Digital currency or “cryptocurrency” has become a prominent term when discussing money transferring, wiring, and banking. There are many misconceptions regarding cryptocurrency and its uses, so it is important to have adequate knowledge about it and its uses.  

Definitions 

Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value, is neither issued nor guaranteed by any jurisdiction, and does not have legal tender status in any jurisdiction. The term digital currency includes sovereign cryptocurrency, virtual currency, and a digital representation of fiat currency. A digital currency wallet is a software application that provides a means for holding, storing, and transferring digital currency. In the simplest words, cryptocurrency is a digital asset that acts as a medium of exchange for money transfers.  

Common Misconceptions 

Many people believe that if they engage in transactions through cryptocurrency or digital exchange sites, that the transaction is not regulated, and the sanctions do not apply. That is NOT TRUE. OFAC compliance obligations remain the same for digital currency, just like traditional fiat currency. The transaction IS REGULATED, and sanction DO APPLY. Just as sanctions are enforced through business, banks, and financial institutions, the U.S. government expects the same level of commitment from entities dealing in cryptocurrency to enforce and comply with the sanctions. Many sites are now freezing and/or holding transfers and asking for proof of validity of the transactions under the sanctions. The U.S. government has become hypervigilant in targeting illegal cryptocurrency transactions because they are concerned that sanctioned countries and parties have used/are using cryptocurrency to avoid sanctions designed to isolate them and to facilitate illicit activities.  

Guidance 

All hope is not lost when it comes to cryptocurrency, users must just ensure that their exchanges and activities are compliant with the sanctions. These are key steps that cryptocurrency users and exchangers can take to protect against potential sanctions violations: 

  1. Crypto exchangers operating in the United States must register with FinCEN as money service businesses, license themselves in the states in which they operate, and exclude users in sanctioned jurisdictions and those on OFAC’s SDN List from transacting on the exchange.  
  1. Exchangers should adopt and implement Know Your Customer procedures, including sanctions screening, to identify parties trading on their exchanges, and they should employ geo-IP blocking to prohibit access by parties from sanctioned jurisdictions.  
  1. U.S. persons trading in cryptocurrency should use exchanges committed to complying with U.S. sanctions requirements.  
  1. Exchanges operating outside the United States that want to attract U.S. users should also consider implementing such measures, to exclude targets of U.S. sanctions from trading.  

For more information, contact our firm today!  

The importation and exportation of most goods and services to/from Iran is not permitted unless OFAC has issued a license authorizing that activity. There are two types of licenses issued by OFAC, general and specific licenses.  

General Licenses: 

General licenses permit transactions that the U.S. government believes are not going to violate U.S. sanctions’ policy goals.  

A general license basically states that all U.S. persons can engage in the specific activity and/or transactions outlined in general license. Examples of activities that are allowed under general licenses are sending family money, sending noncommercial personal remittances to/from Iran, selling real/personal property acquired as inheritance or before one became U.S. person, and more. If a general license exists for the desired activity, one does not need to apply for a specific license. 

Specific Licenses: 

A specific license is required for something that an individual or entity wants to engage in that is not allowed under sanctions regulations and there is no general license that authorizes that activity. 

In that case, that individual or entity would need to apply for a specific license asking for personal and specific authorization from the government to engage in that specific kind of activity. Applications for obtaining a specific license are usually in the form of a letter that is sent to the government via their online portal. 

A common mistake that is made is when individuals apply for a specific license when OFAC has already issued a general license permitting that activity. If a general license exists, the government will not issue a specific license in the individual’s name, instead, they will just return the application without taking any action on it. They will send a one-page “return without action” letter that has no legal significance and cannot serve as a license. 

If you thought you were granted a specific license but you are not sure, send us a copy via our mobile app or email (info@yazdanyarlaw.com) and we will be happy to take a look at it for you and let you know if the document is a specific or general license. 

            This article clarifies who OFAC considers to be a U.S. person as well as OFAC’s implications on owning and maintaining a bank account and real property in Iran as a U.S. person.

