Iran essentially remains off limits to US banks

Iran remains essentially off limits to U.S. banks, despite the lifting of some U.S. sanctions following the landmark Iranian nuclear deal. The Obama administration in mid-January eased several restrictions on doing business with Iran, including former "secondary" sanctions that had threatened to penalize companies outside the U.S. for their business with Iran, as well as some restrictions on Americans seeking to make inroads in the oil-rich country.

Nevertheless, most "primary" sanctions tied to accusations that Tehran supports terrorism remain in effect, blocking U.S. businesses from joining a rush by non-U.S. companies to cash in on Iran's potential revival. It means that U.S. banks have little access to the oil-rich country compared to their rivals in other countries. They mostly cannot handle transactions for U.S. and other companies involved in Iran, and the Iranian government and private entities cannot open accounts with U.S. banks.

"Broadly, the U.S. primary embargo on Iran is still in place," John Smith, the acting director of the Treasury Department's Office of Foreign Assets Control (OFAC), told a congressional panel on Thursday. The sanctions still in place were imposed not over Iran's nuclear program but its record on terrorism and human rights. That means the easing arising from the nuclear deal so far "does not have any impact on us," said an official with one large New York bank who requested anonymity.

"We're still very prohibited from engaging in just about any business activity with Iran except on very limited exceptions."

But many remain keen to exploit the Iran opportunity. They have turned to teams of lawyers and other specialists as they plumb the shifting legal terrain.

"We continue to monitor the developments in Iran," said Citigroup spokesman Kamran Mumtaz. Foreign banks operating in the U.S. too remain hemmed in by the sanctions still in place, because they are forbidden from clearing U.S. dollar-denominated transactions involving Iran through U.S. banks, according to OFAC. In addition, some 200 Iran-related individuals and entities on a list of "blocked" persons, including large government entities involved deeply in the economy like the powerful Revolutionary Guards. Non-U.S. companies providing support to still-blacklisted Iranian entities "may face being cut off from the U.S. financial system," said OFAC's Smith. In 2014, U.S. officials fined BNP Paribas a record of almost $9 billion for moving payments involving Iranian entities through the U.S. economy. To avoid such punishments, non-U.S. banks that work in both Iran and the U.S. must isolate Iranian business from their U.S. assets and implement rigid internal controls, law firm Clifford Chance said in a memo advising U.S. banking giant JPMorgan Chase.

"Many organizations looking to trade with, or make investments in Iran, now that sanctions have been eased may experience a tension between business development personnel who may wish to take advantage of the opportunities offered, and those whose responsibilities are for risk management and compliance," said the memo. U.S. policy has freed banks to make loans in some specific businesses and activities involving Iran, such as to companies that have obtained specific U.S. Treasury permission, or "licenses," to sell airplane parts or to upgrade Iranian civilian aviation engines.