Iran Aid: A Legal Primer
Over the past few months, Iranian-Americans searching for tangible ways to support Iran are learning just how tricky it is to aid a sanctioned country, even when support for pro-democracy, human rights, and civil society actors is explicitly an interest of the (U.S.) government putting forth the sanctions.
As a concrete example to financial institutions, the Deputy Secretary of U.S. Treasury has recently emphasized “the United States’ commitment to ensuring that humanitarian assistance and related trade continues to reach at-risk populations through legitimate and transparent channels…[during] sanctions…. The provision of humanitarian support to alleviate the suffering of vulnerable populations is central to our American values.” (“Treasury Implements Historical Humanitarian Exemptions”, Dec. 20, 2022)
To technology companies, the Deputy Secretary also has recently said, “[W]e are helping the Iranian people be better equipped to counter the government’s efforts to surveil and censor them. …OFAC will continue issuing guidance to support the Administration’s commitment to promoting the free flow of information, which the Iranian regime has consistently denied to its people.” (“U.S. Treasury Issues Iran General License D-2 to Increase Support for Internet Freedom”, Sept. 23, 2022)
There are complex laws in place to ensure resources and money can’t go to support the Iranian Regime. Unfortunately, that same complexity can also serve to confuse US-based civil society leaders who want to organize aid.
An added barrier — over-compliance. Legally-sound efforts often get blocked by a bank or platform, due to the institution being afraid of harsh sentences if they mess up. Banks often de-risk by opting to blanket shut down anything to do with Iran
For example, a recent GoFundMe campaign to raise funds for free internet in Iran was suspended by GoFundMe, despite the recent explicit sanctions exemptions for crowdfunding for internet services.
Even the US treasury is fed up with this kind of overreach:
So, how can we figure out what’s legal vs what’s over-compliance, when it comes to helping in Iran? That’s what we set out to understand.
First, to better understand the applicable authorities, restrictions, and exemptions, we talked with a boutique law firm, co-founded by a lawyer who formerly worked at OFAC on humanitarian, human rights, and civil society support involving Iran and other complex situations. You should obtain your own legal advice on these topics, especially in circumstances like these where legal advice is so fact dependent. Nevertheless, there is a plethora of publicly available rules and guidance in the form of CFRs, speeches, enforcement actions, and articles that help provide a high-level roadmap of key authorities that we learned of and issue spotted, to better equip other Iranian-Americans exploring the complex questions that arise when attempting to donate money for humanitarian aid.
This blog is based on our reading of these, but we are not lawyers ourselves!
We also added notes on crypto considerations towards the end, which we haven’t seen covered elsewhere.
→ If you’re just looking for some basic information on Sanctions with Iran, the Iranian American Bar Association published a great Iran Sanctions Booklet to help get you up to speed.
→ Another great source of OFAC legal information is Yazdanyar Law, who worked with the Iranian American Bar Association to put out a 1 hour video presentation on providing aid to Iran in compliance with U.S. sanctions.
General Legal Issues Overview
Iran’s autocratic government is the focus of sanctions by the US Government, not the citizens of Iran. This legacy sanctions program is particularly complicated because Congress also enshrined particularly blunt and comprehensive sanctions that even OFAC cannot calibrate, covering the whole jurisdiction, not just individuals. But exemptions can help, and OFAC has published meaningful General Licenses to provide relief and pathways for humanitarian aid, pro-democracy and human rights civil society work, including even support for anti-censorship and counter-surveillance technology. For example, the Iran General License D-2 to Increase Support for Internet Freedom.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces U.S. economic and trade sanctions programs, which includes strict overview of transactions of goods, services, or money with Iran.
OFAC has pages of documentation on how to legally engage with Iran, but there are 3 key sections to know:
- § 560.550: Certain noncommercial, personal remittances to or from Iran authorized (how individuals can legally send money to a single person in Iran)
- General License E: Authorizing Certain Services in Support of Nongovernmental Organizations’ Activities in Iran (how a group can legally send aid to Iran)
- General License D-2: General License with Respect to Certain Services, Software, and Hardware Incident to Communications (how software companies can legally provide services that further internet freedom in Iran)
Of the three, General License E is the one that’s most relevant to organizing and sending humanitarian aid to Iran, so we’ll briefly cover the others.
Rules for Individuals // Section 560
The rules concerning individuals and organizations are very different. The rules concerning individual remittances are defined in section 560.550 of the federal code.
