White House ‘Decertifies’ Nuclear Deal with Iran, Targets Powerful Military Wing
By Valentina Pasquali
President Donald Trump’s decision to formally withdraw his endorsement of the global nuclear accord with Iran under U.S. law raises more questions than answers for overseas financial institutions, say sources.
On Friday, Trump announced he would “decertify” the Joint Comprehensive Plan of Action, or JCPOA, pursuant to a 2015 law that requires the White House to report on whether or not Iran is complying with the terms of an accord to freeze its nuclear weapons program, and whether or not the sanctions relief afforded Tehran in exchange is “appropriate” and “proportionate.”
“I am directing my administration to work closely with Congress and our allies to address the deal’s many serious flaws,” Trump said. “It is under continuous review and our participation can be canceled by me as president anytime.”
The White House’s decision makes a host of new scenarios possible, creating significant uncertainty for foreign financial institutions, industry sources in the United States, the United Kingdom and Europe told ACAMS moneylaundering.com.
U.S. lenders remain prohibited from maintaining correspondent or payable-through accounts for Iranian counterparts and from processing Iranian-linked transactions that are not specifically authorized by the U.S. Treasury Department.
Decertification in theory frees U.S. lawmakers to reimpose the raft of U.S. sanctions that were lifted when the JCPOA took effect, including secondary sanctions against foreign banks that knowingly transact with Iranian individuals and entities outside of the United States.
But the White House instead wants to revise the Iran Nuclear Agreement Review Act, or INARA, to incorporate “trigger points” that, based on Iran’s behavior, would reinstitute those restrictions automatically, and eliminate sunset provisions that critics contend provide the country with a slow path to a nuclear weapon, Tillerson said. “What we ask [Congress] to do is give us your support by… amending INARA to memorialize once and forever… that it’s the policy of the United States that Iran will never have nuclear weapons,” Tillerson said.
Beginning in October 2025, Iran is authorized by the terms of the accord to increase its enrichment capacity and the types and numbers of centrifuges in use above the levels currently permitted, according to a State Department fact sheet.
Rather than representing an immediate shift in the use of U.S. sanctions against Iran, the announcement serves as a “very important signal” of what may occur in the coming months, Zachary Goldman, a former advisor in the U.S. Treasury Department’s Office of Terrorism and Financial Intelligence said. “I think that failing to issue the certification this week makes it more likely that at some point in the next year or so he will fail to waive the statutory authorities that the U.S. committed to waive under the JCPOA, and that that would cause the deal to fall apart,” said Goldman, now executive director of New York University’s Center on
Law and Security.
U.S. waivers suspending certain U.S. nuclear-related sanctions against Iran must be periodically renewed, with the next expiration set for January 2018. It is unclear whether allowing the waivers to lapse would amount to a direct violation of the deal by the United States if the restored authorities were never used.
According to Goldman, foreign banks that have reestablished links to Iran in the past 20 months could find themselves in breach of secondary sanctions at that point, though their susceptibility to U.S. penalties likely would depend on the type of business they are conducting, with oil and gas-related transactions probably targeted first.
In December 2016, the Treasury Department’s Office of Foreign Assets Control clarified in guidance that foreign lenders would have 180 days to wind down their Iran-related activities if U.S. secondary sanctions were reimposed. But the guidance was published by the previous administration, which supported the global nuclear accord, and is not legally binding for the current White House, former OFAC analyst Jeremy Paner said. “I also don’t see Treasury putting out new guidance on this now, and if they do it is likely to be vague,” Paner, now an attorney with Holland & Hart in Washington, D.C. said, adding that banks as a result will be “stuck in
limbo” as to whether or not to again terminate Iran-linked business.
Large foreign financial institutions, including BNP Paribas, Barclays plc. and HSBC, have ostensibly kept their distance from Iran after paying billions of dollars in fines to the Treasury Department for violating U.S. sanctions before the JCPOA’s enactment. A number of smaller European financial institutions, including KBC bank in Belgium, Banque de Commerce et
de Placements in Switzerland and DZB bank in Germany, have, however, reportedly processed trade-finance and other transactions to and from Iranian banks and companies.
According to Lourdes Catrain, an international trade attorney at Hogan Lovells in Brussels, the European Union may take steps to protect newly established commerce with Iran if the United States reimposes sanctions lifted by the nuclear accord. “I understand that the European Commission’s trade director is exploring a legal mechanism to provide a certain
level of assurances to EU business that have Iran transactions,” Catrain said. The EU may, for example, adopt a “blocking statute” that would prohibit European individuals and entities from
complying with certain U.S. sanctions against Iran that conflict with European legislation. Brussels took similar steps to limit the application of U.S. sanctions against Libya and Cuba in 1996. Such a mechanism would create “real difficulties” for banks, according to Ben Kingsley, attorney at Slaughter and May in London. “They’ll be faced with the prospect of OFAC and the Department of Justice pursuing them if they don’t comply with U.S. sanctions, and their national regulators or finance ministries pursuing them if they do comply. It’s a rock
and a hard place,” Kingsley noted. New measures, new challenges …
The White House separately directed the Treasury Department to act against Iran’s other “destabilizing” activities in the region, including its development of ballistic missiles, cyberattacks against the United States and its allies, human rights abuses and purported support of U.S.-blacklisted groups such as Hezbollah.
The new measures specifically target the financial operations of Islamic Revolutionary Guard Corps officials, and entities wholly or partially owned by the security force, which controls large swathes of Iran’s economy.
The Terrorist Finance Tracking Program, or TFTP, whereby Treasury can issue subpoenas to run real time searches of payment messages processed through the Belgium-based Society for Worldwide Interbank Financial Telecommunication, or SWIFT, can now be directed to surveil IRGC finances as a result of the measures.
But the U.S. State Department will not designate the IRGC as a foreign terrorist organization as called for by prominent critics of the nuclear deal, Tillerson said Thursday. “We have considered that, but there are particular risks and complexities to designating an entire army, so to
speak, of a country … that are not in the best interest of our military actions or necessarily are going to benefit what we are attempting to do … which is really curtailing the IRGC’s ability to finance and support terrorist activities.”