United States Senate 

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS 

Committee on Homeland Security and Governmental Affairs 

Rob Portman, Chairman 

Review of U.S. Treasury Department’s 

License to Convert Iranian Assets 

Using the U.S. Financial System 

MAJORITY REPORT 

PERMANENT SUBCOMMITTEE ON 

INVESTIGATIONS 

UNITED STATES SENATE 
REVIEW OF U.S. TREASURY DEPARTMENT’S 

LICENSE TO CONVERT IRANIAN ASSETS 

USING THE U.S. FINANCIAL SYSTEM 

TABLE OF CONTENTS 

I. EXECUTIVE SUMMARY ....................................................................................... 1

II. FINDINGS OF FACTS AND RECOMMENDATIONS ......................................... 5

III. BACKGROUND ...................................................................................................... 8

A. United States’ Sanctions Against Iran ............................................................ 8

1. The Joint Plan of Action ...................................................................................... 9

2. The Joint Comprehensive Plan of Action .......................................................... 10

B. United States Sanctions Enforcement ........................................................... 12

1. The United States Treasury Department ......................................................... 12

a. OFAC can Authorize Otherwise Prohibited Transactions using General 

Licenses and Specific Licenses ................................................................................. 14

2. The United States Department of State ........................................................... 15

IV. FINDINGS OF FACT ............................................................................................ 16

A. Iran Collected Billions in Overseas Restricted Accounts .............................. 16

B. Bank Muscat Informed OFAC it Required the U.S. Financial System to 

Convert the Iranian Assets ...................................................................................... 17

C. Treasury Department Officials Assured Congress that Iran would not 

Receive Access to the U.S. Financial System .......................................................... 19

D. OFAC Repeatedly Warned Other Foreign Financial Institutions that the 

U.S. Financial System Remained Off Limits to Iran at “Roadshows” ................... 20

E. U.S. and Iranian Officials Discussed the Iranian Assets at Bank Muscat .. 24

F. Treasury Department Officials Drafted a Specific License Authorizing the 

Use of the U.S. Financial System ............................................................................ 27

G. The Treasury Department Issued a Specific License to Convert “Iranian 

Assets” through the “U.S. Financial System” ......................................................... 29

1. A Senior State Department Official Recognized the Specific License 

Authorized a Transaction Otherwise “Prohibited by U.S. Sanctions” ................... 33
2. The Specific License Permitted Converting Future or “Fresh” Funds Using the 

U.S. Financial System .............................................................................................. 34

3. Iranian Concern Continued Even After OFAC Issued the Specific License ... 35

H. Treasury Department Officials Encouraged Two U.S. Financial Institutions 

to Complete the Currency Conversion; the U.S. Financial Institutions Declined . 36

I. The Federal Reserve Bank Received Inquiries Concerning Bank Muscat’s 

Currency Issue, but did not Facilitate the Conversion ........................................... 40

J. After Issuing the Specific License, Treasury and State Department Officials 

Again Denied that Iran was Granted Access to the U.S. Financial System Under 

the JCPOA ................................................................................................................ 43

K. Iranian Funds Remained at Bank Muscat into 2017 .................................... 50

V. CLASSIFIED ANNEX .......................................................................................... 50
1 

I. EXECUTIVE SUMMARY 

For 30 years, the United States and its international partners imposed a 

strict sanctions regime against the Government of Iran to influence Iranian policy. 

In 2011, the United States and other world powers implemented crippling financial 

sanctions on Iran in response to the country’s enrichment of uranium and 

development of nuclear weapons. The sanctions took a toll on the country and its 

people. The pressure of effective sanctions afforded the United States an 

opportunity to work to achieve concessions in exchange for sanctions relief. 

As the United States negotiated with Iran, one important U.S. interest 

consistently remained off-limits: Iran would not be granted access to either the U.S. 

financial system or the U.S. dollar. Foreign financial institutions were free to 

conduct business with the government of Iran and Iranian entities, but U.S. 

financial institutions continued to be barred from engaging Iran. Senior U.S. 

government officials repeatedly testified to Congress that Iranian access to the U.S. 

financial system was not on the table or part of any deal. This notwithstanding, the 

U.S. Department of the Treasury, at the direction of the U.S. State Department, 

granted a specific license that authorized a conversion of Iranian assets worth 

billions of U.S. dollars using the U.S. financial system. Even after the specific 

license was issued, U.S. government officials maintained in congressional testimony 

that Iran would not be granted access to the U.S. financial system. 

Joint Plan of Action. In November 2013, the United States, along with the 

permanent members of the United Nations Security Council (“Security Council”) 

China, France, Russia, and the United Kingdom, plus Germany (collectively known 

as the “P5 +1”) signed the Joint Plan of Action (“JPOA”) with Iran in Geneva, 

Switzerland. The JPOA was a temporary measure that lifted limited economic 

sanctions on Iran in exchange for Iran suspending portions of its nuclear program 

while working towards a permanent solution. The JPOA went into effect in 

January 2014 as the parties negotiated the terms of a permanent deal. 

Joint Comprehensive Plan of Action. In July 2015, Iran and the P5+1 signed 

the Joint Comprehensive Plan of Action (“JCPOA”), which replaced the JPOA. The 

Security Council adopted the JCPOA on October 18, 2015, and the JCPOA went 

into effect on January 16, 2016 (“Implementation Day”). Iran agreed to several 

nuclear-related limitations, including limiting the production of enriched uranium 

for 15 years and granting the International Atomic Energy Agency access to certain 

facilities to monitor compliance with the agreement. 

In exchange, the United States committed to lifting some economic sanctions 

on Iran, including sanctions by the United States on foreign entities and countries 

that conducted business with Iran outside of the United States (commonly referred 

to as “secondary sanctions”). Iran was also allowed to access assets previously 

frozen abroad. On Implementation Day, Iran had $5.7 billion in assets at Bank 

Muscat in Muscat, Oman in Omani rials. 
2 

Notwithstanding this relief, primary U.S. sanctions impacting Iran generally 

remained in place. It remained illegal for U.S. persons, entities, and financial 

institutions to do business with Iran or parties on behalf of Iran. This ban also 

included any “U-Turn” transactions—which are transactions by or on behalf of an 

Iranian bank in which a U.S. bank acted solely as an intermediary to convert one 

foreign currency into dollars and then to another foreign currency. 

U.S. government officials testified before Congress that Iran would not have 

access to the U.S. financial system. Members of Congress raised concerns about 

Iran’s ability to access the dollar and the U.S. financial system under the JCPOA. 

The primary agencies responsible for administering and policing the United States’ 

sanctions program are the Departments of State and Treasury. Several State and 

Treasury Department officials testified before congressional committees concerning 

the relief provided under the JCPOA. For example, in July 2015, Treasury 

Secretary Jack Lew testified before the Senate Foreign Relations Committee that, 

under the JCPOA, Iran “will continue to be denied access to the [U.S.’s] financial 

and commercial market.” Later that same month, the Treasury Department’s 

Acting Under Secretary for Terrorism and Financial Intelligence, Adam Szubin, 

testified to the Senate Banking Committee: “Iranian banks will not be able to clear 

U.S. dollars through New York, hold correspondent account relationships with U.S. 

financial institutions, or enter into financing arrangements with U.S. banks.” 

The message to Congress and the American people was clear: Iran was not 

given access to the U.S. financial system under the terms of the JCPOA. 

U.S. government officials encouraged other countries to do business with Iran. 

Shortly after the P5+1 reached a deal with Iran in July 2015, officials from the 

Departments of State and Treasury traveled the globe meeting with foreign 

financial institutions to encourage business with Iran. Their purpose was to make 

clear that other countries could conduct transactions with Iran, as long as they 

avoided U.S. persons, the U.S. financial system, and U.S. sanctioned Iranians. In 

total, U.S. officials participated in over 200 of these “roadshows” in major cities such 

as London, Geneva, Tokyo, Berlin, Rome, and Paris. The roadshows amounted to 

the U.S. government telling the world that Iran was open for business, as long as 

the rest of the world left the United States out of it. 

During these roadshows, U.S. officials also signaled that it would not 

aggressively enforce violations of the new sanctions regime. For example, during a 

roadshow in London in March 2015 with representatives from 10 major global 

financial institutions, the head of the U.S. Treasury Department’s Office of Foreign 

Asset Control (“OFAC”) assured attendees that “95 percent of the time OFAC sees 

an apparent violation it results in a simple warning letter or no enforcement 

action.” He explained OFAC would only take action in egregious situations. 

Iran requested access to the U.S. dollar. Foreign banks had problems 

converting Iran’s assets. Just days after Implementation Day, Bank Muscat 

contacted OFAC seeking access to the U.S. dollar. The request related to the 
3 

Central Bank of Iran’s (“CBI”) desire to convert the $5.7 billion in assets held by 

Bank Muscat in Omani rials to euros. Because the Omani rial’s value is pegged to 

the U.S. dollar, the conversion through the U.S. financial system required two 

steps. First, the Omani rials had to be converted to U.S. dollars, and, second, the 

U.S. dollars would be converted to euros. But a conversion to U.S. dollars on behalf 

of the CBI was prohibited under U.S. sanctions. Other options existed to convert 

the funds from rials to euros without using the U.S. financial system. But using the 

U.S. dollar as an intermediary step was the most efficient means, even though U.S. 

sanctions prohibited it. 

The inability to convert the funds held at Bank Muscat through the U.S. 

financial system frustrated key Iranian officials. On January 24, 2016, a lead 

Iranian negotiator, wrote to his U.S. State Department counterpart, complaining 

that Iran could not convert its assets as it requested. Confused by Iran’s 

frustration, Treasury officials reviewed the JCPOA and determined it was 

consistent with Iran’s position, allowing the Government of Iran to engage in 

“transfers,” “foreign exchange (including Rial related transactions),” and the 

“purchase or acquisition by the Government of Iran of U.S. bank notes.” After 

reviewing the JCPOA’s relevant provisions, one Treasury official wrote in an email, 

“Yikes. It looks like we committed to a whole lot beyond just allowing the 

immobilized funds to settle out.” 

The Treasury Department issued a specific license granting Iran access to the 

U.S. financial system. Treasury Department officials began working on a specific 

license authorizing Bank Muscat’s transaction. A specific license allows specified 

transactions to occur that would otherwise violate U.S. sanctions. On February 24, 

2016, the Treasury Department issued a specific license to Bank Muscat to 

authorize the conversion of Iran’s rials to euros through “any United States 

depository institution ... involved as a correspondent bank ... where such foreign 

exchange conversion provides an indirect benefit to persons subject to the 

jurisdiction of the Government of Iran.” Iran was then free to use a U.S. bank to act 

as the intermediary (called a “correspondent bank”) to convert its assets at Bank 

Muscat (Omani rials) through the correspondent bank account in the United States 

(U.S. dollars) to a designated bank in Europe (euros). 

OFAC encouraged two U.S. correspondent banks to convert the funds. Even 

with the license, Iran needed a willing U.S. correspondent bank to convert the 

Omani rials. Bank Muscat maintained correspondent relationships with at least 

two U.S. banks. U.S. officials at OFAC contacted both of the banks to encourage 

them to convert the funds. Convincing a U.S. bank to convert the funds was crucial. 

To further encourage the banks, one U.S. government official wrote “I agree it 

would be a good idea to have [Secretary] Lew engage [the U.S. bank]. If they refuse 

we can suggest [Secretary] Kerry will call, which will drive them nuts.” 

Both U.S. banks eventually declined, primarily due to the unwillingness to 

take on the legal and compliance risk posed by the complex conversion, but also 
4 

reputational concerns in doing business with a comprehensively sanction country 

like Iran. Without a willing U.S. correspondent bank, Iran’s assets remained at 

Bank Muscat. 

Treasury and State Department officials sought other ways to move the 

funds. Discussions involved coordinating with the Federal Reserve Bank of New 

York, the Bank for International Settlements, and the Central Bank of Germany. 

None of these alternatives were effectuated. 

The funds remained at Bank Muscat; Iranian officials remained frustrated. 

Iranian officials continued to express great frustration that funds could not be 

converted as requested. In March 2016, one Iranian official wrote to a Senior State 

Department Official that “OFAC is almost all the time invoked as the reason for 

other countries’ unwillingness to let us have unhindered access to our funds 

abroad.” That same Iranian official also wrote, “Please note that our inability to 

convert and use our bank deposits is causing challenges, particularly after the 

[Implementation Day] when we have expected free access and use of our funds 

abroad.” In defense, the Senior State Department Official responded that the 

United States “exceeded our JCPOA commitments by OFAC’s issuing a license to 

enable Bank Muscat to work with any U.S. financial institution to facilitate the 

conversation of assets in the banks from rials to other non-dollar currencies.” That 

same Senior State Department Official also explained that the Bank Muscat 

transaction was “prohibited by U.S. sanctions that are still in place, and which we 

were clear we would not be removing as part of the JCPOA.” 

U.S. officials continued to assure Congress that Iran would not be able to 

access the U.S. financial system. As the Treasury and State Department worked 

behind the scenes to help Iran access the dollar, the message to Congress remained 

the same: The JCPOA did not allow Iran to access the U.S. financial system. 

In March 2016, Senators Marco Rubio and Mark Kirk wrote to the Treasury 

Department to seek clarity on “new reports suggesting the Administration is 

working to give Iran access to the U.S. financial system or to dollar transactions 

outside of the U.S. financial system.” The Treasury Department responded in June 

2016: 

To be clear, the U.S. Department of Treasury is not working on behalf 

of Iran to enable Iranian access to U.S. dollars elsewhere in the 

international financial system, nor are we assisting Iran in gaining 

access to dollar payment systems outside the U.S. financial system. The 

Administration has not been and is not planning to grant Iran access to 

the U.S. financial system. 

Just three months earlier, the same agency issued a specific license for Iran to 

access to the U.S. financial system and the U.S. dollar. 

Eventually, Iranian officials stopped complaining to the State Department 

about the inability to convert their rials into dollars. In the end, State Department 
5 

officials believed Iran moved the money slowly over time by converting small 

amounts of rials directly to euros without using the U.S. financial system. A 

January 2017 State Department email indicated that Iran still “expressed concern” 

that the Iranian fund issue remained fully unresolved. 

II. FINDINGS OF FACTS AND RECOMMENDATIONS 

Findings of Fact 

(1) Under the JPOA, Iran transferred roughly $13.4 billion in oil 

revenue assets to restricted accounts overseas. Iran deposited $8.8 

billion of that oil revenue in one restricted account at Bank Muscat in 

Muscat, Oman. 

(2) Following Implementation Day for the JCPOA, Iran began to seek 

the benefits of the deal, including requesting access to assets 

frozen in restricted accounts. While other countries were free to do 

business with Iran, primary sanctions by the United States remained in 

place under the terms of the JCPOA. This meant it continued to be illegal 

for U.S. persons and entities to do business with Iranian persons and 

entities. 

