1. Iranian sanctions: operations, reputation and ethics
Alexander Juengling, Chief Compliance Officer, Danone Jason Hungerford, Partner, Mayer Brown
Mont Blanc Circle
November 2018

2. Practical compliance: Iranian sanctions Legal framework
Agenda
Practical compliance: Iranian sanctions
Legal framework
Corporate practice
Operations
Reputation
Ethics

3. US secondary sanctions reimposition
Legal framework
1995
2010
2012
2016
2018
2018
2018
US embargo
CISADA
EU sanctions
JCPOA
US withdrawal
EU blocking statute
US secondary sanctions reimposition

4. Legal framework Generally apply to: US Persons EU applicability:
EU nationals
EU companies
EU flagged vessels/registered aircraft
Business conducted in whole or in part within EU member state
Lack of extraterritorial application
Non-EU subsidiaries of EU parents?
“Nexus”
US applicability:
US Persons
US citizens/permanent residents
All persons physically located in the United States
Entities registered in the US
The non-US branches of US entities
All transactions in or through the United States must also comply with OFAC regulations
Non-US Persons…

5. Legal framework Primary sanctions Implications
Near-total prohibition for US Persons or transactions with a US nexus
Exceptions are few, such as agricultural/medical items
Few EU sanctions remain
Implications
Facilitation
Banking and finance
US individuals
Indirect dealing and predominance

6. Operation of secondary sanctions Secondary sanctions
Legal framework
Operation of secondary sanctions
“material support”, “significant transaction”, “knowingly”
Discretionary, political
Question of legality
Secondary sanctions
Automotive
Metals/minerals
Banking
Shipping
Designated persons
13,599 List migration

7. EU moves since the US withdrawal Clash of US/EU policies
Legal framework
EU moves since the US withdrawal
Encouragement from member state governments to engage with Iran continues
Creation of the EU Iran SPV, banking arrangements outside of US jurisdiction
Blocking statute
Clash of US/EU policies
“Transatlantic rift”
Brexit dynamic
“Disturbed and deeply disappointed”
“One of the most counterproductive measures imaginable for regional and global peace and security”

8. Legal framework Blocking statute
Prohibition on “compliance” with listed US sanctions
Creation of civil right of action
Reporting requirement
Licensing mechanism
“We do not intend to allow our sanctions to be evaded by Europe or anyone else”
Does it really matter?
Uncertainty of provisions
No affect on secondary sanctions risk
EU guidance
Criminal enforcement
Civil claims
Mamancochet Mining Ltd v Aegis Managing Agency Ltd & Others
Rotenberg case, Finland

9. Legal framework Breach of Secondary sanctions
Breach of Primary sanctions
Civil penalties: An amount equal to the greater of US $295,141 or twice the amount of the underlying transaction, per violation. (In practice, OFAC will typically allege a range of violations on the basis of a given set of facts, meaning that the overall fine often significantly exceeds these amounts);
Criminal penalties: An amount up to US$1,000,000 per violation, if the violations were enforced as criminal violations; and
Imprisonment: Individuals may be imprisoned for up to 20 years.
Breach of Secondary sanctions
Financial/banking restrictions, including:
prohibitions on certain loans from US banks
prohibitions on foreign exchange & other transactions
ban on investment by US Persons;
Prohibition on certain property transactions & ownership.
Export sanctions (e.g., denial of export licences; prevention of US exports to the Company).  
Prohibition on US Government contracts.
Sanctions on executive officers, including exclusion from the United States.
Designation of company itself as a sanctioned party (with whom US Persons are prohibited from dealing)

10. Legal framework Enforcement Guidance What is the real risk?
Secondary sanctions?
Multiple regulators?
AML?
Guidance
When should it be sought?
Are there risks?
Should I voluntarily disclose?
How do I prepare?

11. Corporate practice
Sanctions law and regulations affect corporate practice beyond purely legal considerations
Operational impairment
Reputational risk
Ethical considerations

12. Operational impairment
Corporate practice
Operational impairment
Financiers
Insurance
Critical suppliers
Distributors
Business support

13. Operational impairment Reputational risk
Corporate practice
Operational impairment
Reputational risk
NGOs
Media
Customers

14. Operational impairment Reputational risk Ethical considerations
Corporate practice
Operational impairment
Reputational risk
Ethical considerations
Relating to the business itself
Relating to the customer base
Relating to the policies on which the sanctions are based