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170. What activities can trigger sanctions on a foreign financial institution under the NDAA?


For private financial institutions, the Act mandates that the President sanction those institutions that are found to knowingly conduct or facilitate any significant transactions with a U.S.-designated Iranian financial institution or with the Central Bank of Iran (CBI) – whether for the purchase of petroleum or otherwise – unless the transaction is for the sale of food, medicine, or medical devices to Iran. For all transactions with the CBI other than petroleum purchases, this provision takes effect on February 29, 2012, i.e., 60 days after the enactment of the Act. The timing of the petroleum purchase sanctions is discussed immediately below.

Private financial institutions and all other foreign financial institutions – including central banks or foreign state-owned or -controlled banks – potentially face sanctions under the NDAA if they knowingly conduct or facilitate significant financial transactions for the purchase of Iranian petroleum or petroleum products with a U.S.-designated Iranian financial institution or with the CBI after the provision takes effect as early as June 28, 2012, i.e., 180 days after enactment.* This NDAA provision may be held in abeyance beyond June 28, 2012, depending on the President’s determination on the availability and price of alternative supplies. Foreign central and foreign state-owned or -controlled banks are also subject to these sanctions if the transactions are for the sale of petroleum or petroleum products to Iran and they occur after June 28, 2012.

All foreign financial institutions, including private and state-owned institutions, remain subject to section 104(c) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), which calls for sanctions on foreign financial institutions that are found to have knowingly engaged in facilitating significant transactions for specific Iranian-linked individuals and entities.

*Irrespective of the timeframes set forth in the NDAA, any foreign financial institution that knowingly facilitates significant transactions with any U.S.-designated Iranian financial institution would still be subject to CISADA.

Date Released
February 14, 2012