(3) Iran requested access to the U.S. financial system. Three days after 

Implementation Day, Bank Muscat contacted OFAC on behalf of the 

Central Bank of Iran. Bank Muscat sought to convert $5.7 billion in Omai 

rials into euros on behalf of Iran. Because the rial is pegged to the U.S. 

dollar, the most efficient conversion was with an intermediary step 

through a U.S. bank using U.S. dollars. However, other options to convert 

the rials into euros without using the U.S. dollar existed. 

(4) U.S. government officials testified before Congress that Iran was 

not granted access to the U.S. financial system under the JCPOA. 

In July 2015, Treasury Secretary Jack Lew testified before the Senate 

Foreign Relations Committee that, under the JCPOA, Iran “will continue 

to be denied access to the [U.S.’s] financial and commercial market.” 

Later that same month, the Treasury Department’s Acting Under 

Secretary for Terrorism and Financial Intelligence, Adam Szubin, testified 

to the Senate Banking Committee: “Iranian banks will not be able to 

clear U.S. dollars through New York, hold correspondent account 

relationships with U.S. financial institutions, or enter into financing 

arrangements with U.S. banks.” Ambassador Thomas Shannon from the 

State Department testified that there would not be an “exchange of 
6 

dollars inside the U.S. financial system” and that Iran would not have 

access to the larger U.S. financial system. 

(5) The Treasury Department issued a specific license to authorize 

Iran’s assets at Bank Muscat to be converted to U.S. dollars 

through the U.S. financial system. On February 24, 2016, OFAC 

issued a specific license to Bank Muscat authorizing Iranian assets worth 

roughly $5.7 billion to flow through the U.S. financial system. The Bank 

Muscat specific license expired on February 28, 2017. 

(6) For the duration of the specific license, Bank Muscat was 

authorized to use the U.S. financial system to convert additional 

future Iranian deposits, known as “fresh funds.” One Bank Muscat 

executive wrote this was a “gigantic breakthrough which has assured Iran 

of almost full global financial inclusion.” 

(7) U.S. government officials encouraged two U.S. banks to convert 

Iran’s rials. Following the issuance of the specific license, OFAC 

contacted two U.S. banks to convert Iran’s rials to U.S. dollars. A State 

Department official even suggested that Secretary Kerry or Secretary Lew 

should contact the U.S. banks and encourage them to facilitate the 

conversion. Both banks declined to complete the transaction due to 

compliance, reputational, and legal risks associated with doing business 

with Iran. 

(8) The Senior State Department Official negotiating implementation 

of the JCPOA understood giving Iran access to the U.S. financial 

system was prohibited by U.S. sanctions and outside the relief 

under the JCPOA or JPOA. That official wrote to his Iranian 

counterpart that the specific license “exceeded” the U.S. commitments 

under the JCPOA. He continued that the Treasury Department 

authorized the transaction “as a gesture of support” to Iran. 

(9) Treasury Department officials strongly considered issuing a 

general license authorizing all foreign financial institutions to 

conduct similar transactions using the U.S. financial system to 

convert Iranian assets. One official at the National Security Council 

emailed concerns about linking the general license to the JCPOA. In 

response, a Treasury Department official disagreed and asserted a general 

license must be linked to the JCPOA and revoked in the event of a 

snapback. That general license was never issued once it was evident that 

U.S. financial institutions did not appear eager to conduct foreign 

currency exchanges on behalf of Iran. 
7 

(10) Materials prepared for Treasury Secretary Lew to testify before 

Congress about the JCPOA suggested he disclose the specific 

license to Bank Muscat “if pressed.” In his testimony, Secretary Lew 

did not disclose the specific license authorizing Iran to access the U.S. 

financial system. In fact, the Treasury Department maintained Iran was 

not given access to the U.S. financial system, nor was the U.S. 

government working to give them access. 

(11) When the two U.S. correspondent banks declined to convert the 

funds, other options were considered. The other options considered 

included Bank Muscat coordinating with the Federal Reserve Bank of 

New York, the Bank for International Settlements, and the Central Bank 

of Germany. None of these options were effectuated. 

(12) The State Department and Treasury Department held at least 200 

meetings or “roadshows” around the world to encourage other 

countries to do business with Iran. Treasury Department officials 

downplayed any potential future penalties or fines, stating that 95 percent 

of the time, OFAC sends a warning letter or takes no action. And at least 

one European regulator who attended an OFAC roadshow, commented 

that foreign financial institutions felt “political pressure” to conduct 

business with Iran and Iranian companies. 

(13) Treasury Department officials proactively contacted foreign 

financial institutions to provide information about the JCPOA’s 

sanctions relief. In one example, an OFAC compliance officer 

proactively contacted a foreign financial institution to make sure they 

“understood Iran sanctions relief.” The communication left the foreign 

financial institution confused, since that foreign financial institution “had 

no business with Iran.” 

(14) Iran’s assets remained at Bank Muscat. Despite issuing the specific 

license to allow Iran to access the U.S. financial system, Bank Muscat was 

unable to effectuate the conversion using the U.S. dollar. The State 

Department indicated Iran converted the funds in small increments using 

European banks and without accessing the U.S. financial system. 

Recommendations 

(1) Informed future negotiations with Iran. The current Administration 

should be aware of the importance of Iran accessing the U.S. financial 

system in any future negotiations regarding sanctions relief with Iran. 

The Administration should brief congressional committees of jurisdiction 
8 

and oversight committees periodically and on request of the status of any 

future negotiations. 

(2) Congress should require the Treasury Department to provide 

notice of any specific license to Congress. The notice to Congress 

should be provided to all congressional committees of jurisdiction and 

oversight committees within a reasonable time prior to the license taking 

effect. The notice should, at minimum, include a copy of the specific 

license. 

(3) Understand other sanctions relief granted to Iran. The Treasury 

Department should immediately provide all JPOA and JCPOA related 

specific licenses and comfort letters to congressional committees of 

jurisdiction and oversight committees. 

(4) Agencies should increase coordination with regard to sanctions. 

The State and Treasury Departments should closely coordinate when 

discussing sanctions relief to ensure that State Department policy goals 

can be properly executed with Treasury Department tools, such as general 

or specific licenses. 

(5) Increased policing of U.S. sanctions policies. OFAC should 

effectively police U.S. sanctions and ensure the current sanctions regime 

is properly enforced. OFAC officials should also refrain from telling 

foreign persons and entities that violations of U.S. sanctions only result in 

an enforcement action five percent of the time. 

III. BACKGROUND 

A. United States’ Sanctions Against Iran 

United States’ sanctions have been a “significant component of U.S. Iran 

policy for decades.”1 “The United States has imposed restrictions on activities with 

Iran under various legal authorities since 1979, following the seizure of the U.S. 

Embassy in Tehran.”2 While sanctions on Iran were partially lifted following the 

release of hostages in 1981, the United States continued to apply significant 

sanctions on Iran through a number of Executive Orders and statutory authorities.3 

 

1 Kenneth Katzman, Iran Sanctions, Cong. Research Service, at 1 (Apr. 18, 2018) (“Katzman”). 2 Iran Sanctions, U.S. Dep’t of State, https://www.state.gov/e/eb/tfs/spi/iran/index.htm. 

3 See i.e, Exec. Order No. 12205 (Apr. 17, 1980); Exec. Order No. 12277 (Jan. 23, 1981); Exec. Order 

No. 12278 (Jan. 23, 1981); Exec. Order No. 12280 (Jan. 23, 1981); Exec. Order No. 12613 (Oct. 30, 

1987); Exec. Order No. 12959 (May 9, 1995); Exec. Order No. 13059 (Aug. 19, 1997); Exec. Order No. 
9 

In 2010, a series of European Union and United Nations finance and trade-related 

sanctions also increased pressure on Iran’s economy as oil output dropped and 

Iran’s economy floundered.4 As the sanctions successfully pressured the Iranian 

economy, the United States undertook efforts to negotiate certain sanctions relief in 

exchange for concessions regarding Iran’s nuclear program.5

1. The Joint Plan of Action 

On November 24, 2013, a group of countries known as the P5+1—China, 

France, Germany, Russia, the United Kingdom, and the United States—reached a 

preliminary understanding with Iran, which was identified as the Joint Plan of 

Action (“JPOA”).6 The U.S. State Department described the JPOA as the “first 

meaningful limits Iran has accepted on its nuclear program in close to a decade” 

and sought to constrain Iran’s nuclear program while providing the country with 

“sanctions relief [focused] on a limited number of commercial activities and 

associated services.”7 When announcing the deal, however, U.S. officials 

maintained that sanction reductions were “limited, temporary, targeted, and 

reversible.”8 

The JPOA focused on freezing aspects of Iran’s nuclear program to provide 

time to negotiate a comprehensive understanding.9 If Iran complied and refrained 

from “any further advances of its [nuclear] activities,” the JPOA promised Iran 

certain, limited financial relief.10 Specifically, the sanctions relief involved several 

commercial sectors and activities, including “exports of petrochemical products; 

Iran’s purchase and sale of gold and precious metals; the provision of goods and 

services to Iran’s automotive sector; and the licensing of safety-of-flight inspections 

and repairs for Iranian civil aviation.”11

 

13553 (Sept. 28, 2010); Exec. Order No. 13574 (May 23, 2011); Exec. Order No. 13590 (Nov. 20, 

2011); Exec. Order No. 13599 (Feb. 5, 2012); Exec. Order No. 13606 (Apr. 22, 2012); Exec. Order No. 

13622 (July 30, 2012); Exec. Order No. 13645 (June 3, 2013). 

4 Katzman, at 56-60. 

5 Id. at Summary (“The multilateral nuclear accord (Joint Comprehensive Plan of Action, or JCPOA) 

provides Iran broad relief from U.S., U.N., and multilateral sanctions on Iran’s civilian economic 

sectors, including U.S. secondary sanctions (sanctions on foreign firms that do business with Iran).”). 

6 Press Release, Overview of Temporary Suspension of Certain U.S. Sanctions Pursuant to the Initial 

Understanding Between the P5+1 and Iran, U.S. Dep’t of State (Jan. 20, 2014) (hereinafter 

Temporary Suspension), https://2009-2017.state.gov/r/pa/prs/ps/2014/01/220046.htm. 

7 Id. 

8Press Release, Fact Sheet: First Step Understandings Regarding the Islamic Republic of Iran’s 

Nuclear Program, White House (Nov. 23, 2013), https://obamawhitehouse.archives.gov/the-pressoffice/2013/11/23/fact-sheet-first-step-understandings-regarding-islamic-republic-iran-s-n. 

9 Id. 10 Kenneth Katzman & Paul Kerr, Iran Nuclear Agreement, Cong. Research Service, at 5 (Oct. 25, 

2017). 

11 Temporary Suspension. 
10 

One component of the JPOA relief included giving Iran access to some of its 

oil revenues held outside Iran and outside the United States.12 Between January 

20, 2014 and July 20, 2014, Iran was given access to the oil revenue worth roughly 

$4.2 billion through several installments.13 These installments released oil 

revenues held in countries such as Japan, South Korea, and India, after which they 

were transferred to Oman, Switzerland, or the United Arab Emirates.14 The JPOA 

also permitted “nearly $15 billion of [Iran’s] revenues during [the JPOA] period [to] 

go into restricted overseas accounts.”15 These restricted accounts held Iranian 

funds “to establish financial channels to facilitate Iran’s import of certain 

humanitarian goods to Iran, payment of medical expenses incurred by Iranians 

abroad, payments of Iran’s UN obligations” and other negotiated payments.16 

While the understanding was reached in November 2013, it was not 

implemented until January 20, 2014, with an initial expiration date of July 20, 

2014.17 That deadline was extended five times until a comprehensive 

understanding was reached on July 14, 2015.18

2. The Joint Comprehensive Plan of Action 

On July 14, 2015, following nearly 20 months of negotiations, the P5+1, the 

European Union (“E.U.”), and Iran came to an understanding on a Joint 

Comprehensive Plan of Action (“JCPOA”).19 The aim was to “ensure the exclusively 

 

12 Press Release, Fact Sheet: First Step Understandings Regarding the Islamic Republic of Iran’s 

Nuclear Program, White House (Nov. 23, 2013), https://obamawhitehouse.archives.gov/the-pressoffice/2013/11/23/fact-sheet-first-step-understandings-regarding-islamic-republic-iran-s-n. 

13 Frequently Asked Questions Relating to the Temporary Sanctions Relief to Implement the Joint 

Plan of Action between the P5 + 1 and the Islamic Republic of Iran, U.S. Dep’t of Treasury (Jan. 20, 

2014), https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jpoa_faqs.pdf. 14 PSI BM – 000326. 

15 Press Release, Fact Sheet: First Step Understandings Regarding the Islamic Republic of Iran’s 

Nuclear Program, White House (Nov. 23, 2013), https://obamawhitehouse.archives.gov/the-pressoffice/2013/11/23/fact-sheet-first-step-understandings-regarding-islamic-republic-iran-s-n.

16 Frequently Asked Questions Relating to the Temporary Sanctions Relief to Implement the Joint 

Plan of Action between the P5 + 1 and the Islamic Republic of Iran, U.S. Dep’t of Treasury (Jan. 20, 

2014), https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jpoa_faqs.pdf. 

17 JCPOA, available at https://www.state.gov/e/eb/tfs/spi/iran/jcpoa/.

18 Louis Charbonneau & Fredrik Dahl, Iran warned of ‘last chance’ in nuclear talks after deadline 

missed, Reuters (Jul. 18, 2014), https://www.reuters.com/article/us-iran-nuclear/iran-warned-of-lastchance-in-nuclear-talks-after-deadline-missed-idUSKBN0FN27020140719; George Jahn, Iran Nuke 

Talks Face Obstacles Even With More Time, Assoc. Press (Nov. 25, 2015), 

https://web.archive.org/web/20141129130025/http://hosted.ap.org/dynamic/stories/I/IRAN_NUCLEA

R_TALKS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-11-24-07-58-13. 

Michael R. Gordon, Deal Reached on Iran Nuclear Program; Limits on Fuel Would Lesson With 

Time, N.Y. Times (Jul. 14, 2015), https://www.nytimes.com/2015/07/15/world/middleeast/irannuclear-deal-is-reached-after-long-negotiations.html. 