            Firstly, it is extremely important to understand who OFAC considers to be a U.S. person. If you do fall into the category of “U.S. person” according to sanctions regulations, you must follow the rules and regulations according to OFAC.

Who is a US Person according to OFAC (Sanctions Law)?

According to OFAC, you are a United States person if you are any of the following:

  • U.S. citizen
  • Permanent resident alien (Green Card Holder)
  • An entity organized under the laws of the U.S. or any jurisdiction within the U.S. (including foreign branches)
  • Any person inside the U.S.

            According to OFAC, as a U.S. person, you are NOT allowed to own or maintain a bank account in Iran under any circumstances. If a U.S. person does own/maintain a bank account in Iran, the individual needs to seek authorization from OFAC to either continue maintaining or close down that bank account. In most circumstances they should also file a Voluntary Self-Disclosure with OFAC’s enforcement division.

When it comes to property, a U.S. person can own/maintain property only if that property was acquired BEFORE the individual became a U.S. person, or if the property was inherited afterwards. However, a U.S. person cannot, under any circumstances, gain rental income from that property UNLESS that individual obtained a specific license from OFAC authorizing him or her to do so. If any of this circumstances apply to you, please contact our office for more information and guidance.          

While the issue of US-Iran relations is often marked by tension, news of the release of two innocent men is a welcome respite. 

My client, Dr. Masoud Soleimani, was arrested and imprisoned over a year ago for alleged US sanctions violations. More specifically, he was arrested for trying to import synthetic growth hormones to be used solely for stem cell research purposes from the US to Iran.

Sanctions practitioners and legal experts across the field, including myself and my co-counsel Mr. Leonard Franco, as well as scientists worldwide were baffled as to why Dr. Soleimani was being criminally prosecuted and detained for this alleged violation. First, from a legal standpoint, the items at issue could be classified at medicine and were therefore permitted to be exported to Iran under the existing sanctions regulations. Second, even if the US government were to take the position that the items were not medicine, given the nature of the goods (the items had a shelf-life of 6 months and, as conceded by the US government, could not be used for any dangerous purpose or any purpose other than research) and their value (less than $10,000.00), this would be a case that would normally be handled on a civil or administrative level and NOT through criminal prosecution. Earlier this morning, all charges against Dr. Soleimani were dropped.

Similarly, Chinese American Xiyue Wang who was wrongfully detained and unjustly held in Iran for over three years on alleged espionage charges had all charges against him dropped and was also freed. Mr. Wang, a Princeton University PhD student, was arrested in August of 2016 when he traveled to Iran for research purposes. 

Today, due to the cooperation of the US and Iranian governments as well as the efforts of all parties on both sides, both Dr. Soleimani and Mr. Wang are free and on their way home. Although nothing can make up for the time they lost and the hardships of unjust imprisonment they endured, everyone involved is grateful that this ordeal has finally come to an end. 

First, and most importantly, because two innocent men who did not deserve to be imprisoned are now on their way home to be with their families where they belong. And second, this exchange shows the world that, through diplomacy and open dialogue, even two adversaries can reach an outcome that benefits everyone.

On a personal note, it was a true honor to represent Dr. Soleimani and to personally witness his strength of character and kindness of heart in even the most dreadful of circumstances. I hope that today will be the first of many good days for him and that he will soon be back where he belongs: in the hospital saving lives as he was doing before his arrest.

-Mehrnoush Yazdanyar, Esq.

The deadly floods in Iran have devastated many regions of the country and have left many in dire need of resources and help. Many U.S. individuals and entities have contacted our office asking how they can donate to the cause while also ensuring that they are complying with U.S. sanctions law.

Please be advise that the Office of Foreign Assets Control (OFAC) has an in place a general license, General License E, regarding the support of humanitarian activity in Iran. More specifically, General License E, authorizes nongovernmental organizations (NGOs) to export or reexport services to Iran or related to Iran in support of the following not-for-profit activities that are designed to directly benefit the Iranian people.

