Whenever dealing with Iran, it is important to keep in mind that the ITSR prohibits virtually all transaction between United States persons and parties in Iran. This is true even if a person thinks that their transaction is personal in nature and does not constitute business or any type of commercial activity. There is a general license for the inheritance of real estate in Iran: 31 CFR Section 560.543. However, like all general licenses, there are a number of conditions must be met regularly to qualify for authorization. An experienced OFAC attorney can help explain all conditions that need to be met when considering real estate in Iran.
General License Coverage
The general license covers the sale of real property that has been inherited (or that was acquired before becoming a United State citizen, permanent resident, or resident) and the subsequent transfer of the proceeds to the United States. In addition, the general license authorizes all transactions necessary and ordinarily incident to such as a sale of real property which can include the hiring of a real estate agent, the use of a funds agent, hiring a real estate attorney, and other transactions which are normally part of the sale of property in Iran.
However, it is important to keep in mind that the parties involved in the transaction still need to be screened to ensure that they are not blocked pursuant to any sanctions programs. Additionally, certain financial institutions in Iran are still sanctioned and cannot be used in some of these transactions.
Lastly, the general license, while it does cover the transfer of proceeds from Iran to the United States, expressly excludes any Iranian accounts credited or debited. What this means is that United States banks are not allowed to be directly involved with any person in Iran as part of this transaction, instead, the funds need to be transferred through a non-U.S. and non-Iranian third country financial institution.
Structuring the Transaction
It is important to work with counsel when structuring the sale of the property as well as the transfer from the proceeds to the United States. If any aspect of the transaction violates the terms of the general license, that might lead to a potential violation of the sanctions regulations themselves. Furthermore, if it results in a disqualification from the general license, then one may need to apply for a specific license which is a much longer process that typically results in greater fees in addition to a much longer wait time from OFAC. When structuring the transaction, important steps are reviewing the contract, having a good understanding of how the proceeds are going to be transferred to the United States, and making sure that everything abides by the general license.
Documenting Due Diligence
An important step in being compliant with sanctions is making sure that a person documents all due diligence and compliance steps related to authored transactions. Proof required of due diligence may be an important mitigating factor, should anything go wrong.
In addition, it memorializes the facts and the person’s activity. This can be helpful if years down the line, there are any questions from the government or other third parties. Counsel can help explain the best pathway for documenting the transactions and the appropriate amount of time to keep this documentation on hand.
Communicating with U.S. Financial Institutions
It is important that the United States financial institution receiving the money with an origin in Iran be aware of the transaction before the wire comes through. This can help avoid any confusion by a bank’s compliance team and it can also help build trust and credibility with the bank itself. Banks are very wary of Iran-related transactions and banks have been fined billions of dollars over the last several years for processing unauthorized Iran-related transactions.
By communicating with a person’s bank about the transaction, introducing retained counsel to the bank, and then following up by providing banks with the proper documentation demonstrating their compliance and due diligence, one can help the transaction go smoothly and avoid any unnecessary blocking of the funds.