Individuals are only allowed to send non-commercial personal remittances to friends and family.
- In short: one sender, one recipient. You can’t fundraise collectively, and the money can’t have an intermediary on the other end.
- Can’t be traced to supporting a family or friends business interest.
Funds MUST be sent via U.S. depository institution or a licensed securities broker/dealer, unless you physically take it into Iran yourself.
- You need to work with your bank or licensed securities broker/dealer. While not every U.S. depository institution or broker/dealer may be willing to do the remittance, the exemption is well-established in the federal register, and you may expedite the process by notating any funds transfer by citing explicitly to section 560.550 and noting that it is a personal remittance within the terms of the code section. You can also point out that the terms of section 560.550 establish that the “transferring institution…may rely on the originator [i.e., sender] of a [remittance] funds transfer with regard to compliance…, provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance with…this section.” In other words, in the absence of other indicators of concern, the U.S. bank can rely upon your credible representation that the transfer is a remittance for the purpose of section 560.550. This is most likely to happen via a larger U.S. bank that has major global operations and banking relationships with banks in the EU, UAE or Turkey who could help convert across currencies and possibly connect with Iranian family bank accounts outside of Iran itself.
- Carrying cash to Iran for family or friends is authorized if done according to the terms of section 560.550.
Relatedly, if you’d like to send goods as gifts to friends and family, you may — but only up to a value of $100, with some additional qualifications. Read more on that here.
Further reading: As Protests Continue, Biden Should Enable Remittance Transfers to Iran
Rules about Software + Internet // General License D-2
The General License D-2 is a great help to the Iranian people, and particularly relevant for leaders of US-based software companies and groups interested in supporting internet freedom in Iran.
On Sept. 23rd OFAC published the General License D-2 “issued with the intent to facilitate greater access for the Iranian people to secure online platforms and services” (tweet, statement). Elon took the hint and started activating starlinks. The new General License D-2 permits (subject to the specific terms/requirements of the License) U.S. persons to export internet services and software that provides Iranians access to:
- instant messaging
- chat and email
- social networking
- sharing of photos and movies
- web browsing
- blogging
- social media platforms
- collaboration platforms
- video conferencing
- e-gaming
- e-learning platforms
- automated translation
- web maps
- user authentication services
The General License D-2 also permits (subject to the specific terms/requirements of the License) U.S. persons to export:
- certain software and hardware incident to communications
- non-commercial-grade Internet connectivity services, to include cloud-based services
- telecommunications transmission facilities (such as satellite or terrestrial network connectivity) incident to communications
As it pertains to fundraising by non-government organizations (NGO), the new General License D-2 allows NGOs to also raise money towards promoting internet freedom for Iranians, in addition to food, medicine, and other humanitarian supplies. For example, fundraising towards exporting VPN gift cards or even additional Starlink systems would be permitted in principle under the new General License D-2, if you meet all the parameters of the License.
Rules for Organizations // General License E
If you want to fundraise and collect donations to support Iranians, the longstanding General License E is the most relevant set of rules. It allows certain activities involving Iran that would otherwise be prohibited by U.S. sanctions to be conducted without the need for a specific (i.e., private) license, if the parameters of the General License are met.
To summarize, what does General License E allow?
It allows nongovernmental organizations (NGOs) to support the following not-for-profit activities designed to directly benefit the Iranian people, without going in to OFAC for a Specific (i.e., private) License and wait for it to be processed, assuming the parameters of General License E are met:
- Humanitarian Projects — orphanages, donated health services, food, medicine, etc
- Environmental + Wildlife Conservation
- Disaster Response + Rebuilding
- Human Rights + Democracy Building — increasing access to freedom of expression, public advocacy, support attending conferences, training
- Up to $500,000 USD per year, total per NGO, in support of points 1–4
It requires following OFAC compliance (we’ll get into that below), as well as quarterly reporting of activities. Additionally, General License E requires that all transactions be conducted in a verifiable manner, and that records of all transactions be kept for at least five years. It also requires that those engaging in activities covered by the license report certain information to OFAC, including the names and addresses of the organizations involved (e.g., a reputable civil society organization in Iran to receive the funds) and the nature and value of the transactions.
As you can see above, the ability to legally support as an organization far outweighs individual routes. There’s two main options — create an NGO from scratch, or work with an existing one.
Here’s how an NGO can support Iran, in general terms under the General License, but be sure to read all the fine print and make sure you can reliably implement all the requirements:
- NGOs are allowed to transfer up to $500,000 to Iranians per year.
