Treasury conducting “Operation Economic Outcast” to financially isolate Iran

The US Department of the Treasury (Treasury) has opened one of its most sweeping sanctions campaigns against Iran in recent years: “Operation Economic Outcast.” Below is an overview of certain actions taken by Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) to date in support of this initiative, which are discussed in greater detail in the following sections.

On August 24, 2026, Treasury launched Operation Economic Outcast, a coordinated, whole-of-Treasury effort to sever Iran’s global financial, trade, and logistics connections. In announcing the campaign, Treasury put countries around the world on notice that the US government expects immediate action to curb US-prohibited, Iran-related activities, warning that persons facilitating money laundering or sanctions evasion on Iran’s behalf will be cut off from the US financial system. Treasury has since moved at an unusual pace, deploying new secondary sanctions authorities, successive rounds of designations, general license suspensions, a restrictive licensing policy, and new anti-money laundering (AML) measures and whistleblower incentives.

Alongside the announcement, OFAC took four initial actions:

• Expanded the categories of Iran-related conduct that may result in secondary sanctions by issuing a determination that persons operating in five sectors of Iran’s economy may be targeted with sanctions.
• Sanctioned nearly 60 entities, individuals, and vessels across multiple jurisdictions connected to Iran.
• Indefinitely suspended certain general licenses (GLs) under OFAC’s Iran sanctions program.
• Updated guidance on sanctions risks associated with complying with Iranian demands relating to the Strait of Hormuz.

OFAC has followed these initial actions with multiple rounds of designations targeting, among others, financial facilitators; a Turkey-based investment bank and its affiliates; Iranian airlines and other persons connected to Iran’s aviation sector; persons supporting the Iranian proxies Kata’ib Hizballah (KH) and Hizballah; an Iranian digital assets exchange; and procurement networks supporting Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL).

Alongside its designations targeting Iran’s aviation industry, on September 8, 2026, OFAC suspended four GLs relating to that industry. Two days later, on September 10, 2026, OFAC announced a Statement of Licensing Policy (the Statement) establishing a presumption of denial for license requests to engage in activities otherwise prohibited by Iran sanctions. The UK followed suit on September 23, 2026, tightening its own Iran sanctions by applying a presumption of denial to license applications from designated Iranian banks operating in the UK.

FinCEN has also played a central role in Operation Economic Outcast. On August 28, 2026, FinCEN announced a proposed rule that would revoke Banque Misr UAE’s correspondent banking access to US financial institutions (FIs) and impose certain special due diligence obligations on those FIs. Less than two weeks later, on September 8, 2026, FinCEN issued an alert providing guidance to FIs on Iran’s efforts to illicitly procure US- and Western-origin aircraft and aircraft parts (the Aircraft Alert).

FinCEN then issued a Whistleblower Bulletin (the Bulletin) on September 10, 2026, titled “Blow the Whistle on Iran-Related Illicit Finance,” urging individuals worldwide to report Iran-related sanctions evasion and money laundering through its whistleblower program, with potential awards of 10 – 30% of monetary penalties collected. The Bulletin coincides with a leadership transition at FinCEN: Director Andrea Gacki departed effective October 1, 2026, and Jenna Casanova has been named acting director.

Most recently, on October 1, 2026, FinCEN took action against the A7 Network, a Russia-linked shadow banking network used by Iran to evade sanctions, by issuing a notice of proposed rulemaking (NPRM) under Section 9714(a) of the Combating Russian Money Laundering Act that would prohibit covered FIs from engaging in certain transmittals of funds involving the network’s sub-agents. At the same time, FinCEN issued an alert to help FIs detect and report related suspicious activity, and OFAC designated the A7 Network as a transnational criminal organization.

Taken together, these measures heighten compliance and sanctions risks for US and non-US persons with Iran-related exposure, particularly given how rapidly the regulatory environment is evolving. This alert summarizes certain of Treasury’s actions to date – the expanded secondary sanctions determination, the designations, the GL suspensions, the Strait of Hormuz guidance, the US and UK licensing policies, and FinCEN’s proposed rules, alerts, and whistleblower initiative – and closes with practical compliance takeaways to help organizations reassess their risk posture now.