Examples of Permitted Activities:

(1) Activities related to humanitarian projects to meet basic human needs in Iran such as donating health-related services; operation of orphanages; provision of relief services related to natural disasters; distribution of donated articles, such as food, clothing, and medicine, intended to be used to relieve human suffering; and donated training related to any of the foregoing activities.

(2) Activities related to non-commercial reconstruction projects in response to natural disasters in Iran for a period of up to two years following the natural disaster;

While the above types of activities are permitted, please be advised that the transfers of funds in support of the activities outlined above by a single NGO may not exceed USD $500,000 in the aggregate over a 12-month period.

Furthermore, NGOs who engage in conduct pursuant to this general license must submit reports to OFAC on a quarterly basis, providing information including but not limited to a detailed description of the services exported or reexported to Iran, any Iranian NGOs, Government of Iran entities, Iranian financial institutions, or other Iranian persons involved in the activities; the dollar amounts of any transfers to Iran; and the beneficiaries of those transfers. Reports must be filed with the Licensing Division of OFAC.

Please be advised, that individuals MAY NOT fundraise on their own for the purposes of sending funds directly to Iran as General License E provides authorization for NGOS and not individuals. Therefore, individuals should work with and donate funds through non-profit organizations to assist with the earthquake relief effort in Iran. However, individuals in the U.S. may send non-commercial personal remittances to Iran to their own family and friends provided that the transfer complies with sections 560.516 and 560.550 of the Iranian Transactions Sanctions Regulations (ITSR).

And finally, donations of articles such as food, clothing, and medicine intended to be used to relieve human suffering are exempt from the sanctions on trade between the United States and Iran, as long as the donations are not being sent to the Government of Iran or any Iranian individual or entity on the List of Specially Designated Nationals and Blocked Persons (SDN List).

If you have any questions regarding this matter or if you are a non-profit organization and would like additional information or guidance regarding how to legally raise funds for the flood relief effort, please feel free to contact our firm. It will be our pleasure to provide you with pro bono assistance.

 

Iranian-Americans woke up yesterday morning two major announcements made by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) as well as from Iran’s Central Bank. Here’s how this news can impact you:

 

Snapping Back of Sanctions by U.S. Government

In accordance to President Trump’s May 8th2018 decision to cease the United States’ participation in the Joint Comprehensive Plan of Action, yesterday marked the last day of the 90-day wind-down period. As a result, the President issued an Executive Order that snapped back into place certain sanctions relating mostly to what non-U.S. persons and other countries could do vis-à-vis Iran.

Our firm has received thousands of calls, emails and social media inquiries asking, “so what happens with the U.S. withdrawal of the nuclear deal, and how does this impact a U.S. person’s ability to bring their money to the United States from Iran?”  The truth is, there is no direct impact on most U.S. persons looking to bring personal funds from Iran.  Most of the changes in regulations announced on August 6, 2018, have nothing to do with the transmittal of personal assets or what is called noncommercial personal remittances, such as a gift or inheritance from Iran. Similarly, the sale of real property and the transfer of real property proceeds remain, for the most part, legal under the regulations. 

However, as many of you have experienced these past few months, while the transactions remain legal, finding U.S. dollars in Iran has become increasingly difficult and for some, impossible. The drop of Iran’s currency coupled with the fact that you could not buy U.S. dollars on the open market have made logistically sending funds from Iran to the United States extremely problematic for Iranian-Americans.  The only people who have been able to successfully transfer funds are those who 1) have a connection to a broker who is willing to sell to them on the open market and 2) those who can afford the egregious jump in exchange rates.

As we all have witnessed, Iran’s currency was already at an all-time low even before the Trump Administration announced that the United States government would withdraw from the nuclear deal.  Since this announcement, we witnessed a spiral in the value in the Iranian currency against the U.S. dollar.

The Iranian government tried to combat the plummet of the toman/rial by setting a fixed exchange rate and making the exchange of U.S. dollars outside of this rate by brokers illegal. However, this just resulted in individuals buying U.S. dollars from the black market at all time high rates.