- General License E does not explicitly require NGOs to use depository institutions to transfer funds, though depository institutions are permitted to do so. There is no explicit prohibition in General License E for NGOs to raise funds and transfer funds in crypto (BTC, ETH) and crypto stablecoins (USDC, USDT). To be clear, cryptocurrency is not specifically mentioned in explicit authorization terms, either. The best approach at this time is likely to at least ensure that all the other parameters of General License E can be satisfied if transfers are in cryptocurrency rather than fiat, including the risk management, compliance, and reporting requirements for OFAC, under the General License E and generally, including OFAC’s Sanctions Compliance Guidance for the Virtual Currency Industry.
- NGOs are required to submit quarterly reports to the U.S. Treasury of all payments, and so must keep detailed records of all transactions.
- The quarterly reports must include good faith best effort documentation that the destination of funds isn’t the Iranian government or any other specifically prohibited entities/sectors (like military, petroleum, etc) in Iran.
Notes On Over-compliance
To more concretely understand the impact of the sanctions exemptions, we considered the following cases where we suspect that organizations have been overly compliant, contrary to the stated interests of the United States in promoting free access to internet services for Iranians:
- GoFundMe’s decision to suspend the campaign we mentioned above, which attempted to raise funds for free internet in Iran.
- ConsenSys’s decision to bar 50 Iranian & Afghan students from its ConsenSys Academy online course after granting them scholarships worth ~$1,000.
- Gitcoin’s decision to suspend the Women in Blockchain Farsi crowdfunding campaign for free online Farsi Solidity educational materials.
As far as we can tell, these initiatives appear to fall into the expressed intent of a mix of 50 U.S.C. § 1702(b), which includes the Berman Amendment’s statutory exemption for free transfer of educational information; General License E; General License D-2; and Federal Code § 560.554 re: “Importation and exportation of services related to conferences in the United States or third countries authorized.” A good overview of education-related general licenses and regulatory exemptions is here.
NGO Considerations
What actually is an NGO?
General License E does not define “NGO.” In general, an NGO, or non-governmental organization, is a type of organization that is not affiliated with any government and is usually focused on addressing a particular social or environmental issue. NGOs can be funded by a variety of sources, including private donations, foundations, and corporations, and they often work in partnership with governments, international organizations, and other groups to achieve their goals. Examples of NGOs include charities, development organizations, and advocacy groups.
Does the NGO have to be a 501c3?
The General License does not explicitly require a formal 501c3 designation.
Is it better to create a new NGO or use an existing one?
There are other administrative and legal benefits to using a pre-existing NGO in some form, even if not registered in the U.S., such as all the due diligence, overall compliance-type systems, and reporting requirements, for which an existing entity might have the infrastructure already set up; also the liability issues of needing some sort of governance and LLC-type infrastructure to set parameters on (commercial, civil, criminal) liability for people who participate in any way. So, while not required, it could be faster overall to use an existing one and raise money for that NGO.
What are best practices for NGOs?
Ideally the organization is clearly defined and even registered in some form as an official entity, and there should be organizing principles set up. Here are some suggested areas to cover, though the actual requirements depend upon the specific intended mission and operations of the NGO with respect to applicable requirements in the General License and other applicable rules and regulations around providing services or money:
Establish what “NGO” is involved in the sending of services or money. The NGO should have a charter, and document its financial operating structure (bank accounts, crypto wallets, multisig key holders).
Document what activities are involved that are covered activities authorized for support in the General License, and ensure activities/support are limited to that.
Set up a system and assigned person to track that aggregated financial transfers by the NGO to (only) authorized activities will not exceed $500k in a year.
Set up a system to track the information required for quarterly reporting and report quarterly to OFAC. Set up a reminder system to not miss quarterly reporting. Here are some basics on required info, but be sure to check the General License at the time you are operating, since these can be updated/changed over time:
- a detailed description of the services exported or reexported to Iran,
- any Iranian NGOs, Government of Iran entities, Iranian financial institutions, or other Iranian persons involved in the activities;
- the dollar amounts of any transfers to Iran; and
- the beneficiaries of those transfers.
