OFAC has designated 20 entities as Specially Designated Global Terrorists, pursuant to Executive Order 13224 (US asset freezes), for “providing financial support to the Basij Resistance Force (Basij), a paramilitary force subordinate to Iran’s Islamic Revolutionary Guard Corps (IRGC)”.
According to the US Treasury press release, “the IRGC’s Basij militia recruits, trains, and deploys child soldiers to fight in IRGC-fueled conflicts across the region. This Iran-based network is known as Bonyad Taavon Basij, which is translated as Basij Cooperative Foundation, and is comprised of [(at least) the 20 entities designated today]”, of which are “deeply entrenched in major Iranian industries, such as automotive, mines and metals, tractor manufacturing, and banking.”
The 20 entities: Andisheh Mehvaran Investment Company; Bahman Group; Bandar Abbas Zinc Production Company; Bank Mellat; Bonyad Taavon Basij; Calcimin; Esfahan’s Mobarakeh Steel Company; Iran Tractor Manufacturing Company; Iran Zinc Mines Development Company; Mehr Eqtesad Bank; Mehr Eqtesad Financial Group; Negin Sahel Royal Investment Company; Parsian Bank; Parsian Catalyst Chemical Company; Qeshm Zinc Smelting And Reduction Company; Sina Bank; Tadbirgaran Atiyeh Iranian Investment Company; Taktar Investment Company; Technotar Engineering Company; and Zanjan Acid Production Company. See OFAC Notice.
The UK Commercial Court has given judgment in Mamancochet Mining Ltd v Aegis Managing Agency Ltd & Others  EWHC 2643 (Comm) holding that:
– Defendants are liable to pay insurance claim under a marine insurance contract (covering the theft of shipments of steel billets).
– This is because payment would not “expose” the underwriters to EU or US sanctions on Iran if paid out before 4 November 2018 (the end of the wind down period for reimposed US Iran sanctions) therefore the sanctions clause (“no… insurer shall be liable to pay any claim… to the extent that… payment of such claim… would expose that… insurer to any sanction, prohibition or restriction under [UN] resolutions or the trade or economic sanctions, laws, or regulations of the [EU], [UK] or the [USA]”) does not apply.
– The Court said that “exposure” to sanctions meant that the payment had to breach sanctions as opposed to exposing insurers to a real risk of breach.
– The risk was insufficient here because US sanctions waivers were in place until 4 November 2018 (the wind down period following the US decision to withdraw participation in the JCPOA).
– The Court did not reach a concluded view on the Claimant’s argument that reliance on the sanctions clause would breach the EU Blocking Regulation, but saw force in the argument that the Blocking Regulation was not engaged where the insurer’s liability to pay a claim is suspended under a sanctions clause because the insurer is not “complying” with a third country’s prohibition but is simply relying upon the terms of the policy to resist payment.
Yesterday, the US Financial Crimes Enforcement Network (FinCEN) issued an advisory to help U.S. financial institutions detect and report potentially illicit transactions related to Iran and to help foreign financial institutions “understand the obligations of their U.S. correspondents, to avoid exposure to U.S. sanctions, and to address the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) risks that Iranian activity poses to the international financial system”.
The US Treasury press release says that following the full re-imposition on 5 November 2018 of sanctions lifted under the Joint Comprehensive Plan of Action (JCPOA), FinCEN “expects that Iranian financial institutions, the Iranian regime, and its officials will increase their efforts to evade U.S. sanctions to fund malign activities and secure hard currency for the Government of Iran. Treasury and the U.S. Government are interested in information related to the Iranian regime’s efforts outlined in this advisory, as well as information pertaining to how the Iranian regime or Iranian entities subject to sanctions, including the CBI, otherwise evade the sanctions and access the U.S. financial system.”
We reported last week that Standard Chartered could face a possible $1.5 billion fine after US regulators engaged in negotiations with the bank into whether it had processed US dollar transactions for Iranian entities after entering into a US Deferred Prosecution Agreement (DPA) in 2012.
