An overview of ofac and the ITR

1. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 An overview of ofac and the ITR Defining OFAC and the ITR What is prohibited? What is permitted?

2. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 WHAT IS OFAC? • What is OFAC: • The Office of Foreign Assets Control (OFAC) is an agency within the Department of Treasury. • What are they responsible for: • Administering and enforcing U.S. economic sanctions programs. • Why should you care: • OFAC implemented the sanctions against Iran by promulgating the Iranian Transactions Regulations (ITR)

3. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 IRANIAN TRANSACTIONS REGULATIONS • What is ITR: • A country-based sanctions program aimed to prohibit “U.S. persons” from engaging in transactions with the government of Iran, with persons in Iran, or in transactions where the benefit is realized in Iran. • Who is considered a “U.S. Person”: • U.S. citizens (regardless of where you are located) • U.S. legal permanent residents (regardless of where you are located) • Individuals and entities within the U.S. • Entities incorporated in the U.S. (including foreign branches)

4. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 ITR: WHAT IS PROHIBITED? The direct or indirect importation, exportation or re-exportation of goods, services, and technology from Iran or to Iran Goods: No distinction between commercial and non-commercial purpose. • Buying jewelry from Iran and bringing it to the U.S. Facilitating or financing these transactions is prohibited. Services: When services are performed on behalf of a person in Iran, the government of Iran, OR if the benefit is received in Iran • Working in Iran • Hiring a real estate agent • Using the services of a currency exchange broker

5. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 ITR & NEW INVESTMENTS • ITR prohibits new investments in Iran. • ITR prohibits U.S. persons from purchasing, selling, swapping, brokering, financing, guaranteeing goods or services of Iranian origin. • Continuing charging fees and getting interest on existing Iranian loans. Examples: • Buying a house in Iran • Keeping money in bank accounts in Iran • Earning interest on money kept in Iranian banks

6. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 WHAT IS PERMITTED? Importation/Exportation of Goods and Services: Gifts: • Total value must be less than $100 • Items must be of a type and in quantities normally given as gifts; not otherwise prohibited Accompanying Baggage: • For personal use • Not intended for sale or for anyone else; not otherwise prohibited Household and Personal Effects: • Must have been actually used by you in your household • Intended for your personal use not sale or any other person; not otherwise prohibited Information: • Films, newspapers, mail, email

7. YAZDANYAR LAW OFFICES www.yazdanyarlaw.com Beverly Hills, Irvine, San Francisco Tel: 310-780-6360 WHAT IS PERMITTED? Financial Transactions: • Travel-related payments • Payment for the importation or exportation of information or information materials • Non-commercial family remittances • Cannot involve a commercial transaction • Cannot involve a family-owned enterprise • Cannot involve Specially Designated National (SDN) • Cannot use “hawala” as defined by the U.S. government Authorized transactions • By a specific or general license

8. U.S. Sanctions on Iran:OFAC Licensing Farhad R. Alavi Washington, DC Presentation at U.C. IrvineFebruary 22, 2012

9. Overview • 2 types of OFAC licenses – General and Specific • Specific License is a written authorization for certain activities by applicants (and appointees, etc.) based on request made in the application • Can apply for a license for anything not expressly permitted/subject to general license. Probability of approval based on many factors • General and specific licenses generally subject to certain terms & conditions Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

10. What is an OFAC license? • Specific Licenses issued by OFAC based on applications submitted • Based on request applicant makes – if you do not request to engage in a certain activity in/related to Iran, you will most likely not receive authorization for it in the license • Typically a few pages, outlining permitted activities along with terms and conditions • Generally valid for 1-2 years, renewable • License number can be used in wire transfers Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

11. What can be licensed? • Personal Transactions • Commercial Transactions • Philanthropic Transactions Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

12. Personal Transactions • Transactions related to personal property in Iran • Sale, purchase or rental of real estate and personal property (including services) • Liquidating inheritances in Iran • Retrieving pensions, etc. • Note: Subject to certain conditions, sending cash gifts/family remittances between the US and Iran generally does not require a specific license Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

13. Commercial Transactions • Ag/Med Program permitting export to Iran of: • Medical Equipment and Supplies • Pharmaceuticals • Hiring services in Iran (e.g., translators, consultants, etc.) • Remitting commercial earnings in Iran (e.g., earnings from rental property, passive interests in businesses, etc.) Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

14. Charitable Transactions • Building a school or hospital in Iran • Donating computers to universities in Iran • Sending cash to Iranian charities in Iran • Lecturing in an Iranian university (even if unpaid) • Note: Export of items like food and clothing to Iran for charitable use is generally permitted under general license Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

15. OFAC would likely not license: • Investment in Iran (e.g., buying stocks, depositing money in banks) • Outsourcing labor to Iran (e.g., software design) • Partnering with entities in Iran or Iranian entities overseas • Exporting most consumer goods to Iran • Working in Iran for financial gain Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

16. Exceptions • What is generally permitted under the ITR? Subject to certain limitations: • Trade in informational materials • Non-monetary humanitarian transactions • Transactions incident to travel • Communications-related transactions • Provision of certain legal services to individuals in Iran • Non-commercial family remittances • Note: Previous general license for importation of Iranian carpets, dried goods, and caviar repealed effective September 29, 2010 Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

