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Presented by:
Zaher Fallahi, Attorney At Law, CPA
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10866 Wilshire Blvd., Suite 400, Los Angeles, CA 90024 Tel: (424) 901-8529
1503 South Coast Dr., Suite 207, Costa Mesa, CA 92626 Tel; (714) 546-4272
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The highlights contained herein are for
general informational purposes only.
They are not intended for, and may not
be construed as, Legal or Tax advice.
For specific advice, please consult
your adviser.
We at the American Association of
Attorney-Certified Public Accountants
(AAA-CPA) have a similar disclaimer
even for our own members.
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Income; Interest, Dividends, Rental, Capital
Gains, Earned Income, Etc.;
Report of Foreign Bank and Financial Accounts
(FBAR), Form TD F90-22.1, New Amnesty 1-9-2012,
Offshore Voluntary Disclosure Program; and,
Foreign Account Tax Compliance Act (FATCA);
Gift Tax, Form 709;
Inheritance (Estate) Tax, Form 706; and;
Receipt of Foreign Gifts, Form 3520.
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Presumption: Sanctions Laws are Complied With
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Interest Income, Schedule B;
Dividends Income, Schedule B;
Capital Gains, Form 8949 (Former Schedule
D);
Rental Income, Schedule E;
Earned Income, Form 2555;
Distribution From Entities; and,
Others.
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Financial Crime Enforcement Network
(FinCen), fight against money laundering;
Excess of $10 K, must be received by June
30th, No extension;
Penalties, 5 years prison, plus civil penalties;
Potentially a criminal matter (Non-Lawyers
beware);
2012 Offshore Voluntary Disclosure Program
(OVDP), effective January 9, 2012; and,
Foreign financial institutions require W-9, or
take money elsewhere.
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The Foreign Account Tax Compliance Act (FATCA),
enacted in 2010, is an important development in U.S.
efforts to combat tax evasion by U.S. persons holding
investments in offshore accounts;
Under FATCA, U.S. taxpayers holding financial assets
outside the United States will report those assets to
the IRS;
Effective 2014, foreign financial institutions to report
to the IRS information about financial accounts held
by U.S. taxpayers, or by foreign entities in which U.S.
taxpayers hold a substantial ownership interest.
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Legal Status of Donor
◦ US Person; Defined Under IRC 7701 v. Defined by OFAC
◦ US Person, Form 709/Exclusions
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$13K;
Unlimited Medical Expenses;
Charitable Contributions;
Direct Tuition to Institutions;
Unlimited Between Spouses;
Political Contributions, used for the purpose;
2011-12 Threshold is $5,000,000;
◦ Non-US Person
 Receipt of Gift from a Non-Resident Alien, Form 3520
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Sufficient documents to substantiate Gift
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Legal status of Decedent
◦ US Person
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Estate Tax Return, Form 706;
Unlimited Deduction for Spouse;
2011-12 Threshold is $5,000,000;
Receipt of Gift from a Foreign Trust, Form 3520;
◦ Non-US Person
 Receipt of Gift from a Foreign Trust, Form 3520;
◦ Sufficient documents to substantiate Inheritance
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License is granted upon representations made in the application;
The Licensee shall furnish for inspection any relevant documents, requested
by the Treasury Secretary, to substantiate statements made in the
application;
No License required for Non-Commercial Remittances; Gift and Inheritance;
OFAC Applicant may be questioned by:
◦ Local Bank
 Bank Secrecy Act
 Suspicious Activity Report (FinCen, IRS, OFAC)
◦ US Treasury
 FinCen
 Banks, including the Federal Reserve Bank;
 US Customs, $10 K
 IRS
 OFAC
◦ Department Of Justice/ US Attorneys
◦ Even Non-SDN Iranian Banks do not transfer money. Sarrafis do transfer;
A radio listener: Sarrafis require OFAC License.
Note: Iranian Customs Allows $5K.
