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In advance of President Obama’s highly publicized trip to Cuba, the Administration took additional steps to ease restrictions on trade and travel with Cuba. These changes to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) have implications for the banking sector, shippers, the travel industry and other businesses.

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The United Nations and United States recently took significant new steps to expand sanctions on North Korea, with implications for international banking; shipping and port activities; air transport; energy and mining sectors; trade in labor and specified metals, minerals and commodities; aviation fuels; and software. The new rules will have a particular impact on companies conducting business in Asia, most importantly China, but also including South Korea, India, Russia and shipping hubs like Singapore and Hong Kong.

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There has been much discussion of U.S. and EU sanctions changes following Implementation Day under the Joint Comprehensive Plan of Action (“JCPOA”), but a number of countries had imposed sanctions for Iran and it is worth examining how other key markets are adjusting policy. In particular, Canada and Australia recently implemented amendments to their sanctions regimes pertaining to Iran.

Canada

Canada had maintained a broad and complex sanctions regime for Iran, as described below. Following the arrival of Implementation Day, Canada took action on February 5, 2016 to remove many of these sanctions, opening a wide variety of permitted economic activity.  The sanctions and export controls still in place include:

  • A reduced, but still substantial list of designated parties subject to asset freezes.
  • Export controls on dual-use and certain other strategic goods and technology. Applications for export permits will be considered on a case-by-case basis, but exports of more sensitive items normally will be denied.
  • Prohibition on trade in arms and related material as well as the export of goods, items, material and technology related to uranium enrichment.
  • The provision of property, technical or financial assistance and services to Iranian persons for the supply sale, transfer, manufacture or use of products whose export is prohibited.

These rules apply to persons in Canada and Canadian citizens and corporations wherever situated.

Canada’s sanctions regime has been imposed under the United Nations Act implemented by the Regulations Implementing the United Nations Resolutions on Iran (“UN Regulations”) and the Special Economic Measures Act, implemented by the Special Economic Measures (Iran) Regulations (“SEMA Regulations”).  With the reforms of February 5, 2016, the following key restrictions have been removed:

  • Prohibitions against engaging in and financing the Iranian oil and gas sector or providing services to Iranian vessels.
  • Prohibitions against engaging with the Iranian financial sector including the prohibition on opening of correspondent banking accounts in Canada.
  • The blanket prohibition on exports to Iran and imports from Iran expect for sensitive items discussed above.
  • The prohibition on making investments in Iranian entities.

Australia

Like Canada, Australia had maintained a complex sanctions regime for Iran. Australia’s Department of Foreign Affairs and Trade (DFAT) has announced that it will implement plans to lift nuclear-related economic and financial sanctions by making changes to the Charter of the United Nations (Sanctions-Iran) Regulations 2008 and suspending certain provisions of the Autonomous Sanctions Regulations 2011.  Australian law will generally permit business with Iran with the following continuing limitations:

  • There will be a reduced, but still substantial list of designated parties subject to asset freezes.
  • Australia will continue to maintain anti-money laundering controls for Iran. Under the Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulations 2014, Australian financial institutions are prohibited from providing certain designated services to Iranian persons and entities for transactions exceeding AUD 20,000 unless exempted by the DFAT.
  • Restrictions on export to Iran of arms and related material, including some dual use goods, remains in place.

Australia’s revised rules with respect to Iran will no longer prohibit:

  • Exports, including – equipment and technology for the oil, gas and petrochemical industry; vessels for transport and storage of oil and gas; gold, diamonds and precious metals; newly issued Iranian bank notes; and certain naval equipment and technology.
  • Imports, including – crude oil, petroleum, petrochemical and natural gas products; and gold, diamonds and precious metals from the Government of Iran.
  • Provision of technical advice or financial assistance and service for the export of certain goods such as oil and gas, naval equipment or gold, diamonds and precious metals.
  • Investment in Iranian companies in the oil, gas and petrochemical sector. Likewise, Iranian entities will be able to invest in Australia’s oil, gas and financial services sector including the establishment of representative offices, subsidiaries and correspondent banking relationships with Australian financial institutions.

Continued monitoring of legal risk

The amendments to the Australian and Canadian sanctions regimes, and continuing sanctions, should be considerations for businesses and banks with exposure to Iran-related transactions or Iranian customers.

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On January 13, 2016 the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTOs) requiring reporting by title insurance companies and their subsidiaries and agents on certain high-value real estate transactions starting on March 1, 2016. The GTOs require reporting on “all-cash” residential real estate deals made through shell companies in Miami Dade County, Florida and the Borough of Manhattan in New York City.

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In January the EU and the US lifted economic and financial sanctions against Iran in a ground-breaking deal that unfroze billions of pounds of assets and opened up new markets for the first time since 2010.