The news from clients who recently traveled to Iran and those who have family in Iran is that the socio-economic situation “has never been this bad before.” The recurring story you hear played out in one form or another is that people don’t have money to buy bare necessities and those who do are hoarding them because they are unsure of what the future holds. There is an air of uncertainty, fear and desperation in the words of anyone you speak to who has recently visited or been to Iran.

 

Central Bank of Iran’s Decision to Legalize the Purchase & Sale of the US Dollar

So, what is the Iranian government doing to curb the plight of Iran’s economy? The Iranian government and the new head of the Iranian Central Bank announced that the ban on buying and selling U.S. dollars in Iran would be effectively removed. Therefore, licensed currency exchange brokers are once again allowed to purchase and sell U.S. dollars in the open market. Furthermore, there will be no fixed exchange rate and no differentiation of the rate based on the purpose of the exchange (commercial or personal). In other words,except for vital goods and medicines that the government will provide necessary funds for, the market will determine the exchange rate for all U.S. dollars to be bought and sold in Iran. The hope is that this move will level out the surging currency exchange rate.

Although is difficult to predetermine the exact rate, once the exchange of the US dollar resumes in Iran’s open market, we are likely to see fall of in the exchange rate. We will keep you updated as soon as we receive any additional substantial information.

As always, please feel free to contact our firm with any questions.

Introduction

Because of the sanctions and regulations that remain in place governing transactions between the United States and Iran, individuals are rightly careful when transferring money between the two countries. In particular, the United States has prohibited the use of the hawala system to transfer funds to and from Iran. But because the hawala system takes its name from the general word for an ordinary wire transfer or deposit, many people think that any form of “havala” (or “hawala”) is prohibited as well. This is not the case, as the United States has authorized certain types of transfers to and from Iran

“Havala”: a General Verb

The confusion about the types of permitted fund transfers stems from the use of the Persian verb “havala” to describe the informal fund transfer system hawala. “Havala”, from the Arabic verb tahweel, has the general meaning of “to transfer”, and Persian speakers use “havala” to describe any fund transfer, for example, through Western Union, Venmo, a third country bank or any other type of deposit into a bank account. The United States government permits transfers to and from Iran through third country banks for certain types of transactions, such as remittances, inheritance, or sales of real property. The verb, however, could also denote a transfer through the hawala system, which is not allowed under the Iranian Transactions and Sanctions Regulations (ITSR).

Hawala System: a Specific Method of Transferring Money

As many are familiar, the hawala system is an informal method of transferring money between countries that relies on personal networks and trust. For example, Customer A in Iran wants to transfer money to his family in the USA. He goes to a hawaladar (or broker in charge of arranging these types of transfers) in Iran and gives him a sum of money to transfer.  The hawaladar then finds a customer in the USA who wants to send money to his/her family in Iran. The hawalader then deposits the funds he received from Customer A into an account Customer B provides in Iran. The hawaladar in return asks Customer B in the USA to deposit the dollar equivalent of that amount to Customer A’s family member’s account in the USA. Therefore, both customers A and B are able to successfully send funds to their families through this system without ever actually moving money across borders or through banks.

Many prefer the hawala system to formal banking options because it is often more convenient, quicker, and requires less documentation than banks for legitimate transfers between expatriates and their home communities. Moreover, hawala networks thrive where the formal bank sector is weak or where no formal banking relationship exists, such as between the United States and Iran.

The very features that make the hawala system attractive for users are also the reasons why authorities are concerned to scrutinize and regulate these sorts of transfers: because of their opacity hawala transfers could facilitate the financing of terrorism, money laundering, or the circumvention of sanctions. For these reasons, governments have started asking hawaladars to record their transactions and have even prohibited the use of hawala to transfer funds between certain countries, as the United States has with Iran. Moreover, the use of hawala for illicit activities means that individuals making innocent use of the hawala system may unwittingly be implicated in a criminal conspiracy. For example, settling liability between transferring and receiving hawaladars may involve serious illegal activity, such as fraud, sanctions evasion, or narcotics trafficking.

