Secondary Sanctions Risk in Iran
The OFAC sanctions regime includes strict primary and secondary sanctions against Iran, particularly affecting the textile and the petrochemical sectors, aimed at limiting economic cooperation of countries with Iranian organizations and individuals. These restrictions, as outlined in various executive orders, can have a significant impact on foreign businesses, even if they have no direct ties to the United States. Asset freezes, fines, and restrictions on international transactions are real risks for companies working with Iranian partners facing current sanctions, including non-US persons.
Our legal company will help you assess sanction risks, check counterparties, and develop a defense strategy. We will create an effective compliance program, minimize threats, and ensure the legal security of your business.
What are Secondary Sanctions Against Iran?
Secondary sanctions are measures the United States applies to foreign — non-U.S. — individuals, companies, and financial institutions that do business with sanctioned Iranian entities, including government agencies and organizations on the SDN List. Unlike primary sanctions, which bind only U.S. persons and companies, secondary sanctions reach outward: a bank in Europe, a trading company in Asia, or a logistics provider in the Gulf can all be exposed, even without any direct connection to the U.S. financial system.
The mechanism is simple but effective — foreign companies are pushed to choose between doing business with Iran and keeping access to the American market and the U.S. dollar system. For most international businesses, that isn’t really a choice.
Virtual asset service providers are not exempt either: cryptocurrency transactions involving Iran are treated the same way as correspondent banking under OFAC’s secondary sanctions framework.
| Primary Sanctions | Secondary Sanctions | |
| Who is bound | U.S. persons, U.S. companies, U.S.-based banks | Foreign (non-U.S.) individuals, companies, banks |
| Legal basis | U.S. jurisdiction over its own citizens and entities | Leverage over access to the U.S. dollar system and American market |
| Requires U.S. connection? | Yes | No — foreign entities can be exposed with zero direct U.S. ties |
| Typical trigger | Direct transaction with Iran by a U.S. person | Doing business with a sanctioned Iranian entity, regardless of location |
| Consequence | Civil/criminal penalties under U.S. law | Loss of correspondent banking, exclusion from U.S. market, fines |
Risks of Secondary Sanctions
If your company interacts with banks, enterprises, or government entities of Iran, such as the Treasury Department’s Office of Foreign Assets Control. You need to assess all risks in advance related to primary or secondary sanctions and consult with lawyers specializing in sanctions regulation concerning foreign persons. We will help you avoid violations of the OFAC sanctions regime, protect your business, and minimize legal risks associated with nationals and blocked persons.
Assess Sanctions RiskConsequences of Non-Compliance with Secondary Sanctions
Violation of OFAC secondary sanctions, including Iran secondary sanctions, against blocked non-U.S. persons can have serious consequences for foreign companies, including potential exclusion from the U.S financial system even if they do not operate in the United States:
- Financial losses — asset freezes, terminated contracts, inability to settle in dollars;
- Loss of market access — exclusion from the U.S. financial system, inability to work with American partners;
- Legal exposure — large fines, lawsuits, reputational damage;
- Personal liability — entry bans and asset freezes for owners and executives.
Non-compliance with the sanctions regime may lead to irreversible consequences, including civil liability and the complete cessation of the company’s international activities.
All accounts, real estate, and assets of the company can be frozen. This applies to both funds and property. If the company violates OFAC secondary sanctions, particularly those concerning blocked persons, it may be excluded from the SWIFT dollar system, making bank transfers in US dollars impossible. Non-U.S. individuals seeking to make personal remittances should review our guide on legally sending money to/from Iran, which covers permitted channels.
OFAC has the right to impose multimillion-dollar fines on companies that violate sanctions as stipulated in various executive orders. For example, BNP Paribas was fined $8.9 billion for violating sanctions against Iran, Cuba, and Sudan. Standard Chartered Bank had to pay a fine of $1.1 billion for illegal transactions with Iran.
Organizations subjected to secondary sanctions will not be able to work with American partners, banks, and suppliers. This could lead to contract terminations, loss of clients, and business collapse. Reviewing the available OFAC general licenses for Iran is a practical first step — operating within an authorized category significantly reduces secondary sanctions exposure.
Need a consultation on OFAC sanctions and executive orders? Contact our lawyers to assess potential risks and protect your business from threats. We will help you avoid mistakes and maintain your financial stability.
Steps to Ensure Compliance with Secondary Sanctions
- Map your exposure. Review current counterparties and business connections — are any linked to the SDN List?
- Trace financial flows. Confirm correspondent banks aren’t routing anything connected to Iran.
- Audit the supply chain. Contractors and subcontractors can carry sanctionable exposure you don’t see directly.
- Flag high-risk sectors. Oil and gas, medical device shipping, insurance, logistics, and banking carry elevated scrutiny.
- Build a compliance policy. Internal rules, transaction monitoring, staff training, and documented counterparty checks.
- Get a legal risk assessment. A sanctions lawyer can verify counterparties against OFAC lists and flag issues before a bank does.
For the specific rules governing wire transfers to and from Iran, see Iran sanctions: wiring funds.
How Our OFAC Lawyers Can Help
Our specialists conduct a full Iran sanctions risk assessment and verify your business connections against the SDN List. We help build internal compliance systems that prevent accidental violations, review contracts, payment routes, and logistics chains, and provide legal support for international transactions — including appeals against sanctions designations and SDN list removal.
Working with sanctions law requires deep expertise: even indirect cooperation with Iranian organizations can trigger serious consequences. Companies that work with experienced counsel protect themselves from financial losses and preserve their international reputation.
Schedule a consultation — we’ll audit your risk exposure, help you avoid violations, and build a compliance strategy that keeps your business secure.
FAQ
Does using a European or Asian bank make an Iran transaction safe from U.S. secondary sanctions?
Not automatically. The fact that a transaction is processed entirely through non-U.S. banks does not by itself eliminate secondary sanctions risk. The nature of the Iranian counterparty, the activity involved, the financial institutions used, and the applicable sanctions authorities all need to be considered.
Can my company deal with an Iranian business that is not on the SDN List?
Potentially, but the absence of an SDN designation does not by itself mean that a transaction is free of sanctions risk. Other sanctions restrictions, ownership issues, sector-based measures, or secondary sanctions authorities may still be relevant. A transaction should be assessed based on the parties and the specific activity involved.
Can a company be exposed to Iran secondary sanctions because of a business partner or supplier?
Yes. Indirect exposure can matter. A company may need to look beyond its immediate customer and review ownership, intermediaries, suppliers, subcontractors, banks, and other parties involved in the transaction.
What if the Iranian transaction is paid for in euros or another non-dollar currency?
Using a currency other than U.S. dollars does not automatically remove secondary sanctions risk. The currency is only one part of the analysis. The Iranian parties involved, the goods or services, the financial institutions, and the applicable sanctions rules also need to be considered.
What should I do if my bank refuses an Iran-related transaction even though I believe it is legal?
First, identify why the bank rejected or stopped the transaction and determine which parties and payment channels were involved. A sanctions lawyer can then review the transaction, supporting documents, counterparties, and applicable authorizations to determine whether the bank’s concerns can be addressed.
How can I check whether an Iranian counterparty creates secondary sanctions risk?
Start by reviewing the counterparty and its ownership and control against relevant sanctions lists, including the SDN List. You should also examine the transaction, sector, intermediaries, financial institutions, and payment route rather than relying solely on the counterparty’s name.