Document how the organization will do reasonable due diligence to ensure that unauthorized recipients will not receive funding/services under this initiative. Here are some illustrative examples of potential types of parameters and diligence an organization might set or conduct:
- Only working w/ reasonably known/vetted entities in Iran;
- Limit the organizations supported to those working on human rights, so not likely to be energy sector, military, or other prohibited sectors;
- Ask for some form of accounting from recipient organizations of how money was spent at defined intervals and look for anything out of the ordinary for the intended uses;
- Work with widely recognized human rights folks as key focal points;
- Periodic on-chain monitoring about where funds go;
- Document specific operating elements of overall alignment and adherence to OFAC’s Sanctions Compliance Guidance for the Virtual Currency Industry, which applies to all persons/entities under OFAC jurisdiction.
Why is it important to use a limited liability entity?
If no limited liability corporate entity is established, at least key participants could be considered an unincorporated association/partnership with liability flowing to them for commercial, criminal, and tax purposes. A business association expert should be consulted.
Crypto Considerations
Crypto Accounting
General License E does not speak to any currency in particular, like USD-pegged-only, and certainly not cryptocurrency specifically. Therefore, there is no clear guidance on monitoring the $500,000 annual aggregate limit on transfers. The General License also does not specifically authorize (or prohibit) cryptocurrency, so this is just one approach that could be in alignment with the General License, but it is definitely worth discussing with your lawyer, including monitoring the fact that guidance could change at any time, so need to stay up with the latest rather than just read here at a static blog. One possible approach could be that when doing NGO accounting for crypto transfers, the amount could be consistently recorded based on the current price of the crypto in USD at the time of the transfer, in a way that might be done if fiat currency-conversion were involved. So a transfer of 1 BTC valued atat $20,000/BTC at the time of transfer would add $20,000 towards the $500,000 yearly limit, even if the BTC price changes after it is sent. But this is not specifically approved by OFAC, so please do your own research and consult a lawyer to confirm, at the time you might be engaging in activity like this.
Further reading for Cryptocurrency + OFAC: OFAC’s Sanctions Compliance Guidance for the Virtual Currency Industry
Cryptocurrency Choices
To the extent cryptocurrency is involved, it seems best to raise and send funds using the major cryptocurrencies like BTC and ETH. The larger $1 USD stablecoins like Tether (USDT) and USDC can also be used, though less censorship resistant overall. Using BTC and ETH also avoids potential complications from smaller, newer crypto assets being classified as securities in the future. In our view, ETH as an asset is particularly well aligned with the ideal of promoting internet freedom, as ETH has become an “internet credit”, used for sending messages and storing data on Ethereum, as well as being a medium of exchange for internet namespace and even digital art.
Multi-signature Wallets
To the extent people determine with their lawyers that cryptocurrency is appropriate to use for any aspects of this, the use of multi-signature wallets (wallets where multiple keyholders have to sign in order to send a transaction) to enhance security and resilience is likely useful. The operators of the multisig likely should be included in the NGO documentation. If some multisig members prefer to stay private for personal security reasons, documentation should include how they were vetted, and that a trusted custodian maintains a list of the multisig members.
Addendum: NFT Artwork
OFAC has historically included art in the “information materials” under the Berman exemptions from restrictions, as long as not demonstrably part of high value ($100k) art or other identifiable suspicious indicators that it is being used for money laundering and requires more due diligence. It could be argued that the same exemptions apply to digital artwork represented by Non-Fungible Tokens (NFTs) on Ethereum, but this is not something OFAC has confirmed. The purchase of digital artwork NFTs from Iranians by NGOs should be approached with the same due diligence and recipient verification procedures as any other transfer of funds. It’s worth reading Treasury’s February 2022 Study on the Facilitation of Money Laundering and the Financing of Terrorism through the Trade in Works of High-value Art, overall, which has a section on the Emerging Digital Art Market, specifically discussing NFTs on pages 25–27 of the report.
Next Steps
After doing our research, our group has decided to start a new NGO. While working with an existing NGO might be faster, we prefer to start a new NGO that will be unique in being crypto-first for fundraising and governance to avoid the hassles of banks and overly-compliant tech platforms. Our plan is to fundraise for several grant programs simultaneously (food, VPNs, Starlinks, conferences, etc…), where donors can send funds to the program of their choice, and our team would be responsible for distributing funds, verifying the recipients, recording the transactions, and submitting our quarterly reports to the U.S. Treasury. As we go, we will continue to publish what we learn, and try to work with other NGOs to assist with their fundraising operations as well.
If you are interested in helping out, please…
- Follow us on Twitter: https://twitter.com/UnchainIran
- Help us share this post—here is our first tweet about it!
- Contact us via email: iranunchained@proton.me
