Doing Business with Iranian Individuals and Entities One Year on Since the Lifting of the Sanctions

 

Background

On 14 July 2014 P5+1 and Iran agreed the Joint Comprehensive Plan of Action (“JCPOA”) after marathon negotiations in Vienna. This historic deal was eventually to put an end to nuclear sanctions against Iran. This happened on 19 January 2016 which is known as the implementation day. This was the date when the IEA reported back to the UN General Council confirming that Iran had complied with the terms of the JCPOA.

 

The JCPOA and the scope of sanction relief

The aim of the JCPOA was “the comprehensive lifting of all UN National Security Council sanctions as well as multi-lateral and national sanctions relating to Iran’s nuclear programme”. Therefore, the result has been the lifting of the vast majority of EU sanctions, the delisting of many Iranian companies from the EU asset freeze list, the ceasing of US application of US secondary sanctions, the removal from the US sanction list of certain persons and entities and availability of licensing in respect of certain activities.

 

Important challenges and opportunities for HNW advisors

Since the lifting of the sanctions, there has been a marked improvement in the Iranian economy and various observers have noticed an influx of interest from Iranian parties investing in various asset classes within Europe.

Iran has increased its production of oil, there has been increasing interest in Iran as a consumer market and Iranian companies have had the opportunity to showcase products in areas as diverse as petro chemicals and high technology.

There is anecdotal evidence of increase in the number of Iranian HNW immigrants into Europe. This is considered as a new potential client source for various HNW advisors in the fields of immigration, tax, private client, property and the like.

 

Compliance and due diligence issues

HNW advisors are all too familiar with the compliance and due diligence challenges in relation to clients coming from different territories but given the recent lifting of sanctions and in relation to the Iranian HNW clients, there are some additional and complicated due diligence issues.

 

Sanctions specific issues

It will be very difficult for a US HNW advisory to deal with an Iranian client because as mentioned above, the JCPOA did not remove US sanctions prohibiting trading commerce between US entities and Iran.

On the other hand, it would be perfectly possible for European HNW advisors to deal with Iranian clients. This will of course have to be subject to ensuring that they go through a very strict due-diligence exercise which goes beyond checking the identity of individuals but is directed towards ensuring that the particular individual clients or any entities and companies they represent are not subject to any sanctions.

It is essential to ensure when dealing with an Iranian entity that they are not a listed individual or entity or that they do not represent one. The entities still listed by the United Nations, the EU and the United States can be found on the website www.iranwatch.org. The problems arise when dealing with individuals who have relationships with companies which are directly or indirectly linked to sanctioned entities or individuals. In those circumstances, it is important to carry out a strict due diligence process within Iran to make sure that the entities are properly checked.

This would require specific steps to be taken to establish the identity of the individuals or the ownerships and directorships of any companies included. Some of the information regarding companies is readily available in Iran but much of this information is not. Advisors cannot afford to take risks in this regard and it is essential that appropriate enquiries are made.

If the result of the search is inconclusive then the advisor should take time to explore the position further.

 

Different types of searches

Many of the potential individual clients will have corporate interests and it is critical that these are checked thoroughly.

An initial search of the public records could reveal the identity of the directors of such companies, the companies’ registration number, objects, identity of inspectors (when dealing with private joint stock companies), the type of company and some limited information about the companies’ shareholders.

In order to obtain more in depth information in relation to a corporate entity, one will have to use agents in order to obtain full details of shareholders.

When dealing with individuals or when wanting to find out more information about the company such as for example pending litigation etc. a level 3 search can be carried out. This would generally involve a media search and personal enquiries with the company or individual involved.

There are many agencies within Iran that carry out searches of individuals for credibility and reputations. It is however critical that appropriate providers of due-diligence advisors are chosen so that the information obtained is as accurate as possible.

 

Summary

There is no doubt that the recent lifting of the sanctions has created new opportunities for HNW advisors and there will now be many potential clients in that territory for such advisors. However given that many entities and individuals remain listed and given the risks attached to dealing with such entities, the advisors should be acutely aware of these risks and take steps to reduce them.

 

 

Author: Sharokh Koussari, Solicitor & Partner of DWFM Beckman
www.dwfmbeckman.com