This week, US prosecutors have now informed Standard Chartered that criminal charges may be brought against two of the bank’s former employees over the Iran sanctions violations. The bank has yet to comment on both issues.
Today, OFAC has announced a $5,263,171 settlement with JPMorgan Chase Bank, N.A., to settle its potential civil liability for 87 apparent violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations. In particular, the bank processed 87 net settlement payments with a total value of $1,022,408,149, of which approximately $1,500,000 (0.14%) appears to have been attributable to interests of sanctioned-airlines appearing under the SDN List.
Separately, OFAC has issued a Finding of Violation to JPMorgan Chase & Co for violating the Foreign Narcotics Kingpin Sanctions Regulations and the Syrian Sanctions Regulations. Specifically, OFAC has determined that from approximately 2007 to October 2013, the bank processed 85 transactions totalling $46,127.04 and maintained eight accounts on behalf of six customers who were contemporaneously identified on the SDN List. There is no monetary penalty associated with a Finding of Violation. See OFAC Enforcement Information.
In November 2017, former Home Secretary of Hong Kong, Patrick Ho Chi-ping, was arrested in New York for (inter alia) attempting to bribe officials in Chad and Uganda for the benefit of Shanghai-based energy conglomerate, CEFC China Energy.
This week, following a review of new documents, New York prosecutors have alleged that Mr Ho Chi-ping had utilised CEFC China Energy to broker arms transactions and business with Iran, in violation of US sanctions. Furthermore, that he had engaged in discussions regarding the supply of arms to Chad, Libya, South Sudan and Qatar. US prosecutors have not filed charges for the alleged sanctions violations, but will seek to use that evidence to prove that Mr Ho Chi-ping has a history of doing business involving arms transactions and oil rights in the Middle East and Asia, in return for favourable treatment in the region for CEFC China Energy. Mr Ho Chi-ping is scheduled to stand trial next month.
Following yesterday’s ICJ ruling, US Secretary of State Mike Pompeo has announced that the USA will terminate the 1955 Treaty of Amity between Iran and the USA, which Iran claims to have been violated by the US through the reimposition of sanctions. Mr Pompeo remarked that the ICJ’s ruling “was a defeat for Iran. It rightly rejected all of Iran’s baseless requests. The court denied Iran’s attempt to secure broad measures to interfere with U.S. sanctions and rightly noted Iran’s history of noncompliance with its international obligations under the Treaty on the Nonproliferation of Nuclear Weapons.”
In relation to the ICJ’s Order focusing on potential humanitarian issues, Mr Pompeo said that “existing exceptions, authorizations, and licensing policies for humanitarian-related transactions and safety of flight will remain in effect. The United States has been actively engaged on these issues without regard to any proceeding before the ICJ. We’re working closely with the Department of the Treasury to ensure that certain humanitarian-related transactions involving Iran can and will continue.”
The International Court of Justice has held today, in Iran’s application for provisional measures (see previous blog) that pending resolution of the case, the USA must:
1. Remove, by means of its choosing, any impediments arising from the measures announced on 8 May 2018 to the free exportation to the territory of the Islamic Republic of Iran of: (i) medicines and medical devices; (ii) foodstuffs and agricultural commodities; and (iii) spare parts, equipment and associated services (including warranty, maintenance, repair services and inspections) necessary for the safety of civil aviation.
2. Ensure that licences and necessary authorisations are granted and that payments and other transfers of funds are not subject to any restriction in so far as they relate to the goods and services referred to in point (1).
These measures go less far that those requested by Iran, but cover the areas the ICJ regarded as causing potentially irreparable harm pending resolution of the main claim.
Both parties must also refrain from any action which might aggravate or extend the dispute before the Court or make it more difficult to resolve. See Order, Summary of Order, Press Release, and Separate Opinion.