International Law Advisory - Iran Sanctions Expanded: Assets of Iranian Entities and Individuals Frozen

Today, the Treasury and State Departments designated certain Iranian entities and individuals as proliferators of weapons of mass destruction and as supporters of terrorism.  This designation results in a freeze of their assets – to the extent they are under US jurisdiction – and prevents US persons from engaging in any transactions or dealings with these entities or individuals.  Since the Iranian Transactions Regulations (ITR), administered by the Treasury Department’s Office of Foreign Assets Control (OFAC), already impose a comprehensive ban on commercial activities involving Iran – including these Iranian entities and individuals – the primary effect of these designations will be the assets freeze that is now additionally imposed – a measure not contained in the ITR.

The assets freeze applies to all assets of the designated entities and individuals that are in the United States now or in the future, as well as to assets that are under the control of a “US person” (meaning any US citizen or lawful permanent US resident wherever located, any person in the United States, and any US company, including its foreign branches).  While foreign companies and individuals are not directly affected, any financial transaction passing through a US financial institution will be affected.

Treasury Secretary Paulson’s statement in connection with the designations called on international banks and other companies to cease doing business with the designated parties.  In addition to this precatory language, Secretary Paulson connected these designations to the recent warning by the Financial Action Task Force (FATF) – the multilateral body set up to address concerns on countering terrorist financing and money laundering.  On October 11, 2007, FATF advised financial institutions to take into account, via enhanced due diligence processes, the fact that Iran does not have comprehensive protections against money laundering and terrorism financing.  This warning was echoed in an advisory by the Treasury Department’s Financial Crimes Enforcement Network.  Taken together, these actions show that the United States is focusing on financial institutions in its efforts to deter Iran’s WMD proliferation and terrorism support, and that it is trying to influence its international counterparts to take similar actions against Iran.  Companies should consider these risks in connection with their international operations.

Terrorism Designations

The Treasury Department designated two entities as Specially Designated Global Terrorists (SDGTs) under Executive Order 13224, which is designed to freeze assets of and prohibit dealings with those parties designated as terrorists or as supporting terrorism:

• The Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF):  IRG-QF is also known under the names Pasdaran-E Enghelab-E Islami and Sepah E-Qods; and

• Bank Saderat Iran:  Bank Saderat Iran is known as the Iran Export Bank.  The designation includes all of its branches and subsidiaries.

Weapons of Mass Destruction Designations

Separately, due to proliferation concerns, the State and Treasury Departments designated the following entities and individuals under Executive Order 13882, which is designed to freeze assets of and prohibit dealings with parties designated as proliferators of weapons of mass destruction:

• The Islamic Revolutionary Guard Corps (IRGC):  IRGC includes five branches (Ground Forces, Air Force, Navy, Basij militia, and Qods Force special operations).

• Ministry of Defense and Armed Forces Logistics (MODAFL):  MODAFL controls the Defense Industries Organization, an Iranian entity previously designated due to proliferation concerns and previously sanctioned under the Arms Export Control Act and the Export Administration Act for missile technology proliferation activities.

• Bank Melli, its branches, and subsidiaries:  Bank Melli is Iran's largest bank and is believed to provide banking services to entities involved in Iran's nuclear and ballistic missile programs, as well as to the IRGC and the Qods Force. Among Bank Melli's subsidiaries is Bank Kargoshaee, which was separately designated.

• Bank Mellat, its branches, and subsidiaries:  Bank Mellat is believed to provide banking services in support of Iran's nuclear entities, including previously designated entities the Atomic Energy Organization of Iran (AEOI) and Novin Energy Company.

• Persia International Bank PLC:According to Persia International Bank PLC's website, Bank Mellat (see bullet above) holds 60% of its capital.

• Arian Bank: According to the Iran Daily, Arian Bank was established in partnership with Bank Melli (see above) and Bank Saderat, which was previously cut off from the US financial system (see our advisory of September 13, 2006).

• Specified Entities Owned or Controlled by IRGC:  These entities are designated because of their relationship to the IRGC.
• Khatam al-Anbya Construction Headquarters
• Oriental Oil Kish
• Ghorb Nooh
• Sahel Consultant Engineering
• Ghorb-e Karbala
• Sepasad Engineering Co
• Omran Sahel
• Hara Company
• Gharargahe Sazandegi Ghaem

• Specified Individuals Related to IRGC:  These individuals are designated because of their relationship to the IRGC.
• General Hosein Salimi, Commander of the Air Force, IRGC
• Brigadier General Morteza Rezaie, Deputy Commander of the IRGC
• Vice Admiral Ali Akhbar Ahmadian, Chief of the IRGC Joint Staff
• Brigadier Gen. Mohammad Hejazi, Commander of Bassij resistance force
• Brigadier General Qasem Soleimani, Commander of the Qods Force

• Specified Individuals Related to Aerospace Industry Organization (AIO):  These individuals are connected with AIO and are believed to be involved in Iran’s ballistic missile programs.  AIO was previously designated due to proliferation concerns.
• Ahmad Vahid Dastjerdi, Head of the Aerospace Industry Organization (AIO)
• Reza-Gholi Esmaeli, Head of Trade & International Affairs Dept., AIO
• Bahmanyar Morteza Bahmanyar, Head of Finance & Budget Department, AIO

The Treasury Department has issued a fact sheet that provides detailed more information on each of these entities and individuals, and also sets out in more detail the activities of these entities and individuals that led to the designations.  If you have any questions regarding how these designations may affect your company, please contact Ed Krauland at 202.429.8083 or Julia Court Ryan at 202.429.6418.