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Comply with the Laws of Sanctions;
Obtain credible evidence to substantiate
representations made in an OFAC application;
Don’t lable an asset as “Gift” or “Inheritance”
just to void OFAC Licensing and Taxes;
File Form 3520, Receipt of Gift from a NonResident Alien or a Foreign Trust, for “Gift”
and “Estate” timely;
File “Gift” and “Estate” Tax Returns timely;
FBAR must be received by 6-30-2012; and,
FATCA, form 8938, must be filed with 1040.
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
AN OVERVIEW OF OFAC
AND THE ITR
• Defining OFAC and the ITR
• What is prohibited?
• What is permitted?
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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)
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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)
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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.
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
Facilitating or financing
these transactions is
prohibited.
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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
YAZDANYAR LAW OFFICES
Beverly Hills, Irvine, San Francisco
www.yazdanyarlaw.com
Tel: 310-780-6360
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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
Presentation at U.C. Irvine
February 22, 2012
Farhad R. Alavi
Washington, DC
Overview
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2 types of OFAC licenses – General and Specific
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Specific License is a written authorization for
certain activities by applicants (and appointees,
etc.) based on request made in the application
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Can apply for a license for anything not
expressly permitted/subject to general license.
Probability of approval based on many factors
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General and specific licenses generally subject
to certain terms & conditions
Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / [email protected]
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What is an OFAC license?
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Specific Licenses issued by OFAC based on
applications submitted
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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
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Typically a few pages, outlining permitted
activities along with terms and conditions
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Generally valid for 1-2 years, renewable
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License number can be used in wire transfers
Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / [email protected]
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What can be licensed?
 Personal Transactions
 Commercial Transactions
 Philanthropic Transactions
Farhad R. Alavi / BHFA Law Group, PLLC - Washington, DC / [email protected]
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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 / [email protected]
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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 / [email protected]
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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 / [email protected]
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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 / [email protected]
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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 / [email protected]
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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 / [email protected]
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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
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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 / [email protected]
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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 / [email protected]
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Money Transfer
(continued)
U.S.
Person’s
Account
U.S. Person
Iran Funds
Private,
Non-Sanctioned
Bank in Iran
1
Affidavit
and/ or
Letter
Iran
Funds
2
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 / [email protected]
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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 / [email protected]
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Penalties
 Violations can be subject to civil and potentially
criminal liability
 Civil penalties can be up to $250,000 or twice
the 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 / [email protected]
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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 / [email protected]
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Farhad R. Alavi
5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
(direct) (202)686-
4859
[email protected]
www.bhfalaw.com
So What?
Iran Sanctions: Investigations and Penalties
Presented by:
Erich C. Ferrari, Ferrari Legal, P.C.
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
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Blocking and Rejecting Reports
1 Wire Request
Sender
Subpoena
5 to Sender/
Recipient
3 Interdiction
4
Blocked/
Rejected
2 SWIFT
Intermediary
U.S. Bank
U.S. Treasury
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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.
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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
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Enforcement Responses
Sanctions Enforcement Options
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Base Penalty Calculation Matrix
Yes
No
Yes
1
3
One-Half of
Transaction Value
Capped at $125,000
per violation
No
Voluntary Self-Disclosure
Egregious Case
One-Half
of Statutory
Maximum
2
4
Applicable
Schedule Amount
Statutory
Maximum
Capped at $250,000
per violation
* The base penalty amount will not exceed the applicable statutory maximum amount.
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Violation Schedule Amounts
Amount
Transaction Value
$1,000
<
$1,000
$10,000
>= $1,000 and < $10,000
$25,000
>= $10,000 and < $25,000
$50,000
>= $25,000 and < $50,000
$100,000
>= $50,000 and < $100,000
$170,000
>= $100,000 and < $170,000
$250,000
>= $170,000
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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
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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
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Iranian Transactions Regulations
If you have questions after the event
please contact me:
• Phone: 202-280-6370 or 310-270-9930
• Email: [email protected]
• The Iranian Transactions Regulations
Practice Guide
• www.sanctionlaw.com
THANK YOU!
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