REVOCATION OF THE FINANCIAL RESTRICTIONS (IRAN) ORDER 2012 (THE "2012 ORDER")
On 31 January 2013, the Financial Restrictions (Iran) Order 2012 (the "2012 Order") (which replicated and replaced the Financial Restrictions (Iran) Order 2011) was revoked. The result of the revocation is a relaxation of prohibitions on UK credit and financial institutions with regards their dealings with Iranian banks and may be of benefit to UK exporters.
WHAT WAS THE EFFECT OF THE 2012 ORDER?
The 2012 Order prohibited transactions and business relationships between UK credit and financial institutions and Iranian banks. This included transactions and business relationships "through one or more intermediaries". An example of a transaction through one or more intermediaries would be where an Iranian bank transfers monies to a third party bank which subsequently transfers monies to a UK bank. Until the Financial Restrictions (Iran) Order 2011 entered into force, a UK exporter might receive payments from Iranian banks not subject to the asset freeze into a bank account it had in Turkey, the UAE, or elsewhere outside the EU. Once funds were received into that non EU bank account, the UK exporter would then transfer those funds into a bank account with a UK bank in the UK, having first been granted authorisation from HM Treasury. The UK exporter was able to make the authorisation request to HM Treasury "for and on behalf of" its UK bank. Since the Financial Restrictions (Iran) Order 2011 came into force, such transactions became prohibited.
WHAT IS THE IMPACT OF THE REVOCATION OF THE 2012 ORDER?
Now that 2012 Order is revoked, a UK exporter may revert to the above practice so long as it complies fully with the terms and provisions of EU Regulation 1263/2012 which amended EU Regulation 267/2012 (the "December 2012 EU Regulation").
Under the December 2012 EU Regulation, it is prohibited for EU (and therefore UK) credit and financial institutions to transfer funds to or from Iranian banks and financial institutions without authorisation. However, authorisation may be obtained to receive payments from an Iranian bank not subject to the EU asset freeze (of which there are a number) to a UK bank for a number of reasons, including:
(a) transfers regarding foodstuffs, healthcare, medical equipment, or for agricultural or humanitarian purposes (humanitarian payments);
(b) transfers regarding personal remittances;
(c) transfers in connection with a specific trade contract provided that such transfer is not prohibited under this Regulation.
As such, we see no reason why a UK exporter should not be able to apply for and receive an authorisation to receive payment into a UK bank from an Iranian bank not subject to the EU asset freeze - so long as the specific trade contract itself is not prohibited (please e-mail us if you require a list of prohibited products).
Whilst a UK bank will likely refuse to receive a payment direct from an Iranian bank (notwithstanding it may be legitimate for the UK bank to receive such payment), a UK exporter may seek and obtain authorisation from HM Treasury in relation to an indirect payment (i.e. a payment into a UK bank account from a non EU bank which originated from an Iranian bank not subject to the asset freeze).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
