The recent indictments of Chinese technology giant Huawei and the requested extradition of its chief financial officer, Meng Wanzhou, have put discussions of U.S.-China relations at center stage. Huawei’s indictment in the Western District of Washington for alleged trade secret theft came on the heels of the Department of Justice’s November announcement of a China Initiative focused on Chinese economic espionage. Meanwhile, in the Eastern District of New York, Huawei, Meng and others face charges surrounding another sensitive area of U.S. policy: its relationship with Iran. Grounded in part in the Iranian Transactions and Sanctions Regulations (ITSR), the 13-count EDNY indictment alleges bank fraud, wire fraud, a conspiracy to defraud the United States, and violations of the International Emergency Economic Powers Act (IEEPA). Although the EDNY action is still in its infancy, the Second Circuit has been called to consider potential limitations on several of these charges in another pending case.

The IEEPA and ITSR

Enacted under authority from the IEEPA, which also provides the authority to prosecute its violations, the ITSR prohibits, inter alia, “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran or the Government of Iran,” including financial services. 31 C.F.R. §§560.204, 560.427. The prohibition on providing services to Iran has been interpreted broadly. For example, the Second Circuit has held that “execution of money transfers from the United States to Iran on behalf of another, whether or not performed for a fee, constitutes the exportation of a service,” United States v. Banki, 685 F.3d 99, 107 (2d Cir. 2012), and a SDNY district court has held that even intermediary clearing services performed by U.S. banks (i.e., where both the originator and recipient are foreign banks) are prohibited, United States v. Zarrab, No. 15-CR-867, 2016 WL 6820737, at *6-7 (S.D.N.Y. Oct. 17, 2016). The prohibitions of the ITSR are supplemented by a “secondary sanctions” regime, whereby the Office of Foreign Assets Control (OFAC) can impose penalties on foreign individuals and entities who deal with Iran, including restricted access to U.S. financial institutions.

Huawei