19 JCPOA, available at https://www.state.gov/e/eb/tfs/spi/iran/jcpoa/. 
11 

peaceful nature of Iran’s nuclear program.”20 The deal touted “the comprehensive 

lifting of all U.N. Security Council sanctions as well as multilateral and national 

sanctions related to Iran’s nuclear program ... including steps on access in areas of 

trade, technology, finance, and energy.”21 The JCPOA sought to “enable Iran to 

fully enjoy its right to nuclear energy for peaceful purposes under the relevant 

articles of the nuclear Non-Proliferation Treaty.”22

Annex V of the JCPOA outlined a multi-step implementation plan that 

provided for a Finalization Day, an Adoption Day, an Implementation Day, a 

Transition Day, and an U.N. Security Council Resolution (“UNSCR”) Termination 

Day.23 Implementation Day occurred on January 16, 2016, following the 

International Atomic Energy Agency’s (“IAEA”) and the U.S. Secretary of State’s 

verification and confirmation that Iran “implemented its key nuclear-related 

measures described in the JCPOA.”24 Implementation Day marked the date on 

which the United States lifted its nuclear-related sanctions related to Iran, as 

specified in the JCPOA.25

Iran’s nuclear-related commitments included restrictions on Iran’s 

enrichment capability.26 For example, Iran was prohibited from installing 

“additional heavy water reactors or accumulati[ng] ... heavy water” for 15 years.27 

Iran was permitted to maintain a heavy water reactor in Arak, Iran, for the purpose 

of “peaceful nuclear research and radioisotopes production for medical and 

industrial purposes.”28 Finally, Iran had to “allow the IAEA to monitor the 

implementation of the voluntary measures for their respective durations, as well as 

to implement transparency measures, as set out in this JCPOA and its Annexes.”29

In return, the United States committed to lifting “all nuclear-related 

sanctions.”30 This impacted a variety of U.S. secondary sanctions focusing on 

 

20 JCPOA, Preamble and General Provisions, at ii. 

21 Id. at v. 22 Id. at iv. See also Carl Behrens, Nuclear Nonproliferation Issues, Cong. Research Service (Jan. 20, 

2006) (“Under the terms of the [Treaty on the Nonproliferation of Nuclear Weapons], the five 

declared nuclear weapons states — the United States, the United Kingdom, Russia, France and 

China — agreed ‘not in any way to assist’ any nonweapons state to acquire nuclear weapons. They 

also agreed to reduce and eventually eliminate their own nuclear arsenals.”). 

23 JCPOA at Annex V. 

24 Secretary of State’s Confirmation of IAEA Verification, U.S. Dep’t of State (Jan. 16, 2016), 

https://www.state.gov/e/eb/rls/othr/2016/251284.htm; JCPOA Implementation, U.S. Dep’t of Treasury 

(Jan. 16, 2016), https://www.treasury.gov/resource-center/sanctions/OFACEnforcement/Pages/jcpoa_implementation.aspx. 

25 Id. 

26 See JCPOA, Annex I. 

27 Id. at § 10. 

28 Id. at Annex I § 2. 

29 Id. at § 15. 

30 Id. at Annex II § 4. 
12 

Iranian economic sectors, including finance, banking, insurance, energy and 

petrochemical, shipping, shipbuilding, precious metals, software, and automobiles.31 

Among the items included in the JCPOA sanctions relief package were the removal 

of “bilateral trade limitations on Iranian revenues held abroad, including 

limitations on their transfer.”32 The United States also “removed over 400 

individuals and entities” from OFAC’s List of Specially Designated Nationals and 

Blocked Persons (SDN List), which included the Central Bank of Iran and 

additional Iranian financial institutions.33

Notwithstanding this relief, primary U.S. sanctions impacting Iran generally 

remained in place. For example, Iran continued to be banned from directly 

accessing the U.S. financial system, including “U-Turn” transactions.34 “U-Turns” 

are “transactions with non-Iranian foreign banks that were handling transactions 

on behalf of an Iranian bank.”35 Before they were banned in 2008, U-Turn 

transactions were initiated by one non-U.S. financial institution and “passed 

through the U.S. financial system en route to another offshore, non-Iranian, nonU.S. financial institution.”36

B. United States Sanctions Enforcement 

Sanctions remain a critical tool in combatting national security threats and 

advancing foreign policy objectives. Several U.S. government agencies create, 

administer, and enforce sanctions. These agencies have separate and distinct roles, 

but together they establish U.S. policy. Two of the primary federal agencies tasked 

with administering and enforcing sanctions regimes are the Treasury Department 

and the State Department. 

1. The United States Treasury Department 

Congress established the Treasury Department in 178937 as the executive 

agency responsible for promoting economic prosperity and ensuring financial 

security.38 The Treasury Department’s mission is to “maintain a strong economy 

 

31 Id. at Annex II, §§ 4.1 to 5.1.3. 

32 Id. at Annex II § 4.1.4. 

33 Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions Under the Joint 

Comprehensive Plan of Action (JCPOA) on Implementation Day, U.S. Dep’t of Treasury (Jan. 16, 

2016), https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf. 

34 See, infra, Sections C, G(1), & J. See also Katzman, at 29. 

35 Katzman, at 29. 36 Press Release, Treasury Revokes Iran’s U-turn License, U.S. Dep’t of Treasury (Nov. 6, 2008), 

https://www.treasury.gov/press-center/press-releases/Pages/hp1257.aspx. 

37 Act of Congress Establishing the Treasury Department, U.S. Dep’t of Treasury, 

https://www.treasury.gov/about/history/Pages/act-congress.aspx. 

38 Duties and Functions of the U.S. Department of the Treasury, U.S. Dep’t of Treasury (Jan. 4, 2018), 

https://www.treasury.gov/about/role-of-treasury/Pages/default.aspx.
13 

and create economic and job opportunities by promoting the conditions that enable 

economic growth and stability at home and abroad, strengthen national security by 

combatting threats and protecting the integrity of the financial system, and manage 

the U.S. Government’s finances and resources effectively.”39 The Treasury 

Department’s wide range of responsibility reflects its central role in the U.S. 

economic and financial systems. 

The Treasury Department also performs the critical national security role of 

implementing economic sanctions against foreign actors and entities.40 Established 

in 2004, the Treasury Department’s Office of Terrorism and Financial Intelligence 

is responsible for providing policy, strategy, and guidance concerning combatting 

terrorist financing and enforcing economic sanctions programs.41 The term 

“sanction” typically refers to comprehensively or selectively “using the blocking of 

assets and trade restrictions to accomplish foreign policy and national security 

goals.”42 

The Office of Foreign Assets Control (“OFAC”), within the Office of Terrorism 

and Financial Intelligence, reports directly to the Undersecretary for Terrorism and 

Financial Crimes.43 OFAC is responsible for administering and enforcing economic 

and trade sanctions based on U.S. foreign policy and national security goals.44 

OFAC implements sanctions based on “[p]residential national emergency powers, as 

well as authority granted by specific legislation, to impose controls on transactions 

and freeze assets under U.S. jurisdiction.”45

OFAC focuses its targeting on sanctions that are “expected to generate the 

most impact in achieving [U.S.] national security and foreign policy goals.”46 For 

example, on November 30, 2017, OFAC Director John Smith testified before the 

House Committee on Financial Services Subcommittee on Monetary Policy and 

Trade, “when deployed strategically and with precision, sanctions are a highly 

effective way of pressuring regimes and malign actors to change their behavior.”47 

Director Smith further asserted that: 

 

39 Id. 

40 Id. 41 31 U.S.C. § 312. 

42 Resource Center: Basic Information on OFAC and Sanctions, U.S. Dep’t of Treasury (Oct. 31, 

2017), https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#basic. 

43 Id. 44 Terrorism and Financial Intelligence: Office of Foreign Assets Control (OFAC), U.S. Dep’t of 

Treasury (Feb. 6, 2018), https://www.treasury.gov/about/organizationalstructure/offices/Pages/Office-of-Foreign-Assets-Control.aspx.

45 Id.

46 Press Release, Testimony of John E. Smith, Director of the Office of Foreign Assets Control, U.S. 

Dep’t of Treasury (Nov. 30, 2017), available at https://www.treasury.gov/press-center/pressreleases/Pages/sm0226.aspx. 47 Id.
14 

[B]y freezing the assets of illicit actors, cutting them off from the U.S. 

financial system, and restricting their ability to interface with the 

international financial system, the choice to them becomes clear: either 

modify your behavior or accept the isolation and negative economic 

effects of remaining on our financial blacklist.48

OFAC also has the ability to define “prohibited transactions,” which are 

“trade or financial transactions and other dealings in which U.S. persons may not 

engage unless authorized by OFAC or expressly exempted by statute.”49 

Additionally, OFAC can “block” assets by freezing the exercise of powers and 

privileges normally associated with the targeted property unless the owner receives 

OFAC’s authorization.50 

a. OFAC can Authorize Otherwise Prohibited Transactions 

using General Licenses and Specific Licenses 

In certain situations, OFAC can authorize transactions otherwise prohibited 

by issuing general or specific licenses.51 A general license “authorizes a particular 

type of transaction for a class of persons without the need to apply for a license.”52 

A specific license is “a written document issued by OFAC to a particular person or 

entity, authorizing a particular transaction in response to a written license 

application.”53 Parties engaging in transactions pursuant to licenses “must make 

sure that all conditions of the licenses are strictly observed.”54 General licenses are 

publicly available, whereas specific licenses are not.55

In addition to issuing licenses, OFAC can also issue “comfort letters” that 

provide assurances that certain transactions are authorized by the Treasury 

Department or that the proposed transactions are not prohibited or sanctionable.56 

Comfort letters are designed to alleviate concerns of receiving penalties from the 

U.S. government for conducting certain transactions, but they do not provide an 

 

48 Id. 49 Resource Center: Basic Information on OFAC and Sanctions, U.S. Dep’t of Treasury (Oct. 31, 

2017), https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#basic. 

50 Id.

51 Id.

52 Id. 53 Id.

54 Id. 55OFAC FAQs: General Questions, U.S. Dep’t of Treasury (Apr. 12, 2018), 

https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#licenses. 

56 See Letter from Eric Thorson, Inspector General, Dep’t of the Treasury, to Hon. Orrin Hatch, 

Chairman, S. Comm. on Finance (Nov. 10, 2016), https://www.treasury.gov/about/organizationalstructure/ig/Audit%20Reports%20and%20Testimonies/OIG-CA-17-

006%20Iran%20Payment%20Inquiry.pdf. 
15 

authorization like a general or specific license.57 Rather, a comfort letter provides 

the receiving party assurance that an action is not subject to sanctions.58

2. The United States Department of State 

The State Department also plays a critical role in creating and enforcing U.S. 

sanctions. The State Department’s Deputy Assistant Secretary for Counter Threat 

Finance and Sanctions within the Bureau of Economic and Business Affairs is 

responsible for coordinating sanctions regimes, developing strategies for 

implementing specific aspects of sanctions regimes, providing foreign policy 

guidance to other bureaus and agencies, and promoting financial transparency.59 

The Economic and Business Affairs Bureau includes two sanctions-related offices: 

the Office of Economic Sanctions Policy and Implementation and the Office of 

Threat Finance Countermeasures.60

The Office of Economic Sanctions Policy and Implementation is “responsible 

for developing and implementing foreign policy-related sanctions adopted to counter 

threats to national security posed by particular activities and countries.”61 It 

focuses on building international support for economic sanctions, providing foreign 

policy guidance on sanctions implementation to the Treasury Department and the 

Department of Commerce, and working with Congress to draft legislation that 

advances U.S. foreign policy goals through sanctions.62 The goal is to enforce 

sanctions in a way that maximizes economic impact on the targeted entity while 

minimizing damage to U.S. economic interests. 

The Office of Threat Finance Countermeasures is responsible for developing 

policies that seek to minimize the funding available to groups posing threats to U.S. 

interests and security.63 The office develops policies that target groups that exploit 

illicit trade to finance operations against legitimate governments. It also 

 

57 Id.; See also Comments and Recommendations for Guidance Pertaining to the Transfer Pricing of 

Related Party Guarantees, American Bar Association, at 11 (Sep. 13, 2012), 

https://www.americanbar.org/content/dam/aba/administrative/taxation/policy/091312comments.auth

checkdam.pdf (explaining that in the financial guarantee context, comfort letters are further down 

the “spectrum of enforceability.”). 

58 Letter from Eric Thorson, Inspector General, Dep’t of the Treas., to Hon. Orrin Hatch, Chairman, 

S. Comm. on Finance, at 8 (Nov. 10, 2016), https://www.treasury.gov/about/organizationalstructure/ig/Audit%20Reports%20and%20Testimonies/OIG-CA-17-

006%20Iran%20Payment%20Inquiry.pdf. 

59 Counter Threat Finance and Sanctions, U.S. Dep’t of State, https://www.state.gov/e/eb/tfs/. 

60 Id. 

61 Economic Sanctions Policy and Implementation, U.S. Dep’t of State, 

https://www.state.gov/e/eb/tfs/spi/.

62 Id.

63 Threat Finance Countermeasures, U.S. Dep’t of State, https://www.state.gov/e/eb/tfs/tfc/index.htm. 
16 

coordinates with a wide range of domestic agencies and international partners in 

pursuit of U.S. foreign policy and security objectives.64

IV. FINDINGS OF FACT 

This report details four principal findings. First, after the JPOA and the 

JCPOA, Iran collected assets worth billions of U.S. dollars in overseas restricted 

accounts from oil sales. Following the JCPOA’s Implementation Day, the Central 

Bank of Iran requested to convert its funds in Omani rials located at Bank Muscat 

to euros. Bank Muscat wanted to use the U.S. financial system to efficiently 

complete the bulk conversion as an intermediary conversion to U.S. dollars between 

Omani rials and euros. Second, even though other options existed, Treasury 

Department officials drafted and issued a specific license authorizing Bank Muscat 

to convert the Iranian assets using the U.S. financial system. The specific license is 

at odds with senior administration officials’ testimony before Congress that Iran 

would not receive access to the U.S. financial system. Third, Treasury Department 

officials encouraged at least two U.S. financial institutions to facilitate the 

conversion authorized by the specific license. Both financial institutions refused. 

And fourth, Bank Muscat eventually converted the Iranian assets in small amounts 

without using the U.S. financial system. 

A. Iran Collected Billions in Overseas Restricted Accounts 

As part of the JPOA and JCPOA negotiated sanctions relief, the United 

States permitted Iran access to its oil revenue worth roughly $13.4 billion held in 

restricted accounts outside of Iran.65 Iran ultimately distributed those funds to 

restricted accounts at several financial institutions outside both the United States 

and Iran—including Oman, Japan, South Korea, India, Switzerland, and the United 

Arab Emirates.66 Bank Muscat, located in Muscat, Oman, received more than 65 

percent of the total funds.67 

Between March 2015 and October 2015, Bank Muscat accepted 

approximately $8.8 billion in JPOA-related oil revenue in 17 installments.68 Bank 

Muscat also facilitated the repatriation of the equivalent of approximately $2.4 

billion in Emirati dirham banknotes by converting Omani rials to Emirati dirham 

banknotes.69 Additionally, using the Bank Muscat assets, the Central Bank of 

 

64 Id. 65 Briefing with the U.S. Dep’t of Treasury (Sept. 13, 2017); Interview with Sandra Oudkirk, U.S. 

State Dep’t, Bureau of Energy Resource, Deputy Assistant Sec’y (Oct. 17, 2017) (hereinafter Oudkirk 

Interview (Oct. 17, 2017)). 

