran. Promulgated in 31 C.F.R. Part 560, the Iranian Transactions and Sanctions Regulations (ITSR) were implemented by the United States citing Iran’s “support for international terrorism, its efforts to undermine the Middle East peace process, and its efforts to acquire weapons of mass destruction and the means to deliver them.” Its purpose and how it relates to national security seem clear but its implementation is not. For example, the lack of a clear definition to whom the regulations apply leaves many wondering: Can I do any dealings with Iranian nationals?
Fearing that they will violate the regulations, some people or banking institutions will refuse to process legitimate transactions with Iranian nationals.1 For example, even if a statute or license issued by the Department of Treasury’s Office of Foreign Assets Control (OFAC) authorizes the transaction, many banks will refuse to process such transaction because the OFAC regulations are strict liability. Therefore, the risk associated with noncompliance outweighs the benefit of processing the transaction. Furthermore, because the OFAC regulations are broadly written and the exceptions vary between the OFAC’s sanction programs, internationally operating banks or businesses choose between denying the transaction or accepting it with an assumed risk.2 Although the ITSR does not prohibit all transactions, the complexity of the regulations has unintended consequences, such as when natural disasters occur.
On November 12, 2017, more than 530 people died and almost 8,000 people were injured in a tragic 7.3 magnitude earthquake along the Iran-Iraq border. The initial earthquake and its 152 aftershocks were felt as far as Kuwait, Qatar, Turkey, Lebanon, Israel and the United Arab Emirates. Towns and villages were destroyed. President Hassan Rouhani described the incident as “painful for all Iranians.” In response, Iranian athletes auctioned off their medals to provide relief and raise money for victims. United States citizens wishing to help, however, face many hurdles as a result of the Iran Sanctions Program.
The ITSR is impeding the flow of relief to persons impacted by the earthquake. Although most transactions are prohibited, in 2013 OFAC authorized certain transactions for humanitarian purposes. 31 C.F.R. 560.210(b) permits U.S. persons to donate “articles, such as food, clothing, and medicine, intended to be used to relieve human suffering.” Americans can also help by providing personal remittances to family members provided the money first be transferred and deposited in a third-country bank. Additionally, U.S. persons can donate to U.S. based NGOs that are providing relief to Iran. However, U.S. persons cannot donate directly to Iranian organizations providing relief without authorization from OFAC. Without specific authorization from OFAC, maneuvering through the Iran sanctions program to provide relief is very complex and oftentimes requires assistance from an attorney.
Recently, Tohid Najafi, an Iranian American who created a Facebook fundraiser for relief efforts, illustrated the complexity of the Iran Sanctions Program. Tohid Najafi created a fundraiser with a goal of raising $110,000 in one month. Although he had doubts of reaching this goal, his expectations were greatly exceeded because he raised over $200,000 in three days. Najfi intended to send the funds directly to Iranian based relief organizations. Unfortunately, however, the Iran Sanctions complicated Najfi’s mission.
Facebook informed him that the funds “will not be released” without a license from OFAC, which could take months. Najafi then decided to donate the funds to Moms Against Poverty, a U.S.-based organization that holds an OFAC license to contribute to earthquake relief efforts. Facebook ultimately determined the payments from the fundraiser must be refunded, but Facebook made its own donation of $200,000 to Moms Against Poverty. Although the situation ended positively, it demonstrates the frustration and complexity of navigating through the Iran Sanctions for the purposes of providing relief to areas affected by the earthquake.
OFAC issued a general license in 2013 that authorizes U.S.-based NGOs to provide aid to Iran, however, this license did not extend to U.S. citizens nor non-U.S. based organizations. This is problematic because non-U.S. based organizations are likely to be more effective in providing relief because they are on the ground where information is most available. Additionally, although U.S.-based NGOs are authorized to donate to Iran, oftentimes the process takes a while because U.S. banks are reluctant to process the transaction. Due to the dire need for help, U.S. Senators Sanders, Warren, Franken, Carper, and Feinstein requested OFAC ease the restrictions that hinder U.S. citizens and non-U.S. based organizations from providing aid to Iran communities impacted by the recent earthquake. The Senators advocate for a general license that permits U.S. persons to donate to non-U.S. based organizations providing relief.
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1 See Kian Meshkat, The Burden of Economic Sanctions on Iranian-Americans, 44 Geo. J. Int’l L. 915, 944-45 (2013), http://heinonline.org/HOL/P?h=hein.journals/geojintl44&i=973 (explaining that because language providing for certain exemptions was removed from the ITSR, banks have become fearful of processing even valid transactions).
2 See id. at 946, http://heinonline.org/HOL/P?h=hein.journals/geojintl44&i=974.