West Virginia Banker - Winter 2018

www.wvbankers.org 28 West Virginia Banker O n May 8, 2018, President Trump announced his decision to with- draw the United States from the Iran Deal, also known as the Joint Comprehensive Plan of Action (JCPOA), a treaty implemented on Jan. 16, 2016. Joined by Iran, China, France, Germa- ny, Russia, the United Kingdom and the United States, the JCPOA allowed sanctions relief to Iran in exchange for curbing its nuclear-related programs. In conjunction with Trump’s decision, the U.S. reinstated nuclear sanctions on Iran at the conclusion of two wind-down periods, the second of which ended Nov. 4. The wind-down allowed U.S. organizations time to wrap up all soon- to-be sanctioned transactions with Iran. According to the Treasury Department, “Persons engaging in activity undertak- en pursuant to the U.S. sanctions relief provided for in the JCPOA should take the steps necessary to wind down those activities … to avoid exposure to sanc- tions or an enforcement action under U.S. law.” The re-instated sanctions cover various types of transactions with Iran in the energy, shipping and banking sectors, including the purchase or acquisition of U.S. dollar banknotes by the Gov- ernment of Iran; sanctions on petro- leum-related transactions, including the purchase of petroleum, petroleum products or petrochemical products from Iran; the provision of underwrit- ing services, insurance or reinsurance; and transactions by foreign financial institutions with the Central Bank of Iran and other designated Iranian financial institutions. According to an Op-Ed in the Finan- cial Times by U.S. Treasury Secretary Steven Mnuchin, “These actions are an important step towards holding the world’s largest state sponsor of terror accountable for its malign behaviour, human rights abuses, ballistic missiles development, and systematic efforts to exploit the global financial system to fund its revolutionary ambitions.” What Does This Actually Mean? Perhaps the biggest and most signifi- cant aspect of our country’s Iran Deal withdrawal is the re-instatement of a substantial subset of Iranian names and entities to OFAC’s Specially Designat- ed Nationals (SDN) list, those whose assets are blocked and with whom U.S. persons are prohibited from engaging in activities or transactions. What this signifies is an enormous update, all at once, to OFAC’s SDN list. By now, all U.S. financial institutions and organizations should have—or must immediately—perform a customer database re-screen to ensure they’re not conducting business with re-in- stated SDNs. For organizations that do not employ automated watch list screening, this task can seem practically insurmountable from a cost and time standpoint. What Should Institutions Do Now? Conducting sanctioned transactions or certain activities with SDNs can mean business-crushing fines by OFAC. In fact, the number of million-dollar civil money penalties has grown exponen- tially over the last few years. U.S. finan- cial institutions—and all other organiza- tions, for that matter—should: •If not already doing so, strongly con- sider implementing automated watch list screening. Trying to manually handle such an enormous update workload can easily overwhelm compliance staff and leave too much room for human error •If there’s no doubt your institution has recently conducted transactions with Iranian companies or individuals, ensure you cease any further transactions and re-screen your customer database Re-Instated Iran Sanctions What Do They Mean for Your Bank? By Amber Goodrich