A. Expanded secondary sanctions: Additional sectoral sanctions determination involving five sectors of Iran’s economy

 Effective August 24, 2026, OFAC issued a determination that Section 1(a)(i) of Executive Order (EO) 13902 applies to the aviation, digital asset, gold, shipping, and technology sectors of the Iranian economy (the Determination). EO 13902 authorizes the imposition of sanctions on persons operating in a covered sector of Iran’s economy, as well as on persons that knowingly engage in certain significant transactions involving goods or services used in connection with a covered sector. The Determination supplements EO 13902’s existing coverage of Iran’s construction, mining, manufacturing, and textiles sectors, and prior determinations covering Iran’s financial, petroleum, and petrochemical sectors. The Determination does not automatically block persons operating in the covered sectors, but it expands the universe of persons who may be designated under EO 13902, regardless of whether they are located in Iran.

B. Sanctions designations: Iranian-linked persons, entities, and vessels sanctioned

In addition to expanding the risk of secondary sanctions, on August 24, 2026, OFAC designated approximately 60 individuals, entities, and vessels that, according to Treasury Secretary Scott Bessent, “enable the Iranian regime to procure illicit nuclear and missile technology, conduct cyber operations, and generate oil revenue.” OFAC specifically targeted:

• A procurement network of entities and persons across the Middle East and East Asia supporting MODAFL’s procurement of proliferation-sensitive technology and equipment for ballistic missile development and nuclear research.
• A malicious cyber group directed by Iran’s Ministry of Intelligence and Security and responsible for extensive compromises of US critical infrastructure and financially motivated cyber theft.
• A network of brokers, companies, and shadow-fleet vessels operating across various regions that are responsible for transporting Iranian crude oil and petroleum products and channeling revenue to Iranian regime elements.
• Several international companies operating within Iran’s petroleum sector that enable the movement and sale of Iranian crude oil and petroleum products.

On August 28, 2026, in conjunction with FinCEN’s actions discussed below, OFAC sanctioned Reza Mohammad Taeedi, the general manager of Bank Melli’s Dubai branch, and Hong Kong-based Kameng Trading Limited for allegedly facilitating Iranian sanctions evasion.

On September 4, 2026, OFAC sanctioned Turkey-based Golden Global Yatirim Bankasi Anonim Sirketi (Golden Global Bank) and its subsidiaries, which reportedly facilitated “tens of millions of dollars’ worth of transactions” for Iran’s Islamic Revolutionary Guard Corps-Qods Force and provided the Iranian regime with correspondent banking access. Concurrently, OFAC issued GL CC, which authorized, through September 19, 2026, transactions ordinarily incident and necessary to the wind-down of transactions involving three Golden Global Bank entities and their affiliates.

On September 8, 2026, OFAC sanctioned the following: 27 Iranian airlines; four entities and one individual connected to efforts to provide the sanctioned Mahan Air with US-origin aircraft; and certain cargo service providers and general sales agents servicing Mahan Air’s international flights. OFAC also issued GL 37, which authorized the wind-down of transactions involving certain of these entities through September 23, 2026.

On September 10, 2026, OFAC sanctioned entities and individuals allegedly supporting KH and Hizballah, as well as Shams & Bahr Trading Company L.L.C., a hawala (informal value-transfer system), and related persons. On September 17, 2026, OFAC sanctioned BitBank, an Iranian digital assets venture, and related persons.

OFAC subsequently sanctioned 10 individuals and entities in Iran, China, Hong Kong, Pakistan, Saudi Arabia, and Turkey that allegedly procured weapons and weapons components for MODAFL, as well as additional Iranian shadow-fleet vessels, companies operating in Iran’s petroleum and petrochemical sectors, and Samudra Marine Services Private Limited (Samudra) and related persons. MODAFL is responsible for weapons research, production, and acquisition for Iran’s armed forces and oversees organizations developing Iran’s ballistic missiles and unmanned aerial vehicles. The action against the Saudi Arabia-based entity was taken in coordination with the Saudi government. Samudra is an India-based customer broker that allegedly facilitated the import of Iranian-origin petrochemical products into India. OFAC also issued GL EE, which authorizes the wind-down of transactions involving Samudra through October 23, 2026.

