Iran Threat Reduction And Syria Human Rights Act of 2012

On August 10, President Obama signed into law another expansion of US sanctions against Iran and Syria that, most significantly, makes US firms liable for their foreign subsidiaries' involvement in sanctionable activity in Iran and further subjects non-US firms and their corporate officers to possible US sanctions. The Iran Threat Reduction and Syria Human Rights Act of 2012 ("Act"), like its 2010 predecessor, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ("CISADA"), broadens the Iran Sanctions Act of 1996 ("ISA") by requiring the President to take action against non-US firms involved directly or indirectly in specified transactions with Iran. In its broad extraterritorial application, the Act provides strong disincentives to firms that provide energy-related services, insurance and reinsurance services, and shipping services to Iran. It targets not just the firms themselves, but also their corporate officers and principals by restricting their access to the United States and permitting the imposition of other sanctions against them in their individual capacities. The Act also applies sanctions to firms involved in joint ventures with Iran related to the development of petroleum resources and the mining, production and distribution of uranium, establishes new reporting requirements for issuers under the Securities Exchange Act of 1934, and expands both the "menu" of sanctions available to the President and the requisite number of sanctions that the President must apply to firms engaging in sanctionable conduct.1 The Act provides exceptions for many of its restrictions and grants the President some discretionary waiver authority. However, these exceptions and waivers are narrow and the Administration's recent history of enforcement demonstrates both an increased focus on Iran and an increased willingness to apply US law in an extraterritorial manner. Companies should monitor ongoing implementation of the new legislation, review its potential impact, and establish effective due diligence and compliance programs that address their conduct in the United States and abroad. This legislative action targeting Iran complements increasingly strong executive action. Last month, President Obama signed Executive Order 13622, "Authorizing Additional Sanctions With Respect to Iran," which made sanctionable knowingly conducting or facilitating significant transactions with a private or public foreign financial institution or other entity for the purchase or acquisition of Iranian oil. It also authorized sanctions against those who provide material support to major entities in the Iranian energy sector or the Central Bank of Iran for the purchase or acquisition of US bank notes or precious metals by the Government of Iran. The Executive Order was accompanied by the Treasury Department imposition of sanctions under CISADA against two banks—including Bank of Kunlun in China—found to have facilitated significant transactions or providing significant financial services to previously designated Iranian banks. These measures are the latest in a series of Presidential actions this year targeting Iran's access to international financial markets and those who engage in activities intended to evade existing sanctions. Application of US Sanctions Against Iran to Foreign Subsidiaries of US Firms Previously, US firms were not liable under US sanctions law with respect to Iran-related transactions of their foreign subsidiaries if neither the US firm itself nor any individual who was a US person was involved in such transactions. The Act extends the reach of US sanctions law by directing the President to prohibit an entity—including a partnership, association, trust, joint venture, and corporation—owned or controlled by a US person and established or maintained outside the United States from knowingly engaging in any transaction with the Government of Iran, or any person subject to its...

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