66 PSI BM – 00326. 

67 Briefing with the U.S. Dep’t of Treasury (Sept. 13, 2017). 

68 Id. 69 PSI_BM_000596. 
17 

Oman provided approximately $600 million worth of Omani rial banknotes to Iran 

and “facilitated several trade-related transactions on behalf of Iran.”70 

As of Implementation Day, Iran’s balance at Bank Muscat was approximately 

$5.7 billion in Omani rials—the local currency.71 

B. Bank Muscat Informed OFAC it Required the U.S. Financial 

System to Convert the Iranian Assets 

Following Implementation Day, the CBI requested that Bank Muscat convert 

its assets at the bank from Omani rials to euros.72 This would not be a simple 

Omani rial to euro exchange. According to an Iranian official, to convert Omani 

rials to euros, the bank needed to use the U.S. dollar as a “bridge” or “leg.”73 In 

other words, Bank Muscat would first have to sell Omani rials and buy U.S. dollars, 

and then sell those U.S. dollars to buy euros.74 The purchase and sale of U.S. 

dollars in this case would therefore require a U.S. financial institution to complete 

the currency conversion.75 The U.S. financial system remained off limits to Iran 

unless authorized by OFAC under existing law.76 The relief specified in the JCPOA, 

however, did not include such access to the U.S. financial system. 

Upon receiving the CBI’s request, Bank Muscat contacted U.S. government 

officials to seek permission to effectuate Iran’s requested conversion.77 In 

approaching the U.S. government, Bank Muscat claimed it would be impossible to 

complete Iran’s requested conversion to euros without first changing the Omani 

rials to U.S. dollars.78 According to a contemporaneous internal Treasury 

Department analysis, the foreign transaction could also be “cheaper and more 

efficient when financial institutions utilize the [U.S. dollar] to convert two non-[U.S. 

dollar] currencies.”79 A Bank Muscat executive also expressed frustration that the 

 

70 Id. 71 Id. 72 PSI-000046. 

73 PSI000456 (OFAC OFFICIAL 1 explained to a lead Iranian negotiator that “that there may be a 

dollar leg in most currency conversions” because Omani rial is “pegged” or fixed to the U.S. dollar); 

Oudkirk Interview (Oct. 17, 2017). 

74 PSI BM – 000341 (A Treasury Department memo describes how the proposed conversion would 

take place: “In this process, the purchase and/or sale of USD generally involves a U.S. financial 

institution, though the U.S. financial institution would have no actual knowledge or reason to know 

the identity of the Omani financial institutions’ client (including whether the client was subject to 

OFAC sanctions.”). 

75 Id. 76 See Section C; Katzman, at 29 (“U.S. regulations ban Iran from direct access to the U.S. financial 

system”). 

77 Briefing with the U.S. Dep’t of Treasury (Sept. 13, 2017); Oudkirk Interview (Oct. 17, 2017). 

78 Id. 79 PSI BM 000325. 
18 

primary sanctions banning the use of the U.S. financial institution created a 

“challenge to convert one currency to another.”80 

In this case, the primary hurdle was that the Omani rial is “pegged” to the 

U.S. dollar.81 In 1986, Oman created a fixed exchange rate and established a .38 

Omani rial peg to the U.S. dollar.82 A draft Treasury Department background 

memorandum, as shown below, described the process for a foreign financial 

institution to exchange Omani rials to euros with a middle exchange using the U.S. 

dollar: 

83

Even before Implementation Day, Bank Muscat expressed difficulty in 

planning for the currency conversion to OFAC officials. For example, according to 

one Bank Muscat executive, “As early as last Thursday 14th Jan[uary] bank 

representatives communicated with OFAC officials” about currency conversion 

troubles.84 The bank’s executive made “several attempts to get a response from 

OFAC” but was unable to “reach any one in their office.”85 While it was initially 

perceived as a “very straight forward issue” by a lead Iranian negotiator for 

 

80 PSI BM 000296. 

81 PSI BM 000325-000326. 

82 Luiz Lino, Sustaining the GCC Currency Pegs: The Need for Collaboration, Brookings (Feb. 19, 

2018), https://www.brookings.edu/research/sustaining-the-gcc-currency-pegs-the-need-forcollaboration/. 83 PSI BM 000326. 

84 PSI BM 000296-000297. 

85 PSI BM 000297. 
19 

financial issues, the billions held by Bank Muscat eventually required actions by 

both the Treasury Department and State Department over the next several 

months.86

C. Treasury Department Officials Assured Congress that Iran 

would not Receive Access to the U.S. Financial System 

In the year leading up to Implementation Day, congressional committees held 

hearings to discuss the scope and nature of the financial relief that the terms of the 

JCPOA would provide to Iran. On at least four occasions, administration officials 

publicly stated that Iranian access to the U.S. financial system was not part of the 

relief specified in the JCPOA. 

First, on July 23, 2015, U.S. Treasury Secretary Jack Lew testified before the 

U.S. Senate Committee on Foreign Relations concerning the nature of the potential 

sanctions relief contained in the JCPOA. Secretary Lew stated that the JCPOA 

would “suspend nuclear-related secondary sanctions,” but that “a number of key 

sanctions will remain in place.”87 Specifically, Secretary Lew explained that 

“Iranian banks will not be able to clear U.S. dollars through New York, hold 

correspondent account relationships with U.S. financial institutions, or enter into 

financing arrangements with U.S. banks.”88 He further testified that “Iran, in other 

words, will continue to be denied access to the world’s largest financial and 

commercial market.”89

Second, on August 5, 2015, Adam Szubin, the Acting Under Secretary of the 

Treasury for Terrorism and Financial Intelligence, testified before the U.S. Senate 

Committee on Banking, Housing, and Urban Affairs that “Iran will be denied access 

to the world’s most important market and unable to deal in the world’s most 

important currency,” referring to the U.S. financial system and the U.S. dollar.90 

He also stated that “Iranian banks will not be able to clear U.S. dollars through 

New York, hold correspondent account relationships with U.S. financial 

institutions, or enter into financing arrangements with U.S. banks.”91

 

86 PSI_BM_000647. 

87 Iran Nuclear Deal, Hearing Before the S. Comm. On Foreign Relations, 114th Cong. (2015) 

(testimony of Jacob J. Lew, Secretary, U.S. Department of the Treasury); Press Release, Testimony 

of Treasury Secretary Jacob J. Lew before the Senate Foreign Relations Committee on the Iran 

Nuclear Agreement, U.S. Dep’t of Treasury (July 23, 2015). 

88 Id. 89 Press Release, Testimony of Treasury Secretary Jacob J. Lew before the Senate Foreign Relations 

Committee on the Iran Nuclear Agreement, U.S. Dep’t of Treasury (July 23, 2015). 90 Assessing the Nature, Implications, and Potential Consequences of Iran Sanctions Relief that are 

Proposed to be Provided to Iran in Return for the Nuclear-Related Commitments Set Forth in the 

Joint Comprehensive Plan of Action, 114th Cong. (2015), (oral testimony of Adam Szubin, Acting 

Under Secretary of Treasury for Terrorism and Financial Crimes, U.S. Department of the Treasury). 

91 Id. 
20 

Third, in testimony before the U.S. Senate Committee on Banking, Housing, 

and Urban Affairs on September 17, 2015, Mr. Szubin again assured lawmakers 

that “no Iranian banks can access the U.S. financial system, not to open an account, 

not to purchase a security, and not even to execute a dollarized transaction where a 

split–second’s worth of business is done in a New York clearing bank.”92

Fourth, on September 16, 2015, Mr. Szubin gave a public address to the 

Washington Institute for Near East Policy where he discussed the sanctions that 

would remain after Implementation Day.93 There, Mr. Szubin stated: 

Iran will not be able to open bank accounts with U.S. banks, nor will 

Iran be able to access the U.S. banking sector, even for that momentary 

transaction to, what we call, dollarize a foreign payment. ... That is not 

in the cards. That is not part of the relief offered under the JCPOA.94

Both Secretary Lew and Mr. Szubin testified that Iran would not have access 

to the U.S. financial system. This public testimony mirrored what OFAC and State 

Department officials told foreign financial institutions and other investors around 

the world, as detailed in the following section. 

D. OFAC Repeatedly Warned Other Foreign Financial Institutions 

that the U.S. Financial System Remained Off Limits to Iran at 

“Roadshows” 

Soon after the P5+1 reached an understanding on the JCPOA’s terms on July 

14, 2015, Treasury and State Department officials began meeting with foreign 

financial institutions and investors and other business development organizations 

concerning the details of the sanctions relief in the JCPOA.95 These “roadshows,” as 

they became commonly known, provided OFAC officials opportunities to provide 

information to foreign financial institutions concerning the details of the sanctions 

relief under the JCPOA.96 OFAC officials repeatedly advised that the U.S. financial 

system remained off limits for foreign financial institutions conducting business on 

 

92 Nomination of Adam J. Szubin, of the District Of Columbia, to be Under Secretary for Terrorism 

and Financial Crimes, Department Of The Treasury, 114th Cong. (Sept. 17, 2015) (oral testimony of 

Adam Szubin, Acting Under Secretary of Treasury for Terrorism and Financial Crimes, U.S. 

Department of the Treasury). 

93 Beyond the Vote: Implications for the Sanctions Regime on Iran, Sep. 16, 2015, 

https://www.washingtoninstitute.org/uploads/Documents/other/SzubinTranscript20150916-v2.pdf. 

94 Id. 95 PSI000516 (A Treasury Department official noted: “The most important meeting we’ve had thus 

far was a roundtable with over 20 representatives from at least 10 major financial institutions. We 

also met with UK regulators as well as industry groups.”). 

96 Briefing with U.S. Dep’t of Treasury (May 5, 2016); Briefing with U.S. State Dep’t (May 5, 2016). 
21 

behalf of Iran. 97 However, as explained below, those same officials also disclaimed 

jurisdiction over bulk purchases of U.S. dollars held abroad and downplayed the 

likelihood of any future penalties or fines. 

Both Treasury and State Department officials viewed these roadshows as an 

effective way to convey the JCPOA’s relief and invested in sending officials around 

the world.98 From August 6, 2015, to July 12, 2016, Treasury and State 

Department officials organized and participated in over 200 roadshows in various 

cities across the world including but not limited to Seoul, Geneva, London, Tokyo, 

Berlin, Dubai, Muscat, Rome, Paris, Helsinki, Stockholm, Mumbai, New Delhi, and 

Brussels.99 

The intended audience for these meetings was typically foreign financial 

institutions. And one of the most asked questions at these meetings concerned 

details about access to the U.S. dollar. Treasury Department meeting notes 

document that foreign financial institutions frequently asked about dollar clearing 

through the U.S. financial system.100 Dollar clearing is the “process of transmitting, 

reconciling, and in some cases, confirming transactions” by using the U.S. dollar.101 

To address the dollar clearing issue, an OFAC official “laid down two bright line 

rules, explaining that for non-US persons the only restrictions are: (1) don’t deal 

with US person[s] or [the US] financial system, [and] (2) don’t do business with 

someone on the SDN list.”102 

U.S. government officials repeated this particular advice—to not use the U.S. 

financial system for transactions involving Iran—multiple times to bankers and 

business development leaders in countries including Switzerland, England, and 

Germany.103 For example, meeting notes taken during a March 2016 roadshow in 

Switzerland state that John Smith, then the Treasury Department’s OFAC 

Director, reiterated the “Rules of the Road for non-U.S. entities:” 

 

97 Interview with John Smith, U.S. Dep’t of Treasury, Office of Foreign Assets Control, Acting 

Director (Oct. 17, 2017) (hereinafter Smith Interview (Oct. 17, 2017)); Briefing with U.S. Dep’t of 

Treasury (May 5, 2016). 

98 Briefing with U.S. Dep’t of Treasury (May 5, 2016); Briefing with U.S. State Dep’t (May 5, 2016). 

99 U.S. Dep’t of Treasury Production to the Subcommittee (July 15, 2016). 

100 PSI000515. 

101 Alexandra Merle Huet, Overview of the U.S. Payments, Clearing and Settlement Landscape, Fed. 

Reserve Bank of New York, (May 11, 2015), 

https://www.newyorkfed.org/medialibrary/media/banking/international/03.Overview-US-PCSlandscape-Merle.pdf. 

102 PSI000516; Specially Designated Nationals (SDNs) and the SDN List, U.S. Dep’t of Treasury 

(May 15, 2018), https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_lists.aspx 

(“OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on 

behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and 

narcotics traffickers designated under programs that are not country-specific. Collectively, such 

individuals and companies are called ‘Specially Designated Nationals’ or ‘SDNs.’”). 

