Mobile Menu - OpenMobile Menu - Closed

H.R. 4992, United States Financial System Protection Act of 2016

Floor Situation

On Thursday, July 14, 2016, the House will begin consideration of H.R. 4992, United States Financial System Protection Act of 2016, under a closed rule. H.R. 4992 was introduced on April 19, 2016, by Rep. Ed Royce (R-CA), and was referred to the Committee on Financial Services. 


Summary

H.R.4992 codifies existing regulations that prohibit the administration from allowing the U.S. dollar to be used to facilitate trade transactions with Iran and upholds Iran’s designation as a “primary money laundering concern.”  This covers direct dollar transactions and work-arounds including dollar-clearing, dollar-based conversions and dollar-related foreign currency transactions.  These prohibitions would remain in place until the president certifies Iran is no longer engaging in these dangerous acts.[1]

Specifically, the bill codifies the regulations that have been in place since November 2008 prohibiting “U-turn” transactions for Iran; meaning U.S. financial institutions cannot process transactions involving the transfer of funds from a foreign bank that pass through a U.S. financial institution and are then transferred out to a second foreign bank on behalf of any Iranian entity, state-owned or private. The bill allows transfers involving transactions for humanitarian purposes on a case-by-case basis.

The bill also prohibits the President from removing the designation of Iran as a “primary money-laundering concern” until the President certifies that Iran is no longer supporting terrorism, pursuing weapons of mass destruction, and engaging in illicit financial activities.


Background

Despite the implementation of the Joint Comprehensive Plan of Action (JCPOA) regarding the Islamic Republic of Iran’s nuclear program on January 16, 2016, Section 311 of the USA PATRIOT Act allows the Treasury Department, acting through the Financial Crimes Enforcement Network (FinCEN), to take a range of actions to combat money laundering by any nation.  This provision in the PATRIOT Act allows Treasury to designate entities as a “primary money laundering concern”, which enables the agency to use a range of tools and sanctions to combat, among other things, terrorist financing.[2]  Using this authority, Treasury labeled Iran as a primary money laundering concern on November 28, 2011, which prohibited domestic and international financial institutions from doing business with Iran.[3]

In April 2016, the Obama Administration began prepping to give Iran limited access to U.S. dollars as part of a broader initiative to loosen sanctions on Iran. Most major international trade is conducted in U.S dollars. “The Treasury is considering how to issue licenses to offshore dollar clearing houses for specific Iranian financial institutions, an approach that wouldn’t require the involvement of American banks.”[4] Most international banks have continued to stay away because they fear being penalized by remaining U.S. sanctions over issues such as money laundering.[5]

During testimony before Congress regarding the JCPOA, Secretary Lew said “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 financial arrangements with U.S. banks. […] Iran, in other words, will continue to be denied access to the world’s largest financial and commercial market.”[6]

According to the bill sponsor, “Iran was shut out of the U.S. and global financial system because of its support for illicit activities, including terrorism, ballistic missiles, and human rights abuses.  These sanctions should remain in place, as President Obama promised, until Iran changes its behavior.  Iran’s supreme leader must not be allowed to seek ‘death to America’ with U.S. dollars in his pocket.”[7]


Cost

A Congressional Budget Office (CBO) cost estimate is currently not available.


Staff Contact

For questions or further information please contact John Huston with the House Republican Policy Committee by email or at 6-5539.

 

[1] See Foreign Affairs Committee Section-By-Section Summary, H.R. 4992, The United States Financial System Protection Act of 2016
[2] See Treasury Website, Fact Sheet: Overview of Section 311 of the USA PATRIOT Act
[3] See FinCEN website, SECTION 311 - SPECIAL MEASURES
[4] See WSJ Article, “U.S. Moves to Give Iran Limited Access to Dollars,” April 1, 2016.
[5] See Reuters Article, “Small banks help Iran slowly restore foreign financial ties,” Jun 15, 2016.
[6] See Foreign Affairs Committee Website, “THE UNITED STATES MUST NOT AID AND ABET IRANIAN MONEY LAUNDERING,” April 5, 2016.
[7] See Rep. Ed Royce Press Release, “Chairman Royce Introduces Bill to Deny Iran Access to U.S. Dollar,” April 19, 2016.

114th Congress