C. Suspension of GLs and licensing policy: Certain activities relating to education, personal remittances, conferences, sports, and the aviation industry no longer permitted

On August 24, 2026, to further curb Iran-related activities, OFAC indefinitely suspended the following five GLs that permitted certain activities otherwise prohibited by OFAC’s Iran sanctions program:

• 31 C.F.R. § 544: Prior to suspension, this GL authorized US undergraduate degree-granting institutions to engage in certain activities relating to their programs in the humanities, social sciences, law, and business, as well as the release of certain technologies and software to Iranian students.
• 31 C.F.R. § 550: Prior to suspension, this GL authorized certain noncommercial, personal remittances to or from Iran, or on behalf of a person ordinarily resident in Iran.
• 31 C.F.R. § 554: Prior to suspension, this GL authorized the importing, exporting, reexporting, and supplying of services relating to participation in a public conference, performance, exhibition, or similar event in the United States.
• GL F: Prior to suspension, this GL authorized the importing, exporting, and reexporting of services relating to professional and amateur sporting activities and exchanges involving the United States and Iran.
• GL G: Prior to suspension, this GL authorized certain activities relating to student academic exchange agreements between US and Iranian graduate and undergraduate degree-granting institutions, as well as the exchange of certain educational services.

Through GL BB, OFAC authorized a wind-down period for activities previously authorized by the suspended GLs, which expired on September 8, 2026. Those activities are now prohibited absent a specific license or other authorization from OFAC.

On September 8, 2026, OFAC indefinitely suspended three additional GLs and a licensing policy that authorized certain activities relating to Iran’s aviation and transportation industries:

• 31 C.F.R. § 522: Prior to suspension, this GL authorized payments to Iran for services rendered by the Iranian government in connection with the overflight of Iran or emergency landing in Iran of US-owned or -registered aircraft.
• 31 C.F.R. § 528: Prior to suspension, this licensing policy authorized the issuance of specific licenses for the exportation or reexportation of services, goods, or technology to ensure the safety of civil aviation and safe operation of US-origin commercial passenger aircraft.
• 31 C.F.R. § 529: Prior to suspension, this GL authorized the provision of certain bunkering- or emergency repair-related goods or services in the United States to non-Iranian carriers transporting passengers or goods to or from Iran.
• GL J-1: Prior to suspension, this GL authorized the reexportation of certain fixed-wing civil aircraft to Iran on temporary sojourn.

As with the prior suspensions, OFAC issued GL DD, which authorized a wind-down period, through September 23, 2026, for activities previously authorized by 31 C.F.R. §§ 560.522 and 560.529 and GL J-1. These activities are now prohibited absent a specific license or other authorization from OFAC.

D. OFAC alert on the Strait of Hormuz: Sanctions risks of complying with Iranian demands in exchange for passage

 On August 24, 2026, OFAC released an updated alert on sanctions risks associated with Iranian demands regarding the Strait of Hormuz. Under existing authorities, US persons and foreign entities owned or controlled by US persons generally may not engage in direct or indirect transactions with Iran or the government of Iran, including by receiving services. OFAC warned that engaging with Iran’s Persian Gulf Strait Authority, Persian Gulf Marine Insurance Company, or HormuzSafe Marine Services Authority – including by accepting insurance or other services or by responding to information demands in exchange for guarantees of safe passage, even where no payment is made – may violate these prohibitions and expose US persons to penalties. Non-US persons engaging with Iran in relation to the Strait of Hormuz may also face penalties or secondary sanctions risk. OFAC further advised maritime service providers to conduct enhanced due diligence on vessels seeking to transit the Strait of Hormuz to confirm that they have not engaged in sanctionable conduct.

E. Statement of Licensing Policy: Presumed denial for licensing requests to engage in activities prohibited by Iran sanctions

Concurrent with the September 10, 2026, designations described above, OFAC issued the Statement, confirming that requests for specific licenses under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560, and other Iran-related authorities will be subject to a presumption of denial. Going forward, Iran-related specific licenses will be issued only “as required by law or in exceptional and urgent circumstances,” including risks to life, limb, or environmental safety. Applicants should include a written attestation of the existence of such circumstances.