103 PSI000560; PSI000516; PSI000515. 
22 

104

However, at the same time, the Treasury Department was quick to note that 

Iranian access to the U.S. dollar was not completely prohibited. For example, 

according to a Treasury Department summary of the meeting, at one roadshow 

meeting in Hong Kong, “bankers also asked about the ability to provide bulk U.S. 

dollar bank notes to Iran and how that would be viewed by OFAC.”105 OFAC 

officials “indicated that the sale of U.S. dollar bank notes is authorized, but 

cautioned that offering U.S. dollar bank notes to Iran may involve an indirect 

service to an Iranian person which could violate the Iran Transactions and 

Sanctions Regulations.”106 

In addition to disclaiming jurisdiction over U.S. dollars held abroad by nonU.S. persons, OFAC officials also downplayed the likelihood of any future penalties 

or fines. OFAC roadshow notes document how U.S. government officials signaled to 

foreign entities that OFAC would rarely bring legal action or level fines for 

arranging financial transactions with Iranian individuals or entities. For example, 

a State Department email explained “the most important” roadshow was in London 

with “over 20 representatives from at least 10 major financial institutions” and U.K. 

regulators. At that roadshow, according to meeting notes, Mr. Smith told the 

audience: 

[A] really good way of reassuring people about OFAC enforcement, first 

by clarifying the egregious nature of the behavior that led to the big fines 

on European banks and, more importantly, by informing them that 95% 

of the time OFAC sees an apparent violation it results in a simple 

warning letter or no enforcement action.107

In an interview with the Subcommittee, Mr. Smith further explained that the 

Treasury Department only has the resources to focus on egregious violations.108 

Despite “encouraging words” from OFAC and the State Department, many 

international banks feared transacting with Iran due to “remaining uncertainties” 

 

104 PSI000560. 

105 PSI000411. 

106 Id. 107 PSI000516. 

108 Smith Interview (Oct. 17, 2017). 
23 

and “significant operating risks,” according to a public report.109 In fact, prior to an 

“intense” Germany roadshow, at least some attendees had the perception that 

“State and Treasury were delivering different messages on sanctions relief.”110 U.K. 

regulators also later expressed that banks were frustrated about “hearing different 

things from different parties” and, that at least some banks felt “political pressure” 

to “get back in” business with Iran.111

OFAC even conducted proactive outreach to foreign financial institutions that 

never sought compliance advice from the Treasury Department. This outreach 

provided information on the JCPOA-related sanctions relief and compliance with 

remaining sanctions. In one instance, a compliance officer for a foreign financial 

institution called and asked an OFAC official why he received an email regarding 

Iran when the financial institution “had ‘no business with Iran.’”112 The OFAC 

official explained that OFAC proactively contacted the financial institution because 

while “banks set their own policies based on their individual risk appetite, [OFAC] 

wanted to make sure that [the] head office understood the Iran sanctions relief, and 

[that OFAC was] available to answer any questions they might have.”113 The OFAC 

official continued: 

I asked him to make sure that head office understands that with the 

lifting of the Iran secondary sanctions, non-U.S. persons are permitted 

to do business with Iran keeping in mind that sanctions remain on 

transacting with SDNs, and that Head Office’s transactions with Iran 

should not be routed through the U.S.114

After the roadshows, OFAC fielded and responded to follow-up inquiries 

regarding dollar clearing. For example, one OFAC compliance official received a 

follow-up question after an OFAC roadshow asking specifically about dollar clearing 

using the U.S. financial system.115 The OFAC compliance official wrote in an email: 

Please note, however, that the U.S. primary embargo remains in place, 

and it remains prohibited for non-U.S. persons to send Iran-related 

transactions to or through the United States financial system that are 

prohibited pursuant to the Iranian Transactions Sanctions Regulations, 

 

109 David Brunnstrom, Kerry Seeks to Soothe European Bank Nerves Over Iran Trade, Reuters (May 

12, 2016), https://www.reuters.com/article/us-iran-banks-kerry/kerry-seeks-to-soothe-european-banknerves-over-iran-trade-idUSKCN0Y30OJ. 

110 PSI000515. 111 PSI000513. 112 PSI000419. 

113 Id. 114 Id. 115 See PSI000423. 
24 

or to involve a U.S. person in the transaction, unless the transaction is 

exempt from regulation or authorized by OFAC.116

The OFAC compliance official continued, “Transactions in [euros], [British 

Pounds], and other currencies that do not clear through the U.S. financial system 

are generally not problematic unless they involve the foreign branch of a U.S. 

financial institution (e.g. Citibank London, JPM Chase Paris, etc.).”117 Again, even 

after roadshows, OFAC guidance indicated that the U.S. financial system remained 

off limits. 

While roadshows provided OFAC officials opportunities to alleviate concern 

about financial penalties or fines, those same officials also repeatedly reiterated 

that the U.S. financial system remained off limits—even for foreign financial 

institutions conducting business on behalf of Iran.118 This public guidance, 

however, is in contrast to the actions taken behind the scenes by Treasury and 

State Department officials to grant Bank Muscat access to the U.S. financial system 

on behalf of Iran. 

E. U.S. and Iranian Officials Discussed the Iranian Assets at Bank 

Muscat 

The $5.7 billion worth of Iranian assets held at Bank Muscat remained 

effectively trapped after Implementation Day. The Iranian government viewed the 

Bank Muscat conversion issue as a major obstacle and as a failure by the United 

States to adhere to the terms of the JCPOA.119 According to one high level Iranian 

negotiator, Iran “expected and understood” that the relief provided by the JCPOA 

would secure Iran’s “right of conversion without any qualifications and 

conditions.”120 The failed currency conversion was a serious stumbling block just 

days after the JCPOA’s Implementation Day. 

On January 24, 2016, a lead Iranian negotiator wrote to several State 

Department and OFAC officials expressing the need to complete the Bank Muscat 

conversion.121 He stated, “Please note that our inability to convert and use our bank 

deposits is causing challenges, particularly after the [Implementation Day] when we 

have expected free access and use of our funds abroad.”122 The Iranian negotiator 

continued, “Every body [sic] here is surprised and confused about the underlying 

 

116 Id. 117 Id. 118 Id.; Smith Interview (Oct. 17, 2017). 

119 Briefing with the U.S. Dep’t of Treasury (Sept. 13, 2017). 

120 CDP-2017-00018-00021. 121 PSI BM – 000310; Memorandum from The Law Library of Congress, Global Legal Research 

Center to the Chairman of the Permanent Subcommittee on Investigations (Mar. 12, 2018) (on file 

with the Subcommittee). 

122 PSI BM – 000310. 
25 

reasons so much that my boss intended to raise the issue with Dr. Zarif.”123 Dr. 

Zarif is the Iranian Minister of Foreign Affairs.124 He ended his email by offering to 

elevate the situation: “If you think it helps for [Dr.] Zarif to talk to Secretary Kerry, 

please advise.”125 OFAC OFFICIAL 1 replied that OFAC was “aware of the urgency 

of the situation and are discussing it.”126

In a separate internal Treasury Department email chain discussing possible 

solutions to this issue, OFAC OFFICIAL 2 requested research to help describe “the 

JCPOA relief we’ve committed to.”127 OFAC OFFICIAL 1 provided OFAC 

OFFICIAL 2 and other Treasury Department officials with excerpts of “language 

from the JCPOA with respect to our commitments” that she thought would be 

applicable to the Bank Muscat conversion issue.128 She highlighted the JCPOA’s 

preamble: “The E3/EU+3 will refrain from imposing discriminatory regulatory and 

procedural requirements in lieu of the sanctions and restrictive measures covered 

by this JCPOA.”129 OFAC OFFICIAL 1 also cited other sections of the JCPOA’s 

main text and Annex II regarding financial and banking measure relief.130 She also 

included the preamble’s section viii that states the parties “refrain from any action 

inconsistent with the letter, spirit and intent of this JCPOA that would undermine 

its successful implementation.”131 Finally, OFAC OFFICIAL 1 cited the JCPOA’s 

Annex II provisions concerning “Financial and Banking Measures:” 

132

After receiving OFAC OFFICIAL 1’s email detailing the relevant JCPOA 

language, OFAC OFFICIAL 2, apparently not fully comprehending the nature and 

scope of the JCPOA’s financial relief, replied: 

 

123 Id. 124 Islamic Republic of Iran, About Us, Ministry of Foreign Affairs (2018), http://en.mfa.ir/#/about. 

125 PSI BM – 000310. 

126 Id. 127 PSI BM – 000319. 

128 PSI BM – 000317. 

129 Id. 130 PSI BM – 000317-000318. 

131 PSI BM – 000318. 

132 Id. 
26 

133

Two days later, with the Bank Muscat issue still unresolved, a State 

Department official received a proposal to host an Omani delegation in Washington, 

D.C., who “very urgently want to speak to officials on the U.S. side about how to 

release they [sic] money they hold to the Iranians.”134 The State Department 

official ended the email by stating he expected “the delegation to be reasonably 

high-level.”135 OFAC OFFICIAL 1 summarized the current state of the currency 

conversion in an email excerpted below: 

136

In early February 2016, a lead Iranian negotiator again wrote OFAC 

OFFICIAL 1 stating that “every body [sic] concerned at the CBI [Central Bank of 

Iran] is getting already frustrated about the time it has taken to convert one 

currency to another currency other than the US$.”137 The Iranian negotiator 

reiterated that two weeks had elapsed since he first raised the issue with OFAC.138 

State and Treasury Department officials, however, assured Bank Muscat and the 

Iranian government that the U.S. government was working on finding a solution to 

the currency conversion problem.139

 

133 PSI_BM_000317. 

134 PSI_BM_000669. 

135 Id. 136 PSI_BM_000668. 

137 PSI_BM_000631. 

138 Id. 139 PSI000456 (As OFAC OFFICIAL 1 wrote to an Iranian negotiator, “While our priority has been to 

address the Bank Muscat issue in the short term, we are exploring how to address this issue in the 

future.”); PSI000422 (The Iranian negotiator also later wrote to OFAC, “I also understand that a 
27 

F. Treasury Department Officials Drafted a Specific License 

Authorizing the Use of the U.S. Financial System 

As the Iranian assets remained at Bank Muscat, State Department, Treasury 

Department, and other U.S. government officials devised a solution that would 

allow the currency conversion using the U.S. financial system. OFAC officials 

began drafting a specific license authorizing the conversion of the funds using the 

U.S. financial system.140

As OFAC drafted the specific license, there was an internal discussion at 

OFAC concerning how to describe the assets held by Bank Muscat. For example, 

one OFAC official inquired if the funds that “hit the U.S. institutions” were to be 

classified as Bank Muscat’s funds “rather than any Iranian person’s funds.”141 

However, Treasury and State Department officials in several emails referenced the 

funds as “Iranian assets.”142 OFAC OFFICIAL 1, for example, wrote that she 

suspected the “GOI [government of Iran] will be moving all their money out of BM 

[Bank Muscat] pretty quickly anyway.”143

While OFAC worked to complete the specific license, Iran continued to 

pressure the United States concerning its funds at Bank Muscat. For example, 

Foreign Minister Zarif sent a letter to Secretary Kerry expressing dissatisfaction 

with the delays with Bank Muscat.144 Secretary Kerry and Foreign Minister Zarif 

were even scheduled to meet to address the Bank Muscat issue, among other 

topics.145 To prepare Secretary Kerry, on February 10, 2016, OFAC OFFICIAL 1 

drafted the below talking points, in pertinent part: 

 

team from Oman is visiting you next week to finalize resolution of the long outstanding ‘conversion’ 

issue.”). 

140 As background, the Treasury Department can issue both specific and general licenses. A general 

license typically “authorizes a particular type of transaction for a class of persons without the need to 

apply for a license.” A specific license, on the other hand, is “a written document issued by OFAC to 

a particular person or entity, authorizing a particular transaction in response to a written license 

application.” Resource Center: Basic Information on OFAC and Sanctions, U.S. Dep’t of Treasury 

(Oct. 31, 2017), https://www.treasury.gov/resourcecenter/faqs/Sanctions/Pages/faq_general.aspx#basic. 

141 PSI_BM_000521. 142 Id. (“The CBI [Central Bank of Iran] has requested to convert a portion of its funds at Bank 

Muscat to euro (EUR).”); PSI_BM_000560 (“I suspect the GOI [Government of Iran] will be moving 

all their money out of BM pretty quickly anyway.”); CDP-2017-00018-00021 (“OFAC informed Bank 

Muscat and the Central Bank of Oman today that they have a license to convert Iranian assets in its 

accounts to Euros through the US financial system. Hope this helps.”). 

143 PSI_BM_000560. 144 PSI_BM_000584. 

145 PSI_BM_000583. 
28 

146

Susan Rice, National Security Adviser, then forwarded the information directly to 

Secretary Kerry.147

On February 23, 2016, the Central Bank of Iran requested Bank Muscat 

move “significant” amounts of money in two separate payment requests to two 

different foreign financial institutions.148 Bank Muscat would not comply with the 

Central Bank of Iran’s request until it had the specific license.149 That same day, 

the Senior State Department Official stressed that Treasury Department officials 

should “not hold back” the license as leverage on other issues as there would be 

other opportunities in the future.150

In addition to the specific license, both State and Treasury Department 

officials had ongoing discussions about potentially issuing a general license. 

Discussions contemplated authorizing a general license for the “conversion of two 

non-USD currencies through the limited use of the USD as an intermediate 

currency.”151 Indeed, an Iranian official requested a general license to avoid having 

to go through this “painstaking process every time [Iran] need[s] to convert our 

assets into a currency other than U.S. dollar.”152

OFAC officials also worked on crafting a general license during the same 

time as the specific license. Mr. Smith indicated in an email to the State 

Department that a general license would prevent giving one bank and country an 

unfair advantage.153 Mr. Smith even contemplated withholding the specific license 

until OFAC issued the general license, but leaned towards “issuing the specific 

license ... and resolving that urgent issue.”154 In March 2016, after certain U.S. 

 

146 Id. 147 CDP-2017-00018-000115]; U.S. State Dep’t email to the Subcommittee (Mar. 27, 2018) (on file 

with the Subcommittee) (State confirmed the receiving email account was “issued to Senator Kerry 

while he was Secretary”); Biography: Ambassador Susan Rice, White House (2016), 

https://obamawhitehouse.archives.gov/blog/author/ambassador-susan-rice. 

148 PSI BM – 000389. 

149 Id. 150 CDP-2017-00018-000122. 

151 PSI_BM_000477. 

152 CDP-2017-00018-00021. 

153 PSI_BM_000715. 

154 Id. 
29 

correspondent banks were reluctant to complete the currency conversion, as 

discussed in more detail later, OFAC OFFICIAL 2 expressed concerns about the 

potential effectiveness of a general license.155 OFAC OFFICIAL 1 stated that OFAC 

was trying to determine whether “the [General License] in its current iteration 

[was] viable in that we want to make sure that the [General License] is effective 

and used.”156 One month later, in April 2016, OFAC indicated it was not issuing a 

general license.157

G. The Treasury Department Issued a Specific License to Convert 

“Iranian Assets” through the “U.S. Financial System” 

After Bank Muscat and an Iranian official expressed concern that Bank 

Muscat could not convert the Iranian assets without using the U.S. financial 

system, Treasury Department officials took measures to authorize such a 

conversion. Despite recognizing that “such transactions are prohibited by U.S. 

sanctions that are still in place, and which [the U.S. government was] clear [it] 

would not be removing as part of the JCPOA,” on February 24, 2016, the Treasury 

Department, in coordination with the State Department and the National Security 

Council (“NSC”), issued specific license No. IA-2016-325832-1 to Bank Muscat.158

On February 23, 2016, OFAC and State Department officials discussed over 

email the specific license from the Treasury Department to Bank Muscat to 

authorize the transaction using the U.S. financial system. One Senior State 

Department Official wrote, “I’d heard yesterday that license approval of the FOREX 

[or foreign exchange] arrangement for Bank Muscat is imminent. [An Iranian 

official] reports Bank Muscat continues to block the conversion because it says that 

the arrangement has not been approved.”159 Mr. Smith responded that after 

discussions with the National Security Council, the specific license would be issued 

the next day.160

 The specific license explicitly permitted not only Bank Muscat, but its foreign 

exchange counterparties and “any United States depository institution or United 

States registered broker or dealer in securities involved as a correspondent bank” to 

engage in the conversion of the funds at issue.161 Under “Section 1—Authorization,” 

the specific license permitted those entities: 

 

155 PSI_BM_000623. 

156 PSI_BM_000621. 

157 CDP-2017-00018-00002 (OFAC later informed Oman “that they have no such plans to issue any 

general license” that would allow all banks to perform the type of transaction authorized by Bank 

Muscat’s specific license). 

