Iranian Gemstones & U.S. Sanctions: What Every Dealer Needs to Know

Affect all U.S. gem dealers anywhere in the world.

The global gemstone and jewelry industry is highly interconnected, with dealers, buyers, and appraisers often conducting business across international borders. However, this open market also brings with it a complex web of legal and regulatory obligations—especially when it comes to transactions involving certain countries. One of the most critical of these obligations pertains to U.S. sanctions law, specifically those enforced by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury. For gem dealers with any connection to the United States, understanding and adhering to these regulations is a legal necessity.

Understanding OFAC and Its Role

The Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. These sanctions are targeted against countries, regimes, terrorists, international narcotics traffickers, and others considered threats to the United States. Among the key countries subject to OFAC sanctions is Iran. In 2008, Iran was designated a terrorist state by the U.S. Department of State and strict restrictions were put into place for all U.S. citizens, both domestic and abroad.

The Iranian Transactions and Sanctions Regulations (ITSR)

The Iranian Transactions and Sanctions Regulations (ITSR), codified at 31 C.F.R. Part 560, is the principal set of rules governing U.S. dealings with Iran. These regulations prohibit, with limited exceptions, the export, reexport, sale, or supply of goods, technology, or services—directly or indirectly—to Iran or the Government of Iran by U.S. persons, wherever located, or by non-U.S. persons involving U.S.-origin goods, technology, or services. (see Part 560.204)

What Does This Mean for Gem Dealers?

Gem dealers, whether individuals or companies, must be aware that the ITSR applies to a broad range of activities, including—but not limited to—the sale, trade, marketing, or appraisal of gemstones and jewelry. The prohibitions are comprehensive and apply regardless of whether the transaction is conducted directly with an Iranian party or through intermediaries or third countries.

• Direct Transactions: Selling, trading, marketing, or appraising gemstones for delivery to Iran or for the benefit of an Iranian individual or entity is strictly prohibited without a specific OFAC license.
• Indirect or Third-Party Transactions: Conducting business with a third party (such as another dealer or distributor) when the dealer knows or has reason to believe that the ultimate end user or beneficiary is in Iran also violates OFAC regulations.
• Services and Support: Providing services such as marketing consultation, valuation, or facilitating logistics for Iranian-origin gemstones, or for Iranian buyers or sellers, is similarly restricted.

Scope of the Prohibited Activities

The scope of what is prohibited under the ITSR is intentionally broad. It includes not only physical shipments of goods but also the provision of services, including appraisal, marketing, and even promotional activities. This means that activities such as:

• Traveling to Iran to assist with the marketing of Iranian-produced gemstones
• Evaluating or appraising gems that are intended for sale in or to Iran
• Assisting or facilitating in marketing or sales of gemstones to Iranian individuals or entities, either directly or indirectly
• Providing technical advice or business strategies to Iranian jewelry manufacturers are all likely to fall under the regulatory umbrella and thus require prior OFAC authorization.

An example of restricted activity requiring OFAC licensing and authorization is seen at this link Iran Gemkish. U.S. citizen participation in any marketing activities in Iran are strictly prohibited without an OFAC special license.

Consequences of Non-Compliance

Violations of the ITSR can result in severe civil and criminal penalties. Civil penalties can reach up to hundreds of thousands of dollars per violation, while criminal penalties can include fines of up to several million dollars and potential imprisonment for individuals. In addition, non-compliance can result in:

• Loss of the ability to transact with U.S. financial institutions
• Inclusion on OFAC’s list of Specially Designated Nationals (SDNs), which effectively freezes assets and prohibits virtually all dealings with U.S. persons
• Reputational damage and loss of business relationships

Due Diligence and Best Practices

To avoid inadvertent violations, all gem dealers are urged to exercise robust due diligence in their international transactions. This should include:

• Screening all customers and counterparties against OFAC’s SDN and other relevant lists
• Requesting and retaining documentation regarding the ultimate destination and end user of gemstones and jewelry
• Inquiring about the intended use and purchasers, especially when transactions involve regions or individuals with possible Iranian connections
• Consulting with qualified legal counsel or compliance professionals when in doubt about a transaction
• Implementing written compliance policies and providing regular training to all employees

License Exceptions and Specific Authorizations

While OFAC does provide for certain licenses or exceptions, these are limited and must be obtained prior to any transaction. General licenses are rare and tightly defined; most activities involving Iran require a specific license, which must be applied for through OFAC. Dealers should never assume that a transaction is permitted without explicit authorization.

Since 2006 the USGI has worked to inform the industry of restrictions regarding gem dealing and OFAC regulations. If you have questions or comments we welcome your inquiry.