IRAN: EDD - Enhanced Due Diligence
On July 14th, 2015 the E3/EU+3 (UK-France-Germany/EU + USA-Russia-China) signed with the Islamic Republic of Iran the Joint Comprehensive Plan of Action (JCPOA).
The JCPOA produced a comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions (EU and USA mainly) related to Iran’s nuclear programme
On May 8, 2018, the U.S. President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA), and to begin re-imposing, following a wind- down period, the U.S. nuclear-related sanctions that were lifted to effectuate the JCPOA sanctions relief.
With specific regard to the JCPOA, the key-points are that:
- (i) it is endorsed by the UN Security Council;
- (ii) contains the reciprocal commitments of the Parties;
- (iii) lifts some significant economic and financial sanctions against Iran;
- (iv) and the implementation is based on a step-by-step approach, linked to the outcomes of IAEA inspection activities.
In this context, EU companies and financial institutions can now engage in trade with Iran in the following sectors: (i) financial services, banking and insurance; (ii) oil, gas and petrochemicals; (iii) shipping, shipbuilding and transport; (iv) gold and other precious metals.
Consequently, certain persons, entities and bodies have been delisted and no longer are subject to sanctions such as asset freezes, exclusions from financial and capital markets, visa bans. This covers UN listings as well as EU listings.
However, some persons/organisations continue to remain listed and subject to sanctions. Therefore, it is mandatory and prudent that EU economic operators follow a structured process of EDD (Enhanced Due Diligence), in order to carry out an adequate screening of their Iranian counterparts (so called KYC/Know-Your-Customer procedure), gathering and verifying all possible available information, including but not limited to: (i) “UBOs” (Ultimate Beneficial Owners), that directly or indirectly control the Iranian counterpart; (ii) and actual “DMs” (Decision Makers).
According to EU Council Regulations (EC)428/2009 (Dual Use) and (EU)267/2012 (Restrictive Measures Against Iran), under the jurisdiction of EU Member States any breach of certain prohibitions therein established is a criminal offence, in particular any breach relating to: (i) export of prohibited or unlicensed goods and services; (ii) asset freezing measures; (iii) transfers of funds; (iv) dealings with any listed person (individuals, companies, other organizations); (v) additional restrictive measures.
Against this background, EU exporters (or Non-EU organizations dealing with EU) who fail - because of lack or inadequacy of internal controls and KYC procedures - to fully comply with EDD requirements and proactively align with EU government-sponsored compliance initiatives, can find themselves seriously exposed to legal and reputational risks, with a potential disruptive economic and financial impact on their business continuity.
Therefore, all relevant business relationships and transactions with natural and legal persons from Iran must undergo an EDD/KYC process, which EU economic and financial operators have to carry out in compliance with the rules set out both at EU level (see, 4AMLD (EU)2015/849, entered into force on 26th June 2017 and expected to be further amended) and at national level.
Given the complex and fast-changing regulatory framework above outlined, EIFEC has decided to implement a specific EU Export Compliance Certification Program (EU- C/ECO/IRAN) in order to incentivize all interested EU and Italian economic and financial operators to proactively and fully comply with the applicable EU directives and regulations, national laws and regulations (both post JCPOA and AML/CTF), as well as with the appropriate best practices, in any relevant business relationship and transaction with natural and legal persons from Iran.