Despite the fanfare surrounding the deal, in the small print a warning remains: some EU and US financial sanctions nevertheless remain in place against certain Iranian businesses and individuals.

Read more at City A.M.

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On January 27, 2016 the Department of Commerce, Bureau of Industry and Security (“BIS”) and the Department of Treasury, Office of Foreign Assets Control (“OFAC”) published amendments to the Export Administration Regulations (EAR) (Link) and Cuban Assets Control Regulations (CACR) (Link).  These amendments further loosen aspects of the Cuba embargo in line with the President’s December 2014 initiative:

  • Trade Finance – OFAC added a new general license authorizing payment and financing terms, including letters of credit, for U.S. exports and reexports of 100 percent U.S.-origin items from a third country so long as they (a) are authorized by the BIS and (b) not related to agriculture or commodities.  OFAC’s previous policy restricted financing for exports to cash-in-advance or third-country financing.

 

  • Trade and Business Licensing Opportunities – BIS established a new case-by-case licensing policy to permit exports and reexports “meeting the needs of the Cuban people,” including exports and reexports destined for state-owned enterprises, agencies and other organizations of the Cuban government.  BIS provided a list of examples including agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction/renovation and public transportation.  BIS suggested that the types of eligible items could include water treatment, electrical generation facilities, athletic facilities and other infrastructure beneficial to the Cuban people.  The new licensing policy opens the door for U.S. companies to consider a range of possible exports.  Areas that are still off-limits include items that primarily generate revenue for the state (including tourism and extractive industries) or are destined to Cuban intelligence and security services.

 

  • Travel Authorizations for Business – OFAC expanded the general license for travel to Cuba to include travel-related transactions for market research, commercial marketing, sales or contract negotiations, accompanied delivery, installation, leasing, or servicing in Cuba of items consistent BIS export and licensing policy.  In addition, OFAC expanded its previous authorization for attending professional meetings to also allow organizing such meetings.

 

  • Aviation and Vessels – OFAC expanded the general license relating to carrier services between the United States and Cuba to allow the entry into blocked space, code-sharing, and leasing arrangements, including with Cuban nationals.  Transactions related to travel between the United States and Cuba by aircraft or vessel on temporary sojourn and transactions by personnel required for normal operation and service of such aircraft and vessel also are authorized.  BIS has adopted a general policy of approval for items necessary for safety of civil aviation including the export or reexport of aircraft leased to state-owned enterprises.

 

  • Telecom / Electronics – BIS now “will generally approve license applications for exports and reexports of telecommunications items that would improve communications to, from, and among the Cuban people.”  BIS policy will also be more favorable with respect to items and software related to civil society and news gathering.

 

  • Public Performances.  OFAC expanded the general license for public performances, clinics and workshops to not only those participating in the event but to those organizing it, provided the event is open for attendance and, in relevant situations, participation by the Cuban public.

 

  • Media and Artistic Activities.  OFAC expanded the general license for travel related transactions directly incident to the exportation, importation or transmission of informational materials.  This includes transactions directly incident to professional media or artistic productions, including filming movies and television programs, music recording and the creation of art works in Cuba by travelers with professional experience in these areas.

 

Notwithstanding these changes to the Cuba regulations, it is important to emphasize that the Cuba embargo still remains in force and cannot be lifted without congressional authorization.  Transactions outside the scope of BIS license exceptions or OFAC general licenses remain prohibited unless specifically licensed.

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With “Implementation Day” came the lifting of certain key U.S. and EU sanctions on the civil aviation industry. However, many prohibitions still remain, and licensing requirements may attach to U.S. persons or non-U.S. persons who seek to do business in Iran or operate airline services to/from Iran. Companies must continue to navigate this complex sanctions framework if seeking to engage in Iran’s aviation sector.

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With the arrival of “Implementation Day” on January 16, 2016, the EU has lifted all economic and financial sanctions related to the Iranian nuclear program. Some European non-nuclear sanctions on Iran, however, still remain in place.  Furthermore, some EU companies could still be subject to U.S. primary and secondary sanction, as well as export control provisions.   Continue reading →

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Within days after the lifting of nuclear weapons-related sanctions against Iran, President Obama announced new sanctions against Iranian and other entities involved in Iran’s ballistic missile program.  These sanctions, which were triggered by a recent missile test by Iran in violation of UN prohibitions, designated eleven Iranian, Chinese, and UAE entities and individuals who were determined to be involved in procurement activities on behalf of Iran’s ballistic missile program. These entities and individuals (list found here) have been added to the U.S. Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) List.

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The front line of Iran sanctions compliance and enforcement has been the banking sector. With the arrival of “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), financial institutions and persons engaging in financial transactions face an adjusted, but still complex, sanctions environment. Continue reading →