Iranian Americans Hit, And Missed, by Sanctions

While the innocent fear being targeted by the Treasury Department, less scrupulous characters are evading the law.

America is rightly referred to as a nation of immigrants, who have started a new life on its shores and made countless contributions to its development as a great nation. Yet the debate about problems surrounding our immigration system never ends. The national debate that centers on illegal immigrants ignores the significant problem of some legal immigrants: lawful residents and citizens who skirt America’s laws and national interests for economic gain. The Iranian-American community is a good case study, and also serves to demonstrate how legislation is failing in this arena.

America affords an opportunity to make a new start both to the oppressed that have no hope for a better life in their country of birth, as well to the successful who yearn for political freedom. But such opportunities and privileges have obligations, the most basic of which is to comply with U.S. laws.

Tax laws require all citizens and permanent residents of the United States to declare their worldwide income and foreign bank accounts with deposits that exceed $10,000. The logic behind this requirement is quite simple. Americans who enjoy all the benefits afforded by the United States but happen to earn income from international activities should still pay their fair share of taxes, and should report foreign bank accounts to prevent illegal activities such as money laundering and financing terrorism. Double-tax treaties ensure that they don’t overpay, if they are already paying abroad.

To our mind, these tax and reporting laws are not universally respected by some recent immigrants to the United States and are not adequately and fairly enforced by the U.S. Treasury and the IRS—this at a time when most Americans continue to pull their own weight despite economic and financial hardship. While the Treasury has stepped up its enforcement of tax collection from those with hidden assets in tax havens such as Switzerland and Luxembourg, it has largely ignored wealthy immigrants who evade taxes. In our opinion, the size of these unpaid taxes likely dwarfs the taxes due on foreign bank accounts in countries such as Switzerland and Luxembourg.

Besides evading taxes, some wealthy immigrants break other U.S. laws. These laws fall under the broad category of U.S. economic sanctions and are under the jurisdiction of the Under Secretary for Terrorism and Financial Intelligence of the U.S. Treasury’s Office of Foreign Assets Control (OFAC). OFAC legislation is designed to enforce economic sanctions against countries and individuals who partake in activities reprehensible to American values and adversely affect its interests, and the Islamic Republic of Iran has been on the top of that list for some three decades. By weakening Iran’s economy and relationships with the world at large, and being a primary impetus for Iran’s recent overtures with respect to its nuclear program and its other belligerent activities, some have deemed this part of OFAC’s policies a success.

OFAC regulations outlaw (without a license from OFAC) virtually any economic activity involving Iran. The statutes are sufficiently vague, thus the government has considerable leeway in interpreting what activities violate these sanctions, but they generally include money transfer and repatriation, buying and selling assets, investing, importing and exporting goods, and maintaining investment and bank accounts in Iran. A number of American citizens and residents of Iranian origin nonetheless secretly maintain significant business interests in Iran and hide these interests to avoid OFAC regulations and to avoid paying U.S. taxes.

Given the nature of doing business in Iran’s corrupt state-dependent economy, many of these individuals have ties to Iran’s government and the increasingly ascendant and economically dominant Revolutionary Guards. While illegally enriching themselves, these individuals are indirectly supporting the clerical regime and undermining U.S. foreign policy. Meanwhile, these individuals take advantage of their American passports to travel freely, educate their children in American schools, and maintain a number of government benefits in the United States, such as Social Security, Medicare and even Medicaid. The United States has done a poor job of tracking and punishing the largest among these sanctions violators, who knowingly violate laws to avoid potentially billions of dollars in taxes and sanctions penalties.

While these wealthy lawbreakers live in luxury and are mostly untouched, some uninformed and innocent Iranian residents of the United States are singled out for punishment. In the well-publicized case of the United States of America v. Mahmoud Reza Banki, a Berkeley-educated American of Iranian origin was imprisoned for twenty-two months for receiving money from his family in Iran. Malfeasance was never proven in Banki’s case, and the Second Circuit Appellate Court ultimately overturned the substantive convictions in the case. Similarly, Iranian immigrants are prevented from helping their families back home with the basic necessities of life, such as medicines. This has created a culture of fear, where any ties to one’s home country carries a stigma.

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