On September 23, 2026, the UK announced a similar “Presumption of Denial of Licence Applications for Designated Iranian banks.” Under this policy, license applications submitted by certain designated Iranian banks operating in the UK for activity otherwise prohibited by sanctions will be presumed to be denied unless the application demonstrates clear and compelling reasons for licensing. The UK also announced that GL INT/2025/7628424, which authorizes certain transactions involving five FIs, will expire on October 22, 2026.

F. Shadow banking network: Proposed rule revoking Banque Misr UAE’s correspondent banking access to US FIs

 On August 28, 2026, following Treasury’s announcement of Operation Economic Outcast and OFAC’s initial actions, FinCEN announced a proposed rule pursuant to Section 311 of the USA PATRIOT Act that would revoke Banque Misr UAE’s correspondent banking access to US FIs (the Banque Misr UAE NPRM). Under the Banque Misr UAE NPRM, FinCEN would find Banque Misr UAE to be an FI of primary money laundering concern based on evidence that it is a “significant conduit” for Iranian shadow banking. US FIs would consequently be (i) prohibited from opening or maintaining correspondent accounts for, or on behalf of, Banque Misr UAE; (ii) required to take reasonable steps not to process transactions through correspondent accounts of foreign banking institutions where such transactions involve Banque Misr UAE; and (iii) required to apply special due diligence to foreign correspondent accounts reasonably designed to guard against their use by Banque Misr UAE. Public comments on the Banque Misr UAE NPRM were due October 1, 2026.

G. FinCEN Aircraft Alert: Iran’s procurement efforts for its commercial aviation industry

In connection with Treasury’s targeting of Iran’s aviation industry, FinCEN issued the Aircraft Alert on September 8, 2026, to assist FIs in identifying and reporting procurement networks supporting Iran’s aviation industry. According to the Aircraft Alert, Iran uses commercial airlines to support the Islamic Revolutionary Guard Corps (IRGC) and Iran’s terrorist proxies, including by transporting funds, personnel, and weapons. To that end, Iran reportedly employs deceptive schemes, particularly through front companies, to illicitly procure US- and Western-origin aircraft and aircraft parts.

Building on its prior Iran-related advisory and alert, FinCEN identified seven red flags associated with these procurement efforts. Notable indicators include:

• Documentation or due diligence associated with the sale of an aircraft indicating that the aircraft has been in storage for a prolonged period of time, or has undergone frequent re-registrations, layered changes in ownership by companies in multiple jurisdictions, or an unusual number of moves between jurisdictions, leading up to the sale.
• A company, especially a general trading company, located in a free-trade zone or a jurisdiction at a high risk for Iranian aviation procurement that does not ordinarily deal in aviation goods attempts to order US- or Western-origin aircraft components.
• A customer in a jurisdiction of concern for Iranian aviation procurement places an order for US- or Western-origin aircraft components from firms in one country for delivery to freight forwarding or logistics firms in a second country.

No single red flag is determinative, and FIs should consider the surrounding facts and circumstances before concluding that an activity or transaction is suspicious. When filing a suspicious activity report (SAR) relating to the conduct described in the Aircraft Alert, FIs should include the key term “FIN-2026-IRANAIR” in SAR field 2.

H. Whistleblower Bulletin: FinCEN encouraging individuals to report Iran-related Bank Secrecy Act (BSA) and sanctions violations

On September 10, 2026, FinCEN released the Bulletin encouraging individuals to submit information through its whistleblower program, which covers violations of the BSA as well as the national security statutes underlying US sanctions, including the International Emergency Economic Powers Act and the Trading with the Enemy Act. The Bulletin expressly welcomes tips from US and non-US whistleblowers concerning violations of the BSA or OFAC-administered sanctions programs, including violations involving Iranian proxies and facilitators operating outside Iran. Notably, FinCEN states that, at Treasury’s discretion, awards may be paid even to individuals who work, directly or indirectly, for the Iranian regime or Iranian state-owned enterprises. Although OFAC sanctions violations generally require a US nexus, the Bulletin reminds readers that non-US persons are prohibited from causing US persons to violate sanctions, conspiring to violate US sanctions on Iran, and engaging in conduct that evades sanctions – a pointed warning to foreign intermediaries.

