Presenting a live 90-minute webinar with interactive Q&A Iranian Sanctions Compliance Strategies Meeting Strict and Rapidly Changing U.S. and EU Sanctions Requirements THURSDAY, DECEMBER 20, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Thaddeus R. McBride, Partner, Sheppard Mullin Richter & Hampton , Washington, D.C. Mario Mancuso, Partner, Fried Frank Harris Shriver & Jacobson , Washington, D.C. Philip Triggs, AML and Sanctions Policy Manager, UK Retail and Business Banking Compliance, Barclays , London, England The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Iranian Sanctions Compliance Strategies Strafford Publications December 20, 2012 4
Agenda Introduction Overview of current sanctions US perspective EU/UK perspective Compliance pitfalls and guidance Questions / Discussion 5
Overview Understanding sanctions Dynamic regulatory scheme Vigorous enforcement Protect national security Increasingly international 6
US Policy Observations US efforts to squeeze Iran both unilaterally and internationally Iran Threat Reduction and Syria Human Rights Act National Defense Authorization Act UN Security Council action Other steps 7
US Policy (cont’d) Obama Administration – Public opposition to proposed NDAA sanctions provisions as curtailment on Executive discretion to conduct foreign policy in careful, calibrated manner – Yet hails current arsenal of US sanctions for efficacy – Rumored Obama nominees for top positions differ on sanctions • Sen. John Kerry for US Sec. of State (record of voting for sanctions) • Former Sen. Chuck Hagel for US Sec. of Defense (record of voting against sanctions) 8
US Policy (cont’d) Congress – NDAA sanctions advocates (Sen. Menendez (D-NJ); Sen. Kirk (R-IL); and Sen. Lieberman (I-CT)) represent broad bipartisan effort to build on momentum of existing extraterritorial sanctions bill passed unanimously in Senate (after heel-dragging from Sen. Rand Paul) – One of the most vocal critics to sanctions is Rep. Dennis Kucinich – Appear resolved to reduce Presidential flexibility to ensure sanctions have teeth 9
US Policy (cont’d) EU and Other Stakeholders – EU concern over impact of inflexible US extraterritorial measures on European companies with legacy business interests in Iran – EU sanctions continue to expand but remain targeted and direct, as opposed to extraterritorial in nature Return to Bargaining Table? – Press accounts of proposed talks (as early as next week but more likely after the New Year) between Iran and P5+1 (USA, France, UK, China, Russia, and Germany) – Nuclear concessions for sanctions easing measures may be on table – Effect of Congressional skepticism and impatience unclear 10
EU Policy Observations EU has gradually introduced comprehensive restrictive measures since 2007 – Response to ‘deep and increasing concerns’ about Iran's proliferation-sensitive nuclear activities Original approach taken by Member States – Absent evidence of proliferation, doing business with Iran and its state institutions (e.g., NOCs and banks) was acceptable 11
EU Policy (cont’d) Approach has changed since 2008: – Broader unilateral sanctions disrupting direct trade (e.g., oil, gas, fund transfers, SWIFT) – Human rights concerns – Greater co-ordination with US There are difficulties: – Some Members have had more to lose • Exports in 2011 (compared to 2005): Germany € 3.0bn (- 29.2%), Italy € 1.86bn (-17.3%), France € 1.65bn (-17.4%), UK € 0.2bn (-68.2%) – Data sharing – Patchy implementation – US measures 12
UK Political Landscape With France and Germany, the UK has taken a leading roll in sponsoring UNSCRs demanding that Iran suspend uranium enrichment and imposing sanctions for Iran’s failure to comply Relations have deteriorated: – March 2007 hostage crisis – Diplomatic tension following 2009 presidential elections – 2011 termination of diplomatic ties 13
UK Landscape (cont’d) UK Government currently ‘does not encourage trade with, or investment in Iran. We also do not offer any commercial services for companies wanting to do business with Iran. We do not give financial support for trade promotion activities and we do not organise trade missions.’ UK has always had less to lose – only UK EUR 0.67bn exports to Iran in 2005 But: – BP’s pre-zero exposure is an issue – As with the EU, the ITRSHRA poses problems – Standard Chartered as case study of US bellicosity against City of London? 14
US Sanctions Overview Administered by U.S. Treasury Department, Office of Foreign Assets Control (OFAC) Approximately 25 different U.S. sanctions programs at present Some comprehensive, e.g. , Cuba, Iran, and some selective, e.g. , Burma, Zimbabwe 15 15
Iran Sanctions Jurisdiction - US Apply to actions by U.S. persons and persons subject to U.S. jurisdiction, as follows: – All U.S. citizens and residents, wherever located – All U.S.-organized or incorporated companies or entities – All persons in United States, regardless of nationality – Entities owned/controlled by U.S. person (ITRSHRA) 16
Jurisdiction (cont’d) Under recent statutory amendment (IEEPA Enhancement Act), any person who “causes” a violation can be subject to liability Lloyds - $350 million (2009) Credit Suisse - $536 million (2009) Standard Chartered - $327 million (2012) 17 17
Export of Services Prohibition on direct and indirect provision of services to sanctions targets Providing service anywhere may be prohibited if benefit of service is received by sanctioned party or in sanctioned country – Example : Cannot give consulting or marketing advice to a non-U.S. company related to its business in Iran 18 18
Facilitation Facilitation is specifically prohibited U.S. persons are prohibited from facilitating action that would be prohibited if performed by U.S. person Broadly defined – covers virtually any assistance to a prohibited transaction 19
Facilitation (cont’d) Specific prohibitions from regulations Changing policies or procedures to allow foreign entity to conduct transaction prohibited to the U.S. person Referring prohibited business deals to a foreign person Financing / insuring a foreign subsidiary’s trade with sanctioned country 20
Jurisdiction: Examples European subsidiary of U.S. manufacturer Chinese national executive while in United States Iranian national graduate student doing work beyond scope of visa Brazilian bank that transfers Iranian entity’s money through New York 21
EU Sanctions Significant asset freezes against designated persons including: - Iranian banks including Markazi - IRISL - Key energy companies and their subsidiaries Export and Import Restrictions (sale, supply, transfer or export of goods or technology): - Dual use - Nuclear - Military - Exploration / production of crude oil and natural gas - Refining - Liquefaction of natural gas - Crude oil, petroleum products, petrochemical products - Gold, precious metals, diamonds (to / from Government of Iran) 22
EU Sanctions (cont’d) Financial restrictions: Brokering, financing, financial assistance, insurance, investments Prohibition on supply of specialised financial messaging services used to exchange financial data (SWIFT) Financial institutions are prohibited from: Opening a new account with an Iranian bank or a new correspondent relationship Opening new representative office, branch or subsidiary in Iran Establish a new joint venture 23
EU Sanctions (cont’d) Transport restrictions: Unloading / loading IRISL vessels Bunkering, supply or servicing of Iranian owned vessel where there is suspicion Engineering and maintenance of Iranian owned aircraft where there is suspicion Authorisation / notification of fund transfers Introduced to ensure compliance with restrictions Cause of significant delays (4 weeks) This is a strict liability regime 24
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