We, therefore, strongly discourage the use of the hawala system to transfer money between the United States and Iran. When sending or receiving funds to and from Iran, you should only work with currency exchange brokers who send funds through third country banks and you should never allow direct deposits of any kind into your account from within the United States. And, as always, please be sure that your transfer is compliant with current U.S. sanctions law and that you submit all the proper documentation to your bank prior to each incoming wire.

It has been brought to our attention that many individuals are routinely mistaking a “return-without-action” letter from OFAC for an OFAC license. Please be advised that a one page letter or response from OFAC is often a RWA Letter and not an actual license. This is merely a correspondence from OFAC. This IS NOT an OFAC license and will not be treated as such by your bank or by OFAC should any problems arise with the underlying transaction(s).

Furthermore, when an OFAC license is submitted to the government, OFAC will routinely issue a case number for that application for reference purposes. This is so one can easily reference the case when calling or writing to OFAC to check the status of the application and/or to submit any needed supplemental information. Once again, a case number IS NOT an OFAC license number and will not be treated as such by your bank or by OFAC.

Please be advised that this type of letter is also routinely sent in response to a license application submission in which the applicant is asking OFAC for authorization to engage in activities that are ALREADY authorized by GENERAL LICENSES, such as the receipt of Non Commercial Personal Remittances from Iran or the Sale of Property in Iran.  A “return-with-no-action” letter can also be sent if an application is missing certain information thereby preventing OFAC from being able issue a final decision.

An actual OFAC license will have a license number as well as an expiration date. It will also clearly outline the authorized activity. For a sample OFAC license, please clink the following link: Sample License

If you received a return-without-action letter and would like additional guidance regarding this matter, please feel free to contact our firm at 310-780-6360 or email us via our website’s contact page.

 

Because of the uncertain economic situation in Iran, many individuals who have real property in Iran would prefer to gift it to their children or other family members, including US persons, while they are still alive instead transferring title of the property as an inheritance after their passing. While this makes perfect sense if one wants to avoid possible probate and other legal issues and inheritance taxes in Iran, transferring title of real property to a US person as a gift is a violation of current US sanctions regulations.

The Office of Foreign Assets Control (OFAC) currently prohibits US persons from making any new investments in Iran without its prior authorization. Under OFAC regulations the acquisition of real property in Iran by US persons, including any type of title transfer or transfer of property, is considered a type of investment and therefore is prohibited. The only condition on which US persons can receive transfer of title to real property in Iran is if OFAC has authorized such a transaction.

OFAC does, however, authorize US persons to acquire and sell real property in Iran if they inherit that property. Moreover, according to Reg: § 560.543 of the Iranian Transactions and Sanctions Regime (ITSR) US persons may engage in transactions necessary and ordinarily incidental to the sale of real property in Iran, such as engaging the services of an attorney, funds agent, or real estate broker. US persons may also transfer the proceeds from sales of real property in Iran to the United States only if they acquired the real property before becoming a US person or inherited it from persons in Iran.

Although the inheritance of real property is permitted, OFAC does not consider a gift of real property from an Iranian national who is still living an inheritance. For this reason US persons must obtain specific authorization from OFAC (i.e. a specific OFAC license) before the transfer of title in order to legally accept the gift. Furthermore, if US persons wish to sell the property they acquire as gifts, they must again obtain another license from OFAC, as that transaction falls outside the scope of general licenses issued by OFAC.

As for other forms of property, such as vehicles, coinage, furniture, and the like, there are separate licenses that authorize US persons to receive these as gifts. And as with real property, US persons may inherit these items and transfer the proceeds from sales of them to the US, provide that they have obtained the necessary documentation attesting to the validity of the inheritance, sale, and transfer. Therefore if you are planning to accept a gift of any type of property in Iran, contact our office for more information on how to acquire the necessary OFAC license, to arrange the required documentation, and to disclose any past violations to the government.