158 CDP-2017-00018-00015; PSI000478. 

159 CDP-2017-00018-00045. 

160 Id. 161 PSI000479. 
30 

[T]o engage in any transactions necessary to allow the conversion of 

funds held at Bank Muscat in a non-U.S. dollar (USD) currency into a 

different non-USD currency where such foreign exchange conversion 

provides an indirect benefit to persons subject to the jurisdiction of the 

Government of Iran, including persons whose property and interests in 

property are blocked solely pursuant to Executive Order 13599...162

The specific license detailed precisely how the currency conversion would occur: 

(1) Bank Muscat sells a non-USD currency and buys USD from a 

non-U.S. foreign exchange counterparty in the interbank market 

in its own name; 

(2) the non-U.S. foreign exchange counterparty delivers the USD to 

a Bank Muscat account maintained at a United States depository 

institution or United States registered broker or dealer in 

securities; 

(3) Bank Muscat sells the USD and buys a different non-USD 

currency from a non-U.S. foreign exchange counterparty in the 

interbank market in its own name; and 

(4) that non-U.S. foreign exchange counterparty delivers the 

different non-USD funds into a foreign currency account Bank 

Muscat maintains on the books of a non-U.S., non-Iranian 

financial institution located in a jurisdiction in which the funds 

can be used in the local payment system, as described in the 

Application.163

The specific license was intended to alleviate the significant pressure Iranian 

officials raised with both State and Treasury Department officials. And at least two 

Treasury Department OFAC compliance officers expressed relief once it was issued, 

stating: 

 

162 Id. 163 Id. 
31 

164

Immediately after it was finalized, the Treasury Department delivered the 

specific license to Bank Muscat and communicated the decision to the other 

relevant domestic and foreign parties.165 The next day, February 25, 2016, a 

Treasury Department official emailed the license to a Bank Muscat executive, 

indicating that the bank should “provide a copy of the license to the U.S. 

correspondents” that Bank Muscat would involve in the proposed transaction.166 

The official continued: 

OFAC believes that – by disclosing the [Central Bank of Iran’s] 

indirect167 interest in the licensed transactions to Bank Muscat’s own 

U.S. correspondents, providing them a copy of the license, and fulfilling 

the remaining conditions of the license – Bank Muscat provides a 

 

164 PSI-000015. 

165 PSI-000047. 

166PSI-000050-000051. 

167 PSI_BM_000603 (On February 15, 2016, Mr. Szubin made a deliberate point to suggest adding 

the word “indirect” despite other Treasury Department officials recognizing the Government of Iran 

and the Central Bank of Iran requested the conversion.”). 
32 

sufficient degree of transparency to allow these U.S. financial 

institutions to comply with the sanctions laws and regulations 

administered by OFAC.168

That same day, a Senior State Department Official wrote a two-sentence 

email to his Iranian counterpart, stating, “OFAC informed Bank Muscat and the 

Central Bank of Oman today that they have a license to convert Iranian assets in 

its accounts to Euros through the US financial system. Hope this helps.”169 And a 

chart the Treasury Department produced to the Subcommittee, shown below, 

details a proposed funds flow and the use of U.S. financial system. 

The specific license would have little effect, however, unless a U.S. 

correspondent bank was willing to facilitate the conversion. 

 

168 PSI-000048. 

169 CDP-2017-00018-00021. 
33 

1. A Senior State Department Official Recognized the Specific 

License Authorized a Transaction Otherwise “Prohibited by 

U.S. Sanctions” 

Notwithstanding the specific license, Iran’s financial negotiator continued to 

express concerns about Iran’s ability to convert its funds held outside Iran. An 

Iranian official requested OFAC issue a general license rather than a specific 

license in the future so that it “relives [sic] us from going through this painstaking 

process every time we need to convert” assets into a different currency.170 In effect, 

a general license would be a blanket authorization for foreign financial institutions 

to conduct similar currency conversions that Bank Muscat was authorized to do.171 

An Iranian official expressed frustration with his government’s inability to convert 

the funds, even after the specific license was issued: 

I do understand that we both will face a number of challenges 

immediately after the implementation. However, the nature and extent 

of these challenges are going beyond any reasonable expectation as far 

as we are concerned and I do request you to address all these issues in 

[a] manner which resolves them fundamentally.172

A Senior State Department Official responded to the Iranian official two days 

later on February 28, 2016, signifying how extraordinary the specific license was in 

light of the negotiated JCPOA relief. That Senior State Department Official 

explained to his Iranian counterpart that he and his colleagues were “pleased to be 

helpful where we can in facilitating Iran’s reconnection to the international 

financial system,” but that the U.S. government was not responsible for decisions 

“foreign financial institutions take in processing Iranian transactions.”173 That 

Senior State Department Official then explained that such “transactions are 

prohibited by U.S. sanctions that are still in place, and which we were clear we 

would not be removing as part of the JCPOA. Nevertheless, as a gesture of support 

for Iran’s getting access, we helped on this as we will on other cases.”174 

The Iranian official, however, continued to press U.S. government officials 

that even with the specific license, Iran was having difficulty converting its funds. 

For example, he raised the broader issue of financial liquidity concerns and Iran’s 

general access to its funds held abroad. He wrote to the Senior State Department 

Official that he was not “... in a position, and don’t intend, to confirm or reject such 

claims but one thing is clear: OFAC is almost all the time invoked as the reason for 

other countries’ unwillingness to let us have unhindered access to our funds 

abroad.”175 Nearly a month later, the Senior State Department Official again 

 

170 Id. 171 PSI_BM_000610. 

172 CDP-2017-00018-00021. 

173 CDP-2017-00018-00015. 

174 Id. (emphasis added). 

175 CDP-2017-00018-00032. 
34 

reiterated in an email to his Iranian counterpart that the Bank Muscat specific 

license was not required by the JCPOA: 

176

In an interview with the Subcommittee, the Senior State Department Official 

noted his exchange was part of pressing the Iranians on multiple fronts.177 He 

clarified that this exchange was for effect as a negotiator to ensure Iran appreciated 

the efforts being made to meet the expectations of the JCPOA.178 He used the 

phrase “exceeded our JCPOA commitments” because there was nothing in the 

JCPOA that required the issuance of the specific license.179 He also explained that 

this was “posturing” in the middle of a negotiation.180 It was important, according 

to the Senior State Department Official, that the Iranians felt like they were getting 

the benefits under the terms of the deal and getting access to the restricted funds 

was important to the JCPOA. His email also acknowledged an awareness of nonnuclear related issues such as arms shipments to Houthis and missile launches.181

2. The Specific License Permitted Converting Future or “Fresh” 

Funds Using the U.S. Financial System 

The specific license authorized not only the transactions necessary for the 

conversion of Iranian assets already deposited at Bank Muscat, but also for 

unlimited future Iranian deposits at Bank Muscat until the license expired. In 

effect, the specific license granted the Iranians an endless currency conversion 

pipeline using the U.S. financial system through Bank Muscat until the license 

expired. The Treasury Department authorized future conversions due to Bank 

Muscat’s concerns. In an email from an OFAC Sanctions Compliance and 

 

176 CDP-2017-00018-00017 (emphasis added). 

177 Interview with the Senior State Department Official, U.S. State Dep’t (May 7, 2018) (hereinafter 

State Department Interview (May 7, 2018)). 

178 Id. 179 Id. 180 Id. 181 Id. 
35 

Evaluation employee to Mr. Smith and other senior Treasury Department officials, 

Bank Muscat asked OFAC about possible future deposits or conversions: 

Bank Muscat requested that its specific license not only authorize 

conversion of funds it holds for Iran currently at Bank Muscat, but also 

the conversion of funds related to trade transactions with Iran going 

forward. ... Bank Muscat is concerned that Iran will move its 

approximately $5.7 billion worth of JPOA funds out of Bank Muscat and 

it will adversely affect the bank’s balances if it cannot accept fresh funds 

from Iran to finance prospective trade.182

To resolve this “fresh funds” issue, Mr. Smith, in a meeting with an Omani 

official, “noted that the way [OFAC] resolved the issue of fresh funds was to allow 

for their transfer under this license and explained that the license allows for both 

existing and fresh funds to flow through Bank Muscat.”183 Bank Muscat viewed the 

addition of the provision allowing the conversion of “fresh funds” as a momentous 

step. As one Bank Muscat executive wrote, “When [Bank Muscat’s] Legal team 

reviewed the specific license, they commented that this was a ‘gigantic’ 

breakthrough which has assured Iran of almost full global financial inclusion.”184

Mr. Smith also noted that he understood “the Omanis were disappointed 

after their meeting at OFAC where they asked whether we could allow for Oman to 

be the only jurisdiction to control the flow of Iranian funds into the international 

financial system.”185 Mr. Smith told the Omani Deputy Chief of Mission that while 

Bank Muscat was the only bank at that time allowed to conduct the currency 

conversion in this matter, there were efforts for a broader fix to resolve the currency 

conversion issue to “allow for banks worldwide to engage in similar transactions.”186

3. Iranian Concern Continued Even After OFAC Issued the 

Specific License 

By cable, Secretary Kerry asked the U.S. Embassy in Oman to deliver a 

message to the Omani Foreign Minister. The Secretary’s message stated: 

[T]he obstacle is our primary U.S. embargo, which continues to prohibit 

U.S. financial institutions from processing transactions involving Iran, 

necessitating a license from the Office of Foreign Assets Control (OFAC). 

I am pleased to report, though, that OFAC has now issued a specific 

 

182 PSI_BM_000610. 

183 PSI-000047. 

184 CDP-2017-00018-00040. 

185 PSI-000047. 

186 Id. 
36 

license to Bank Muscat, which we believe will remove the obstacles that 

prevented these foreign exchange transactions from occurring.187

While the specific license authorized the transaction, it would not “become 

active until it is shared with and accepted for use by” Bank Muscat’s correspondent 

bank.188 And, as a Iranian negotiator recognized in an email to OFAC OFFICIAL 1, 

finding a willing U.S. financial institution remained problematic: “[The State 

Department] advised us on 26th Feb 2016 that ‘ ... OFAC informed Bank Muscat 

and the Central Bank of Oman today that they have a license to convert Iranian 

assets in its accounts to Euros through the US financial system. Hope this helps.’ 

Unfortunately it HAS NOT HELPED.”189

OFAC OFFICIAL 1 replied that even though OFAC issued the specific 

license, it was OFAC’s understanding that Bank Muscat’s U.S. correspondent bank 

“needs time to do due diligence and get the requisite approvals from their 

management.” OFAC OFFICIAL 1 continued, “There is no further role for OFAC in 

the process at this point as this is an internal compliance matter on the part of the 

financial institutions involved.”190 Bank Muscat needed at least one U.S. financial 

institution to complete the currency conversion or the specific license would have 

little effect. 

H. Treasury Department Officials Encouraged Two U.S. Financial 

Institutions to Complete the Currency Conversion; the U.S. 

Financial Institutions Declined 

In the weeks after the Treasury Department issued the specific license, 

OFAC officials encouraged at least two U.S. financial institutions to facilitate the 

conversion currency for Bank Muscat. Bank Muscat attempted to complete the 

currency conversion with two financial institutions that it maintained a 

correspondent banking191 relationship with: U.S. BANK 1 and U.S. BANK 2.192 

Notwithstanding the Treasury Department’s involvement, both U.S. financial 

institutions declined to complete the currency conversion for reasons discussed 

below. 

There was significant pressure on both the State and Treasury Department 

officials to ensure Bank Muscat converted the Iranian assets as the Central Bank of 

 

187 CDP-2017-00018-00012. 

188 CDP-2017-00018-00039 (emphasis in original). 

189 Id. 190 PSI000459. 

191 As background, correspondent banking is the provision of banking services by one bank to 

another bank. It enables banks to conduct business and provide services for their customers in 

jurisdictions where the banks have no physical presence. See Staff of S. Permanent Subcomm. on 

Investigations, 107th Cong., Rep. On Correspondent Banking (S. Prt. 107-1) (2001). 

192 PSI000459. 
37 

Iran requested. High level Iranian officials made clear to U.S. officials that 

converting the Iranian assets worth billions of dollars was absolutely vital.193 The 

Treasury Department even classified the conversion as a “Priority No. 1” issue that 

could have “broad impact across multiple activities and may delay the 

implementation of the JCPOA.”194 In short, locating a willing U.S. financial 

institution to facilitate the dollar conversion was imperative. 

Thus, Treasury Department officials engaged with two U.S. financial 

institutions to encourage them to facilitate the currency conversion. A Senior State 

Department Official was clear in an email to several OFAC officials that “... you all 

have been in touch with some banks to encourage their participation with Bank 

Muscat on that particular case.”195 Additionally, just days after the specific license 

was issued, a Bank Muscat executive wrote in an email asking if OFAC would 

“reach out” to both U.S. financial institutions.196 Over the next several weeks, 

OFAC then proceeded to arrange nearly a dozen phone calls with sanctions experts 

and business line executives at the two U.S. financial institutions.197

OFAC officials initiated contact with a representative of U.S. BANK 1; 

however, that bank quickly determined that it would not facilitate the currency 

conversion because of legal risks associated with Iranian assets. 198 U.S. BANK 1, 

according to a Bank Muscat email, cited a previous court case in which assets worth 

$1.75 billion were blocked or seized in a U.S. bank account in New York.199 U.S. 

BANK 1 was concerned a lien related to a prior legal judgment would “attach” the 

funds once they arrived in the United States and the bank could be forced to hold 

those funds to satisfy the prior judgment. An OFAC email later confirmed that U.S. 

BANK 1 did not want to conduct the conversion because of “attachment issues”200—

referring to the legal process of securing assets to satisfy an outstanding judgment. 

A March 15, 2016, email between two U.S. BANK 1 employees further 

elaborated on both the legal risk and nature of OFAC’s outreach. U.S. BANK 1’s 

Director for Global Sanctions wrote to the Regional Head of Sanctions: 

OFAC called us up last week and asked us to help Bank Muscat move 

up to several billion dollars in Iranian money through the U.S. financial 

system. After we explained the attachment risk, they reconsidered but 

 

193 See Section E. 

194 PSI_BM_000618. 

195 CDP-201700018-00029 (emphasis added). 

196 PSI-000050. 

197 See PSI-000286; PSI-000262; PSI-000274; PSI-000179; PSI-000255. 

198 PSI-000176. One Treasury official wrote to Bank Muscat, “Thanks for the note. We will schedule 

a call with U.S. BANK 1 and let you know once we have spoken with them.” 

