This client alert provides an overview of the key components—including new sectoral sanctions, the suspension of general licenses, new Treasury Department Office of Foreign Assets Control (“OFAC”) guidance on Strait of Hormuz payments, nearly 90 new designations, and a FinCEN Section 311 action on August 28, 2026—and their practical implications for U.S. and non-U.S. businesses.

Background: Existing Comprehensive U.S. Sanctions on Iran and Recent MOU

Iran remains subject to one of the most comprehensive U.S. sanctions regimes in the world. U.S. primary sanctions, administered by OFAC—principally under the Iranian Transactions and Sanctions Regulations (“ITSR”), 31 C.F.R. Part 560—broadly prohibit U.S. persons (individuals and entities) from engaging in nearly all transactions involving Iran, the Government of Iran, and Iranian financial institutions. Prohibitions also apply to non-U.S. entities owned or controlled by U.S. persons. Furthermore, non-U.S. persons may not reexport U.S.-origin goods, technology, or services to Iran, cause U.S. persons to violate U.S. sanctions on Iran, or otherwise evade those sanctions.

In addition, the United States maintains an extensive secondary sanctions framework that authorizes the imposition of sanctions on non-U.S. persons. These secondary sanctions have had a powerful deterrent effect on international commerce with Iran, as non-U.S. companies risk losing access to the U.S. market and financial system if they engage in sanctionable activity. Moreover, the Islamic Revolutionary Guard Corps (“IRGC”) is designated as a Foreign Terrorist Organization (“FTO”), creating criminal and civil liability under 18 U.S.C. § 2339B for anyone providing material support to the IRGC.

As discussed in our prior client alert, on June 17, 2026, the Presidents of the United States and Iran signed the 14-point “Islamabad Memorandum of Understanding,” (“MOU”) providing a framework for the easing of U.S. economic pressure and a cessation of military hostilities. Shortly thereafter, the U.S. offered limited sanctions relief to Iran through the issuance of General License X, which authorized certain transactions related to the production, sale, delivery, or offloading of Iranian-origin crude oil, petrochemical products, and petroleum products. However, General License X was revoked following a breakdown of the framework agreement and military ceasefire.

Operation Economic Outcast

Operation Economic Outcast is a whole-of-government approach involving coordinated efforts by the U.S. Departments of Treasury, State, and War to increase economic pressure on Iran and the IRGC. While the United States has long maintained secondary sanctions targeting third-country facilitators of Iranian trade, this initiative signals an intensified “zero-leakage” enforcement posture, coupling new sectoral determinations with diplomatic ultimatums demanding that third countries sever economic ties with Iran within defined timelines.

As part of the August 24, 2026 press conference, Treasury Secretary Scott Bessent indicated that President Trump had made phone calls with world leaders with specific requests to cease their interactions with Iran. Secretary Bessent also announced that the identified U.S. agencies would engage with “counterparts around the world to make clear that the United States expects immediate action.” Further, he stated that “[e]very country will be given a defined timeline to shut down the Iran-related activity we have identified.”

Concurrently on August 24, 2026, and as described in more detail below, the Treasury Department and State Department announced a new sectoral sanctions determination, suspension of general licenses, new guidance, designations targeting entities, individuals, and vessels operating in Iran’s nuclear and missile technology, cyber operations, and petroleum and petrochemical sectors, and a FinCEN action under Section 311.

New Sectoral Sanctions 

OFAC issued a determination under Executive Order (“E.O.”) 13902 targeting five new sectors of the Iranian economy: the digital assets, technology, gold, aviation, and shipping sectors. The determination authorizes the imposition of sanctions on any person determined by the Treasury Department, in consultation with the State Department, to operate in such sectors of Iran’s economy.