17. Critical Considerations • Note: Specific licenses from OFAC must be used strictly by their terms and are not blank checks to do business or engage in transactions in Iran. • Each specific license has a number. You can reference the number on your wire transfer to help effectuate the payment more smoothly. • License applications generally take several months to process, so think ahead. Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

18. Critical Considerations • U.S. persons cannot: • Structure transactions with an intention to circumvent restrictions and provisions of the ITR • Divert transactions to 3rd country nationals if that transaction would be a violation if the U.S. person him/herself executed it • Example: U.S. person cannot give money to a relative in France to go invest in Iran on U.S. person’s behalf Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

19. Money Transfer • New regulations generally continue to allow for authorized / licensed funds transfers to/from Iran • Always ensure that the money transfer (commercial or personal) is authorized • Is the intended route for transmitting funds out of Iran compliant with U.S. laws? (e.g., make sure no personal hawalah or use of sanctioned banks, etc.) Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

20. Money Transfer (continued) U.S. Person U.S. Person’s Account Iran Funds Iran Funds Affidavit and/ or Letter 1 2 Private, Non-Sanctioned Bank in Iran Bank (U.S.) 3rd country non-Iranian, non-U.S., non-sanctioned bank(e.g. in UAE, Turkey) Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

21. Money Transfer (continued) • Have you given your bank adequate documentation? • Should follow “best practices” • Funds rejection can be legally troublesome and costly • Account closure at US banks increasingly common Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

22. Penalties • Violations can be subject to civil and potentially criminal liability • Civil penalties can be up to $250,000or twicethe value of the transaction, whichever is higher. Cases can be referred for criminal enforcement as well Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

23. Penalties (continued) • Administrative Subpoenas (as part of investigations into rejected wires or “havalehdars” can lead to an effective audit of your Iran activities and considerable exposure • Very time consuming and potentially costly • Frequency of Administrative Subpoenas (even for activities several years past) appears to be increasing Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / falavi@bhfalaw.com

24. Any Questions? Farhad R. Alavi 5335 Wisconsin Avenue, NW Suite 440 Washington, DC 20015 (direct) (202)686- 4859 falavi@bhfalaw.com www.bhfalaw.com

25. So What? Iran Sanctions: Investigations and Penalties Presented by: Erich C. Ferrari, Ferrari Legal, P.C.

26. How will they ever find out? • Common ways that investigations are initiated • Blocking and Reject Reports • Most common way; thousands of these reports are sent every year • License Applications • Revealing information about violations • Federal Investigations • Very common when investigating havaleh brokers • Self-Disclosures: Intentional and Unintentional • Voluntary self-disclosures vs. contacting OFAC and informing them of violations • Anonymous Tips

27. Blocking and Rejecting Reports 1 Wire Request Sender Subpoenato Sender/ Recipient 5 3 Interdiction 4 Blocked/Rejected 2 SWIFT Intermediary U.S. Bank U.S. Treasury

28. What kind of trouble can you get in? • Problems with the banks • Bank Investigations • Freezing of Accounts • Closing of Accounts • OFAC Investigations • Administrative Subpoenas • Penalty Process • Coordination with other agencies • Criminal Investigations • Agents • Target/Subject Letters • Exports and Money Transferring • Banki, Seifi, Amirnazmi, Mousavi, Vaghari, Hariri, Lahiji, Socara, etc.

29. OFAC Investigations • Administrative Subpoenas • 30 days to provide information and documents • You can request an extension, but may have to sign a tolling agreement • Your response is under penalty of perjury • Not only false statements, but also misleading statements • OFAC will refer cases to DOJ for false statements (5 year max) • Voluntary Self-Disclosures • Self reporting a violation • 50% reduction in base penalty • If a violation occurred and you need a license to transfer funds, then VSD • Penalty Calculations • Base Penalty Calculations • Enforcement Guidelines • Settlement

30. Enforcement Responses • Sanctions Enforcement Options Criminal Referral Civil Penalty Finding of Violation Cautionary Letter No Action Lesser Penalty Higher Penalty

31. Base Penalty Calculation Matrix Egregious Case No Yes One-Half of Transaction Value Capped at $125,000 per violation One-Half of Statutory Maximum 1 3 Yes Voluntary Self-Disclosure Applicable Schedule Amount Capped at $250,000 per violation Statutory Maximum 2 4 No * The base penalty amount will not exceed the applicable statutory maximum amount.

32. Violation Schedule Amounts

33. Criminal Prosecutions • US Attorney’s Offices across the U.S. have been actively prosecuting these cases. • There are a number of individuals under investigation across the United States for these types of violations. • Testimony of Special Agent Pelczar (JTTF)Hearing Transcript from the Vaghari Case: Much of his work involves investigating Iranians. • If the FBI comes knocking…. • Don’t speak to them without counsel • People get nervous and may say something that mischaracterizes • Proffer Letter

34. Conclusion • Enforcement cases are on the rise: • 2009: 1,000 investigations • 2010: 1,200 investigations • 2011: 1,300 investigations • Difficulty in transferring funds is leading to more creative ways to get around sanctions which is leading to more investigations • Talk to a lawyer with experience before acting • Prior to engaging in the transactions • File a request for interpretative guidance • Map out how the transaction will occur

35. Iranian Transactions Regulations • If you have questions after the event please contact me: • Phone: 202-280-6370 or 310-270-9930 • Email: ferrari@ferrari-legal.com • The Iranian Transactions Regulations Practice Guide • www.sanctionlaw.com • THANK YOU!