Iranian Sanctions: United States Designates Iran as a Primary Money Laundering Concern under Section 311 of the USA PATRIOT Act; New Sanctions Target Persons Who Provide Goods, Services, Technology or Support that Contributes to Iran’s Development of Petroleum Resources or Production of Petrochemical Products

Sullivan & Cromwell LLP - December 2, 2011

In response to recent revelations regarding Iran’s nuclear weapons program, and in advance of significant legislation currently under consideration by the U.S. Congress, the United States has imposed several new sanctions measures targeting Iran.

First, although short of calls by some to sanction the Central Bank of Iran (also known as Bank Markazi), the U.S. Treasury Department issued a finding pursuant to Section 311 of the USA PATRIOT Act that Iran is a jurisdiction of primary money laundering concern, and issued proposed rules that would impose special measures against banking institutions in Iran, including the Central Bank of Iran. The special measures would prohibit U.S. financial institutions and financial agencies from opening or maintaining a correspondent account for or on behalf of an Iranian banking institution and will also require covered financial institutions to apply special due diligence measures to their correspondent accounts for non-U.S. financial institutions to guard against their improper indirect use by Iranian banking institutions.

In addition, on November 21, 2011, President Obama issued Executive Order 13590. E.O. 13590 parallels and enhances the Iran Sanctions Act, targeting for sanctions any person who provides goods, services, technology or support that contributes to Iran’s development of petroleum resources or production of petrochemical products. These sanctions are designed to work with the Iran Sanctions Act to further impede Iran’s efforts to maintain and modernize its oil and gas sector.

E.O. 13590 also newly designates 11 Iranian parties that support Iran’s nuclear procurement network and carry out research and development in the field of nuclear technology, pursuant to a previous Executive Order that blocks the property of proliferators of weapons of mass destruction and their supporters. Those 11 have been listed as Specially Designated Nationals on the List of Specially Designated Persons and Blocked Nationals maintained by the Treasury Department’s Office of Foreign Assets Control.