We often get questions on what to do with U.S. based accounts which have been opened by Iranians while traveling in the United States or by Iranian Americans who have relocated, either temporarily or permanently, to Iran. Dealing with such accounts can be problematic, however, it is an issue which the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has previously provided guidance and is fairly easy to understand as long as you understand the regulations contained in 31 CFR Part 560.
First, it should be understood that the accounts are restricted, not blocked. That is because the Iranian Transactions and Sanctions Regulations prohibit the export of goods or services to Iran. As such, if a U.S. depository institution is operating an account on behalf of an individual or company in Iran, then the bank would be deemed to be engaged in a prohibited exportation of services to that Iranian person or entity in violation of the Iranian Transactions and Sanctions Regulations. Because the accounts are not blocked accounts, OFAC allows for the account holder to close down the accounts and have the funds transferred to their accounts held outside of the United States. That said, there is guidance from OFAC which states that the accounts of parties in Iran do not need to be restricted, as long as the U.S. depository institution maintaining the account is satisfied that the account holder is not ordinarily resident in Iran.
Despite what the regulations allow for and what OFAC’s guidance states, it’s highly unlikely that U.S. depository institutions are going to be willing to maintain accounts for parties in Iran. We have seen time and time again in our practice that U.S. depository institutions routinely close down accounts belonging to account holders who have had lawful transactions with Iran due to a belief that such parties present a higher risk profile for the bank. As such, I don’t see most U.S. depository institutions following this guidance, but in case any bank compliance officers were wondering what to do with such accounts then this short post should make the answer more clear.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.