Suspension of General Licenses 

OFAC announced the suspension of five general licenses—authorizations issued by OFAC that allow certain categories of transactions that would otherwise be prohibited under U.S. sanctions. Specifically, OFAC indefinitely suspended the following general licenses, which previously authorized:

Relatedly, OFAC issued General License BB authorizing the wind-down of transactions previously authorized by the five suspended general licenses through 12:01 a.m. EDT on September 8, 2026, provided that any payment to a blocked person is made into a blocked interest-bearing account in accordance with the ITSR. Companies and individuals that have been conducting activities under the now-suspended licenses should carefully evaluate their current activities to ensure compliance with the wind-down timeline and take steps to conclude in an orderly manner any transactions that were previously authorized.  

Strait of Hormuz Guidance

OFAC issued an updated alert regarding the sanctions risks of Iranian demands for Strait of Hormuz passage. The guidance updates an earlier May 1, 2026 alert in response to evolving Iranian threats to shipping. OFAC has confirmed that payments of “tolls” or other fees for safe passage through the Strait of Hormuz could trigger potential secondary sanctions exposure. OFAC’s guidance highlighted that U.S. and non-U.S. persons risk sanctions or penalties by engaging with the designated so-called Persian Gulf Strait Authority, Persian Gulf Marine Insurance Company, and HormuzSafe Marine Services Authority, including by accepting insurance or other services or responding to information demands for guarantees of safe passage, even if there is no associated payment or other exchange of value for these services 

New Designations

OFAC and the State Department designated nearly 90 entities, individuals, and vessels under several legal authorities, including under E.O. 13382, E.O. 13846, E.O. 13694 (as amended by E.O. 13757, E.O. 14144, and E.O. 14306), E.O. 13902, E.O. 13949, and E.O. 13224. The designations targeted individuals and entities based or registered in Iran as well as third countries, including China, France, Greece, Hong Kong, India, Singapore, Switzerland, Syria, Türkiye, Ukraine, the United Arab Emirates, and the United Kingdom.

OFAC’s designations target:

• Separately, the State Department announced numerous sanctions targeting individuals and entities, including those involved in:

This action follows the State Department’s Rewards for Justice offer last week of up to $10 million for information on leaders of Iran’s military, underscoring the breadth and intensity of the U.S. Government’s multi-agency approach.

FinCEN Section 311 Action Against UAE Bank

On August 28, 2026, Treasury announced further action under Operation Economic Outcast targeting Iran’s access to banking in the United Arab Emirates. FinCEN issued a notice of proposed rulemaking finding that Banque Misr UAE is a financial institution of primary money laundering concern. The proposed rule would prohibit U.S. financial institutions from opening or maintaining correspondent accounts for Banque Misr UAE, require U.S. financial institutions to take reasonable steps not to process transactions involving Banque Misr UAE through their correspondent accounts, and require special due diligence on foreign correspondent accounts to guard against processing transactions involving Banque Misr UAE.

This action is notable for Treasury’s use of FinCEN’s Section 311 authority under the USA PATRIOT Act—rather than full blocking sanctions—to cut off a key financial lifeline for the Iranian regime, demonstrating Treasury’s willingness to deploy a variety of tools to target sanctions evasion networks.

Concurrently, OFAC announced two sanctions designations that targeted the manager of the Dubai branch of Bank Melli and an alleged Hong Kong-based front company alleged to have laundered funds for a sanctioned Iranian exchange house.

Key Considerations

Operation Economic Outcast represents an escalation of U.S. economic pressure on Iran and demonstrates the Administration’s intent to expand its focus beyond Iran itself to the third-country “enablers” that allow Iran to evade sanctions and continue generating revenue. Given the breadth of existing U.S. sanctions on Iran—which already prohibit virtually all U.S. person transactions with Iran—the principal impact of Operation Economic Outcast will be felt by non-U.S. companies and third countries that maintain commercial ties with Iran. Companies, including financial institutions, should consider the following:

K&S’s International Trade team will continue to monitor Iran-related sanctions developments and stands ready to advise companies on compliance obligations and assess how such developments may affect your business. Please contact any member of our team with questions or to discuss next steps.