199 CDP-2017-00018-00002. 

200 PSI_BM_000721. 
38 

I mention this to show that U.S. policy is not necessarily that nothing 

be done vis-à-vis Iran.201 

That U.S. BANK 1 executive later told the Subcommittee that OFAC reached out to 

them and asked if they would process the transaction.202 While the U.S. BANK 1 

executive did not think that OFAC’s contact was inappropriate, he elaborated that, 

to his knowledge, this was something that had never been done before.203 U.S. 

BANK 1, according to its executive, ultimately turned down OFAC because of 

reputational risk associated with conducting business with Iran and legal risk of 

litigants suing Iran for terrorism related incidents.204

After U.S. BANK 1 declined, the pressure increased to find a willing U.S. 

correspondent bank to facilitate the conversion. One State Department official 

wrote in an email asking if there was “anything new on Bank Muscat and their 

correspondent? Our friends are complaining.”205 Finding another willing U.S. 

financial institution was complicated. As one OFAC official explained, OFAC could 

play no further role in the process as it was now an “internal compliance matter on 

the part of the financial institutions involved.”206 Notwithstanding this position, a 

State Department official proposed having Secretary Kerry or Secretary Lew 

contact the remaining U.S. correspondent bank.207 On April 9, 2016, in an email 

shown below, a State Department Official wrote to two State Department officials 

suggesting that it would be “a good idea” to have Secretary Lew “engage” U.S. 

BANK 2.208 He also stated that if the Treasury Department did not comply with the 

request, he would suggest Secretary Kerry call.209

The Senior State Department Official indicated later in the same email that 

Secretary Kerry was “more than eager to engage.”210 In an interview with the 

Subcommittee, the Senior State Department Official did not know if either 

Secretary Kerry or Secretary Lew called or engaged the U.S. financial institution 

directly. The Senior State Department Official did state that he believed “drive 

 

201 U.S. BANK 1 Email 2016.03.15. 

202 Interview with the Director for Global Sanctions Compliance, U.S. BANK 1 (May 4, 2018) 

(hereinafter U.S. BANK 1 Interview (May 4, 2018)). 

203 Id. 204 Id. 205 PSI-000180. 

206 PSI-000459. 

207 CDP-2017-00018-000124-000125. 

208 CDP-2017-00018-000124. 

209 Id. 210 Id. 
39 

them nuts” was written because the Treasury Department would view the State 

Department engaging with financial institutions as a bureaucratic overstep.211

OFAC OFFICIAL 1 then indicated that U.S. BANK 2 was the other U.S. 

correspondent bank available to facilitate the conversion.212 From February to 

April 2016, U.S. BANK 2’s compliance, business, and legal executives considered 

whether to convert the funds. Even though OFAC told U.S. BANK 2 executives it 

was “supportive of the activity/transactions,” U.S. BANK 2 eventually declined to 

conduct the currency conversion due to the compliance risk posed by the difficulty of 

consistently executing the proposed complex transactions.213 U.S. BANK 2 was also 

cognizant of concerns with the optics of dealing with Iranian assets.214

On February 25, 2016, an OFAC official contacted U.S. BANK 2’s Compliance 

Executive to let them know that “they are supportive of the activity/transactions 

under the license and that they will put Bank Muscat in touch with me to talk 

about the potential transactions.”215 The Compliance Executive stated they told 

OFAC that U.S. BANK 2 “would be taking similar steps to what we did in the past” 

to review the license and the proposed transaction’s details.216 In the course of a 

broader discussion about the proposed business, the Compliance Executive also 

noted that U.S. BANK 2 “may once again be the subject of press articles even 

though the activity is licensed for dealing with Iran, although here indirectly.”217 

The next day, on February 26, 2016, a Bank Muscat executive emailed the 

Compliance Executive to “discuss the specific license.”218 Later, on March 1, 2016, 

Bank Muscat sent U.S. BANK 2 a detailed description of precisely how the proposed 

currency conversion would take place.219 On March 18, 2016, U.S. BANK 2’s 

Compliance Executive wrote in an internal email, “Today, OFAC called me about 

the status and also to ask if we would support the [foreign exchange] transactions if 

they also additionally issued a General License to all entities to engage in the same 

activity.”220 The same executive indicated that: 

These will be large sums of money and may involve both legacy Iranian 

funds and also new funds from proceeds of fresh oil sales. This will most 

likely end up in the press in the future so I want to make sure that 

 

211 State Department Interview (May 7, 2018). 212 PSI_BM_000721. 

213 Interview with the U.S. BANK 2’s Compliance Executive (May 4, 2018) (hereinafter U.S. BANK 2 

Interview (May 4, 2018)). 

214 BANK200000128; BANK200000214. 

215 BANK200000128. 

216 U.S. BANK 2 Interview (May 4, 2018); BANK200000128. 

217 Id. 218 BANK200000176. 

219 BANK200000350. 

220 BANK200000334. 
40 

Senior Business and Legal/Compliance don’t have an issue at this 

stage.”221

Ten days later, on March 28, 2016, U.S. BANK 2’s Compliance Executive 

indicated that while OFAC “confirmed that the flows appear to be consistent with 

the terms of the license” U.S. BANK 2 “does not have an appetite to engage in the 

activities at this time.”222 In an interview with the Subcommittee, U.S. BANK 2’s 

Compliance Executive, explained that while OFAC authorized the transaction, U.S. 

BANK 2 declined to facilitate the deal for primarily because the transaction itself 

was complicated and created difficulty monitoring the flows of money.223 U.S. 

BANK 2’s Compliance Executive also stated that doing business with Iran could 

present reputational risks as Iran is a comprehensively sanctioned country.224 In 

the end, according to an internal document, U.S. BANK 2 declined to handle [the 

currency conversion] based on [U.S. BANK 2’s] uncertainty about how to manage 

and monitor the flow given the currency conversions.”225

I. The Federal Reserve Bank Received Inquiries Concerning 

Bank Muscat’s Currency Issue, but did not Facilitate the 

Conversion 

After Bank Muscat’s two U.S. correspondent banks refused to facilitate the 

currency conversion, both OFAC and Bank Muscat sought alternative solutions. 

One of those alternatives was to use the Federal Reserve Bank of New York (the 

“Federal Reserve Bank”), which is part of the Federal Reserve System, the central 

bank of the United States. The Federal Reserve System can provide certain 

financial services to the U.S. government, U.S. financial institutions, and foreign 

official institutions.226

A Senior State Department Official, in an email to Mr. Smith and other 

Treasury Department officials, expressed the importance of exploring alternatives 

after the U.S. correspondent banks refused. On April 11, 2016, that Senior State 

Department Official wrote that the Bank Muscat issue remains a top Iranian 

priority and asked “[s]ince no U.S. bank appears willing to avail itself of the OFAC 

license to facilitate the Bank Muscat transaction, is there any news on an alternate 

approach to help resolve the issue?”227 Mr. Smith replied that OFAC was still 

“actively engaged on alternatives for resolving the Bank Muscat issue, but we have 

not found a solution yet.”228 A Bank Muscat executive then proposed using the 

 

221 Id. 222 Id. 223 U.S. BANK 2 Interview (May 4, 2018). 224 Id. 225 BANK200000214. 

226 What is the Purpose of the Federal Reserve System?, Board of Governors of the Federal Reserve 

System (Nov. 3, 2016), https://www.federalreserve.gov/faqs/about_12594.htm. 

227 CDP-2017-00018-00036. 

228 CDP-2017-00018-00035. 
41 

Federal Reserve Bank as a direct alternative to the U.S. correspondent banks that 

refused to complete the conversion, as shown in a State Department meeting note 

below: 

229

The Federal Reserve Bank was an obvious partner in this currency 

conversion process as it previously facilitated another JCPOA-related transaction 

for the purchase of Iranian “heavy water.”230 In the JCPOA, the Iranian 

government committed to refrain from accumulating heavy water “beyond Iran’s 

needs” and “sell any remaining heavy water on the international market for 15 

years.”231

According to a news report detailing the heavy water purchase, the Treasury 

Department previously declined to publicly disclose the currency used in the 

purchase.232 Treasury Department documents now show that the U.S. government 

authorized a U.S. dollar-originated purchase of Iran’s heavy water and relied on the 

Federal Reserve Bank to effectuate the purchase. On June 20, 2016, OFAC issued a 

“comfort letter” to the Federal Reserve Bank of New York concerning a series of 

transactions and conversions to facilitate the $8.6 million purchase of 32 metric 

tons of heavy water “from Iran for import into the United States.”233 The comfort 

letter responded to the Treasury Department’s Bureau of the Fiscal Service’s plan 

to originate a transfer to the Federal Reserve Bank.234 The Federal Reserve Bank 

would then “enter into a foreign exchange” transaction with a counterparty to 

purchase the euro equivalent of the U.S. dollar amount.235

 

229 CDP-2017-00018-00003. 

230 U.S. Gov’t Accountability Off., GAO-16-565, Iran Nuclear Agreement: The International Atomic 

Energy Agency’s Authorities, Resources, and Challenges 10-12 (July 14, 2016) (Heavy water can be 

used in some types of nuclear power reactors.). 

231 Paul Kerr, Iran’s Nuclear Program: Status, Cong. Research Service, at 26 (Apr. 27, 2017). 

232 Reuters Staff, U.S. to Buy Heavy Water from Iran’s Nuclear Program, Reuters (Apr. 22, 2016), 

https://www.reuters.com/article/us-iran-nuclear-usa-idUSKCN0XJ25G (“A U.S. Treasury 

Department official would not discuss details of the payment for the heavy water until after the 

purchase is complete, but said it would be completed under the same method. ‘Regardless of 

whether or not this is in U.S. dollars, this licensed transaction is limited in scope,’ the Treasury 

official said on condition of anonymity.”). 

233 PSI000465. 

234 PSI000466. 

235 Id. 
42 

With respect to the Bank Muscat currency conversion, the Federal Reserve 

Bank received three separate inquiries from: (1) OFAC; (2) the Bank for 

International Settlements; and (3) the Central Bank of Germany. The Federal 

Reserve Bank examined and considered all three inquires; however, it never 

reached a final determination on the legal characterization of any of the proposed 

transfers.236

First, in mid-April 2016, OFAC officials contacted the Federal Reserve Bank 

and requested assistance to complete an Omani currency conversion.237 The 

problem, as a Federal Reserve Bank official told the Subcommittee, was that the 

Omani rial is pegged to the U.S. dollar.238 This meant that any conversion of Omani 

rials to euros would necessarily include intermediary steps involving the U.S. 

dollar, which is commonly characterized as a “dollar leg.” OFAC “expressed 

frustration” with the dollar leg because there was no way to avoid using the U.S. 

financial system to complete the conversion to euros.239 However, according to 

Federal Reserve Bank officials, after initial conversations with OFAC, the issue 

faded without resolution.240 The Federal Reserve Bank did not receive any 

additional inquiries relating to the proposed currency transfer for several 

months.241

Second, in December 2016, the Bank for International Settlements (“BIS”) 

contacted the Federal Reserve Bank regarding the conversion issue.242 BIS is an 

international financial organization headquartered in Basel, Switzerland, whose 

mission is to act as “a bank for central banks.”243 In that role, BIS is able to act as 

“a prime counterparty for central banks in their financial transactions” or serve as 

“an agent or trustee in connection with international financial operations.”244 

According to Federal Reserve Bank officials, BIS and the Omani government 

discussed a potential foreign exchange through Oman’s account held at the BIS. 

The Federal Reserve Bank, as a board member of BIS, had a standing objection 

since 2002 that prohibited BIS from conducting U.S. dollar transactions with 

Iranian entities. As a board member, the Federal Reserve Bank could object to 

transactions taking place in its “home currency”—i.e. the U.S. dollar.245 Thus, the 

 

236 Interview with the Federal Reserve Bank (Feb. 13, 2018) (hereinafter Federal Reserve Bank 

Interview (Feb. 13, 2018)). 

237 Id. 238 Id. 239 Id. 240 Id. 241 Id. 242 Id. 243 Bank for International Settlements, About the BIS – Overview, 

https://www.bis.org/about/index.htm. 

244 Id. 245 Federal Reserve Bank Interview (Feb. 13, 2018). 
43 

BIS legal team asked if the Federal Reserve Bank would object to the proposed 

transaction. Before the Federal Reserve Bank reached any formal decision on the 

matter BIS disengaged from the preliminary conversations and never proposed the 

transfer.246

Third, in April 2017, the Central Bank of Germany contacted the Federal 

Reserve Bank concerning the currency conversion issue.247 According to Federal 

Reserve Bank officials, a German commercial bank (“German Bank A”) approached 

the Central Bank of Germany about conducting a “series of small conversions” of 

Omani rials to euros.248 German Bank A would facilitate these conversions without 

using the U.S. dollar or U.S. financial system.249 Simply put, the proposed 

transaction was arranged as a loan. German Bank A would lend the Central Bank 

of Iran euros, but allow repayment of the euros with Omani rial through a German 

Bank A account held in Oman.250

The Central Bank of Germany contacted the Federal Reserve Bank because it 

was possible that proceeds from the conversions could end up in the Central Bank of 

Germany’s account at the Federal Reserve Bank.251 The Central Bank of Germany 

told the Federal Reserve Bank officials that German Bank A obtained an OFAC 

comfort letter indicating U.S. approval of the proposed transaction because there 

would “no longer be any Iranian interest in the proceeds.”252 Nevertheless, the 

Central Bank of Germany wanted to make sure that the Federal Reserve Bank 

shared the same opinion that any proceeds from the transfer would no longer be 

tainted by Iranian interest, which could trigger sanctions. Federal Reserve Bank 

then contacted OFAC to discuss the proposed structure and the comfort letter.253 

But, again, the discussions concerning the proposed transfers dwindled and 

eventually ceased.254 The Federal Reserve Bank never reached a formal decision on 

the legal characterization of any of the proposed transfers.255

J. After Issuing the Specific License, Treasury and State 

Department Officials Again Denied that Iran was Granted 

Access to the U.S. Financial System Under the JCPOA 

Prior to the implementation of the JCPOA, Treasury and State Department 

officials testified that under the JCPOA Iran would not have access to the U.S. 

 

246 Id. 247 Id. 248 Id. 249 Id. 250 Id. 251 Id. 252 Id. 253 Id. 254 Id. 255 Id. 
44 

financial system.256 After Implementation Day and the issuance of Bank Muscat’s 

specific license, Treasury Department officials again asserted that Iran was not 

granted access to the U.S. financial system under the terms of the JCPOA. 

Secretary Lew, Mr. Szubin, and Ambassador Thomas Shannon all testified on the 

details concerning sanctions relief afforded to Iran under the JCPOA. 

