The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced a new “humanitarian mechanism” to ensure transparency in humanitarian trade with Iran. According to OFAC, this mechanism “will help the international community perform enhanced due diligence on humanitarian trade to ensure that funds associated with permissible trade in support of the Iranian people are not diverted by the Iranian regime to develop ballistic missiles, support terrorism, or finance other malign activities.” This announcement accompanied a separate but related announcement by Treasury’s Financial Crimes Enforcement Network (FinCEN) regarding Iran money laundering concerns (see Trump and Trade Update Treasury’s Financial Crimes Enforcement Network (FinCEN) Issues Final Rule Concerning Iran Money Laundering Concerns).

Under this new method for providing humanitarian aid to Iran, Treasury and the Department of State will establish a process to help ensure that participating governments and financial institutions commit to conducting enhanced due diligence to mitigate the higher risks associated with Iran-related transactions and thus avoid running afoul of U.S. sanctions on Iran. While certain exceptions and general licenses have long allowed for certain humanitarian aid to Iran, OFAC stated that this new mechanism will result in enhanced due diligence to ensure payment mechanisms for legitimate humanitarian aid exports. This mechanism, designed solely for the purpose of commercial exports of agricultural commodities, food, medicine and medical devices to Iran, will be available to U.S. persons and U.S.-owned or -controlled foreign entities, as well as non-U.S. entities. OFAC has indicated that it will continue to consider other requests related to humanitarian aid for Iran as appropriate.

The new mechanism will require an “unprecedented” amount of information, with appropriate disclosure and use restrictions, on a monthly basis, as described in guidance provided by OFAC outlining specific requirements. It appears that a main purpose of this new mechanism is to restrict the role of the Central Bank of Iran (CBI) in facilitating or playing any role in humanitarian aid transactions in order to prevent any fund transfers to terrorist organizations.

This framework for more transparent humanitarian trade with Iran will allow U.S. persons, foreign governments and foreign financial institutions to seek written confirmation from OFAC that the proposed financial channel will not be exposed to U.S. sanctions, in exchange for these foreign governments and financial institutions committing to providing additional information on a monthly basis on their use of this mechanism. OFAC has indicated that the following documentation and information could be required for an Iranian humanitarian aid transaction:

  • Information used to identify the Iranian customers and to verify their identities and beneficial ownership;
  • Information to understand the purpose and intended nature of the transaction;
  • Information on the commercial and logistic elements of the transaction;
  • Written commitments from any Iranian distributors involved in the transaction that the goods will not be sold or resold to Iranian individuals or entities on the Specially Designated Nationals (SDN) List; and
  • Monthly statement balances of any account of an Iranian financial institution that is being used for humanitarian aid transactions.

OFAC encourages interested entities, foreign governments, and foreign financial institutions to contact OFAC for more information or with questions.