Sanctions lifted
Implementation Day has happened.UK, European and all non-US international businesses generally are now able, at least in principle, to re-engage with Iran.
Subject to certain exceptions, US persons continue to be prohibited from doing business with Iran. One very significant exception is that the US has now issued a General Licence allowing non-US entities owned or controlled by US persons to engage in transactions with Iran.
Banking Challenges
During the period of sanctions, Iran has been disconnected from the international financial systems.
Although guidance has been issued by both UK and US to clarify what business with Iran is and is not permitted, it will take some time for international banks to get comfortable in processing payments involving Iranian-related funds. The origin for their concern is in large part due to a fear of US penalties.
The JCPOA agreement confirms that non-US, international banks can in general terms engage in transactions with Iranian banks without fear of US penalties provided that they do not take place in the US jurisdiction. With that said, we anticipate that it will take some time for the banking community to reverse that fear factor.
In addition, international banks will still need to satisfy themselves about the source of funds emanating from Iran and the destination of payments made to Iran. Leaving sanctions to one side, banks have existing anti-money laundering and compliance responsibilities which they will need to satisfy and Iran's international isolation means that its anti-money laundering and compliance systems are not necessarily of an equivalent standard. Iran will now be running to catch up with international standards.
"All the European banks will be thinking about it, talking about it and deciding on what their policy will be and how they will react. Legally the position is clear. European banks can do this business,” commented Rovine Chandrasekera, managing partner.
Commentary by Rovine Chandrasekera and James Willn, Stephenson Harwood Middle East