To prepare Secretary Lew for his testimony, Treasury Department staff 

created a “Talking Points” document concerning the implementation of the JCPOA 

with details of the financial relief.257 That document suggested Secretary Lew could 

discuss the need for authorizing Iran to receive access to the dollar under the terms 

of the JCPOA, but only “if pressed.” Under the “Release of Iran’s Previously 

Restricted Funds” header, Secretary Lew’s background document included the 

following section, with several edits proposed by one OFAC official: 

258

The background document provided to Secretary Lew also included 

information regarding the specific license issued to Bank Muscat, along with the 

possibility of Treasury issuing a general license, as explained below:259 

 

256 See Section C. 

257 PSI_BM_000469. 

258 PSI_BM_000482 (yellow emphasis in original). 

259 PSI_BM_000479 (One OFAC official stated that naming the bank “seems to raise Trade Secrets 

act issues” if the information was for anything other than background for the Secretary). 
45 

260

The NSC weighed in on the nature of Secretary Lew’s testimony concerning 

both the specific and general licenses. NSC officials expressed concern about 

linking either license to the JCPOA. On March 3, 2016, just days after the Treasury 

Department issued the specific license, a Treasury Department official wrote in an 

email that “NSC seemed to express some discomfort about linking the [foreign 

exchange] license to the JCPOA.”261 This prompted another Treasury Department 

official to reply: 

[N]ot sure we want to link it with the JCPOA, since it is applicable to 

any transaction that falls within the authorization – and, since we are 

selling this as a “financial reality” more than a JCPOA necessity, can we 

really say it will be part of a snapback.262 

OFAC OFFICIAL 1, however, disagreed and wrote, “For background, we need 

to link it to the JCPOA: We are only issuing [the general license] because of the 

JCPOA and it would be revoked in the event of a snapback.”263 One OFAC official 

responded, “Thanks OFAC OFFICIAL 1. Apparently I have been asleep on this 

one—I didn’t think it was because of the JCPOA, but brought to light because of it. 

Makes me dislike it even more.”264

 

260 PSI_BM_000474 (yellow emphasis in original). 

261 PSI BM - 000441. 

262 PSI_BM_000478 (“Snapback” refers to a mechanism that may reinstate sanctions under certain 

conditions. For example, “If a party to the JCPOA notifies the Security Council of an issue it 

believes ‘constitutes significant non-performance of commitments under the JCPOA,’ the Security 

Council must vote on a draft resolution addressing whether it should continue to withhold the 

sanctions imposed on Iran through its earlier resolutions.” Stephen Mulligan, Withdrawal from 

International Agreements: Legal Framework, the Paris Agreement, and the Iran Nuclear Agreement, 

Cong. Research Service, at 25 (Feb. 9, 2017)). 

263 PSI_BM_000477. 

264 Id. 
46 

Secretary Lew’s March 22, 2016 testimony to the House Financial Services 

Committee provided no details about the specific license to Bank Muscat, or the 

consideration of issuing a general license as outlined in the background document 

and talking points. This hearing took place nearly one month after the Treasury 

Department issued the specific license to Bank Muscat. During the hearing, 

Congressman Ed Royce stated: 

In July, you testified to the Senate that Iranian banks will not be able 

to clear U.S. dollars through New York, or hold correspondent account 

relationships with U.S. financial institutions, or enter into financing 

agreements with U.S. banks. Iran, in other words, will continue to be 

denied access to the world’s largest financial and commercial market. 

And I have received reports from the Administration that it is now 

considering providing Iran with access to the U.S. financial systems. So 

are these reports which contradict your previous testimony correct, and 

is the Administration planning to ease restrictions on Iran’s access to 

U.S. banks?265

In response to Congressman Royce’s inquiry, Secretary Lew declared that the 

JCPOA caused Iran to “roll back its nuclear program” and that part of the JCPOA 

was for “Iran to have nuclear sanctions lifted.”266 The Secretary did not directly 

answer whether Iran would have access to the U.S. financial system. Congressman 

Royce then pressed the issue again and asked whether the U.S. would give Iran 

access to “the U.S. dollar or U.S. financial systems.”267 In his response, Secretary 

Lew did not rely on his “talking points” or reference the general or specific licenses. 

Instead, he stated that the United States continued “to look at how we comply with 

the [JCPOA] to make sure that Iran gets relief under the nuclear portions while we 

keep pressure on Iran on these other issues.”268

Later during the same hearing, Chairman Jeb Hensarling asked Secretary 

Lew: “Do you believe that these banks are going to be able to access—I didn’t get a 

clear answer from you—that they can have access and work with American 

financial institutions?”269 Secretary Lew responded: 

I think that what I said in the earlier response is that we will comply 

with the [JCPOA] and lift the nuclear sanctions; we will keep other 

sanctions in place. Part of the agreement was to give Iran access to 

money that it has a right to. We will work on making that happen. It is 

not going to be our goal to block transactions that are legitimate under 

 

265 The Annual Testimony of the Secretary of the Treasury On The State Of The International 

Financial System, Hearing Before the H. Comm. On Financial Services, 114th Cong. (Mar. 22, 2016). 

266 Id. 267 Id. 268 Id. 269 Id. 
47 

the JCPOA, but we will enforce on other areas like terrorism and the 

like.270

Two months later, Congressman Royce again questioned a Treasury 

Department official—this time it was Mr. Szubin.271 Congressman Royce started by 

addressing Secretary Lew’s previous testimony: 

I asked the Treasury Secretary—I think it was 2 months ago—if he stood 

by his testimony during the agreement’s consideration in which we were 

assured [Iran] would not have access [to the U.S. financial system]. 

Instead of shutting the door right there, Secretary Lew said his focus 

was on making sure Iran gets relief. And 2 months since, the President 

still has not responded to my letter on this question.272

Congressman Royce continued, “And the concern is that while Iran wouldn’t 

be allowed direct access to the dollar, you could structure a scheme offshore that 

would have similar impact.”273 Mr. Szubin interjected and replied, 

I just wanted to clarify that Secretary Lew has made himself clear on 

the record in public, and of course, we look forward to responding to your 

letter to be clear in writing as well. But he has said exactly what I have 

said here today, and I know he was looking forward to me being here to 

be able to relay his views on this. Iran will not have access to our 

financial system.274

Finally, on April 5, 2016, Ambassador Thomas Shannon, the Under Secretary 

of State for Political Affairs for the State Department, testified at the Senate 

Foreign Relations Committee.275 Senator Marco Rubio described a hypothetical 

scenario similar to the actual Bank Muscat currency conversion authorized by the 

specific license. Senator Rubio stated, “Now, I think the President and everyone’s 

been pretty clear what [Iran is] not allowed to do. They’re not allowed to go through 

a U.S. bank to turn the rial into a dollar and then the dollar into a Swiss franc. 

That’s pretty clear. I think that’s been outlined.”276 Senator Rubio then asked 

about a different hypothetical scenario concerning foreign transactions that would 

 

270 Id. 271 Iran Nuclear Deal Oversight: Implementation and its Consequences (Part II), Hearing Before the 

H. Comm. on Foreign Affairs, 114th Cong. (May 25, 2016). 

272 Id. 273 Id. 274 Iran Nuclear Deal Oversight: Implementation and its Consequences (Part II), Hearing Before the 

H. Comm. on Foreign Affairs, 114th Cong. (May 25, 2016), (testimony of Adam Szubin, Acting Under 

Secretary of Treasury for Terrorism and Financial Crimes, U.S. Department of the Treasury) 

(emphasis added). 

275 Recent Iranian Actions and Implementation of the Nuclear Deal, Hearing Before the Sen. Foreign 

Relations Comm., 114th Cong. (Apr. 5, 2016). 

276 Id. 
48 

not require the U.S. financial system at all. Amb. Shannon stated that he “was not 

sure” and that he: 

[W]ould have to check, because if it doesn’t touch a U.S. bank, if it 

doesn’t touch the U.S. financial system -- because what our -- our 

sanctions legislation has gone [sic] and what -- what we have been able 

to accomplish in terms of -- of limiting Iran’s access to our larger 

financial system is we have not permitted U-turn authorization, and no, 

there is no exchange of dollars inside the U.S. financial system, and we 

have not allowed an access to our larger financial system.277

Months before Secretary Lew, Mr. Szubin, and Amb. Shannon testified in 

front of congressional committees, the Treasury Department, issued the specific 

license to Bank Muscat permitting the conversion of Iranian assets using the U.S. 

financial system. 

Members of Congress also sent letters to the Treasury Department 

requesting information concerning Iranian access to the U.S. financial system. 

Senators Kirk and Rubio sent at least two letters to Secretary Lew in March and 

May 2016 asking for assurances that the United States was not working to enable 

Iranian access to the U.S. dollar. The Treasury Department’s two responses again 

reassured Congress that the U.S. government was not working to provide Iran 

access to the U.S. financial system. 

First, on March 30, 2016, Senators Kirk and Rubio wrote a joint letter to 

Secretary Lew stating that they were “gravely alarmed by news reports suggesting 

the Administration is working to give Iran access to the U.S. financial system or to 

dollar transactions outside of the U.S. financial system.”278 The letter continued, 

“Senior officials in the Treasury Department have repeatedly assured Congress that 

the Administration will not allow Iran direct or indirect access to the U.S. financial 

system.”279 Senators Kirk and Rubio’s letter then requested assurances from the 

Treasury Department that the United States “will not work on behalf of Iran to 

enable Iranian access to U.S. dollars elsewhere in the international financial 

system.”280 

The Treasury Department responded on May 11, 2016, stating, “As we have 

said consistently, we are not planning to reinstate the ‘U-turn’ authorization or to 

give Iran access to the U.S. financial system under the JCPOA.”281 The Treasury 

letter further stated, “We also continue to vigorously enforce the many sanctions 

 

277 Id. 278 Letter from Sens. Mark Kirk and Marco Rubio to U.S. Treasury Secretary Jacob Lew (Mar. 30, 

2016). 

279 Id. 280 Id. 281 Letter from Anne Wall, Assistant Secretary for Legislative Affairs, U.S. Treasury Dep’t to Sens. 

Mark Kirk and Marco Rubio (May 11, 2016). 
49 

that remain against Iran, including our primary sanctions that generally prohibit 

Iranian banks from clearing U.S. dollars through the U.S. financial system or 

holding correspondent account relationships with U.S. financial institutions.”282 

Second, on May 19, 2016, Senators Kirk and Rubio sent a follow-up letter to 

Secretary Lew on the same issue. The Senators expressed disappointment that the 

Treasury Department did not provide a clear assurance that the United States was 

not working to directly or indirectly give Iran access to the U.S. dollar or financial 

system.283 The Treasury Department responded nearly three weeks later on June 

7, 2016.284 The letter response, signed by Thomas Patrick Maloney, a Senior 

Advisor to the Office of Legislative Affairs opened with the following paragraph: 

Thank you for your letter seeking assurances regarding Iranian access 

to U.S. dollars. To be clear, the U.S. Department of the Treasury is not 

working on behalf of Iran to enable Iranian access to U.S. dollars 

elsewhere in the international financial system, nor are we assisting 

Iran in gaining access to dollar payment systems outside the U.S. 

financial system. The administration has not been and is not planning 

to grant Iran access to the U.S. financial system.285

The Treasury Department sent this letter roughly three months after it 

issued the specific license authorizing the conversion of Iranian assets through the 

U.S. financial system. 

Finally, in July 2016, 35 bipartisan Senators wrote a letter to President 

Obama to express concern that the Administration was “considering accommodation 

of certain dollar-based transactions for Iran following implementation of the 

[JCPOA], despite sanctions imposed on Iran because of illicit activity separate from 

its nuclear enrichment program.”286 The letter continued: 

We welcome your Administration’s assurance that Iran will not gain 

direct access to the U.S. financial system. As Iran seeks greater access 

to the global financial system, we urge you to take all action necessary 

 

282 Id. 283 Letter from Sens. Mark Kirk and Marco Rubio to U.S. Treasury Secretary Jacob Lew (May 19, 

2016). 

284 Letter from Thomas Maloney, Senior Advisor, Office of Legislative Affairs, U.S. Treasury Dep’t to 

Sens. Mark Kirk and Marco Rubio (June 7, 2016). 

285 Id. 286 Letter from Sens. Collins, Nelson, Ayotte, Menendez, Murkowski, Coons, Risch, Warren, Wicker, 

Peters, Hatch, Cardin, Rounds, Bennet, Kirk, Schumer, Moran, Booker, Rubio, Roberts, Crapo, Cruz, 

Inhofe, Isakson, Hoeven, Boozman, Vitter, Tillis, Grassley, Lankford, Toomey, Scott, Gardner, 

Perdue, and Fischer to President Obama (July 8, 2016), 

https://www.collins.senate.gov/sites/default/files/CollinsNelson%20Letter%20on%20Dollar%20Transactions%20for%20Iran.pdf. 
50 

to preserve the strength of U.S. sanctions imposed for Iran’s illicit nonnuclear activities—including preventing any indirect access to the U.S. 

financial system or the illegal use of dollars in Iranian trade.287

The letter then urged the President to “ensure the maximum of existing 

sanctions on Iran, including the restriction on dollar-based transactions for Iran, 

until Iran changes its nefarious behavior. If Iran wants direct or indirect access to 

the U.S. financial system, Iran can cease money laundering, proliferating weapons, 

developing ballistic missile, and support terror.”288

K. Iranian Funds Remained at Bank Muscat into 2017 

Without a willing U.S. correspondent bank, the Iranian funds held by Bank 

Muscat could not be converted using the U.S. financial system. The funds remained 

at Bank Muscat into 2017. A January 2017 State Department email indicated that 

Iran still “expressed concern” that the Iranian fund issue still had not been 

resolved.289 That same email indicated that the State Department “would work the 

issue expeditiously.”290 In a follow-up interview, the Senior State Department 

Official told the Subcommittee he believed that Bank Muscat and Iran converted 

the funds using European banks and in small increments.291 Sandra Oudkirk, now 

a Deputy Assistant Secretary with the Department of State’s Bureau of Energy 

Resources, also told the Subcommittee in an October 2017 interview that she 

believed Bank Muscat eventually found a way to make small fund transfers without 

the use of the U.S. financial system.292

V. CLASSIFIED ANNEX 

The State Department and the Treasury Department produced classified 

documents to the Subcommittee. This public, unclassified report does not discuss or 

cite those classified documents. This report has a classified annex that adds to the 

Subcommittee’s conclusions concerning the efforts by other U.S. agencies to address 

the conversion issue of the funds held at Bank Muscat. 

 

287 Id. 288 Id. 289 CDP-2017-00018-00052. 

290 Id. 291 State Department Interview (May 7, 2018). 

292 Oudkirk Interview (Oct. 17, 2017).