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.