The Bulletin provides examples of Iranian sanctions evasion typologies and illicit finance schemes involving Iranian proxies. Sanctions evasion typologies include:

• Higher-risk company types and jurisdictions. Involvement of company types and jurisdictions at a higher risk for Iranian sanctions evasion, including those from Iraq, the United Arab Emirates (UAE), Turkey, and China, and dealings with shipping companies that have Iranian counterparties, including in Iraq, the UAE, and China (especially Hong Kong).
• Shipping irregularities. Irregularities in shipping documentation that may hide links to Iran, including efforts to disguise the true identity of vessels.
• Digital-asset red flags. Payments to or from Iran-based digital asset exchanges or service providers, or to entities acting as fronts for such entities; unusual digital asset payments by petroleum, shipping, trading, or trust companies; and unregistered peer-to-peer exchanges, foreign-located money services businesses, and nested digital asset exchanges.
• Exchange-house anomalies. Unusual use of exchange houses, including where the fees, transaction volumes, or patterns of transactions do not reflect customary commercial practices.

Typologies associated with potential illicit finance schemes involving Iranian proxies include:

• Certain FIs in high-risk jurisdictions. Transactions with FIs operating in high-risk jurisdictions that are believed to have lax customer identification and verification processes or opaque ownership structures, or that otherwise fail to comply with AML and countering the financing of terrorism best practices.
• Front companies. Transactions involving general trading companies with unclear business purposes or other entities whose beneficial ownership information suggests a nexus to Iran.
• Suspicious charities. Charitable or nonprofit organizations that solicit donations but do not appear to provide charitable services, or that appear to openly support terrorist activity or operations.
• Suspicious digital-asset payments. Patterns of small digital-asset payments aggregated and moved onward, particularly where account access originates from IP addresses in high-risk jurisdictions.

Awards are available where a voluntary tip of original information leads to a successful Treasury or US Department of Justice enforcement action resulting in monetary penalties exceeding $1 million.

The Bulletin coincides with a leadership change at FinCEN. Following Director Andrea Gacki’s departure, effective October 1, 2026, Treasury named Jenna Casanova as acting director. Casanova is a career Treasury official whose prior positions include senior enforcement officer at FinCEN and senior advisor to the undersecretary for terrorism and financial intelligence, where she coordinated illicit finance policy across Treasury components.

The transition comes at a pivotal moment for the whistleblower program, which has moved from concept to operation over the past year. On February 13, 2026, FinCEN launched a dedicated webpage to confidentially accept whistleblower tips on fraud, money laundering, and sanctions violations. On April 1, 2026, FinCEN published an NPRM to fully implement the program, proposing procedures for secure tip submission, eligibility criteria and award adjudication processes, awards of 10 – 30% of collected monetary penalties, and anti-retaliation protections. The comment period closed on June 1, 2026, and a final rule is anticipated. Congressional pressure has also been building: In February 2026, Senators Chuck Grassley and John Fetterman urged Treasury to implement the program rules, noting that FinCEN has already established the Financial Integrity Fund from which awards will be paid and has received hundreds of unique tips. The appointment of an acting director with a FinCEN enforcement background suggests continuity, if not acceleration, on the enforcement and whistleblower fronts.

I. Russia-linked shadow banking network: Treasury targets the A7 Network used by Iran to evade US sanctions

On October 1, 2026, Treasury took multiple actions targeting the A7 Network, a Russian shadow banking network that enables actors in heavily sanctioned jurisdictions, such as Russia and Iran – including the Central Bank of Iran, the IRGC, and Iran-backed terrorist organizations – to move illicit funds through the international financial system.

First, FinCEN issued a finding and NPRM pursuant to Section 9714(a) of the Combating Russian Money Laundering Act that would (i) designate transactions involving the A7 Network’s “Sub-Agents” (companies controlled by the A7 Network and based in third-country jurisdictions) as being of primary money laundering concern in connection with Russian illicit finance and (ii) prohibit covered FIs from engaging in transmittals of funds involving such Sub-Agents (the A7 NPRM).

FinCEN’s finding is based on the A7 Network’s provision of financial services infrastructure that enables clients that are targets of US sanctions to make cross-border payments in fiat currency and digital assets while obscuring any sanctions nexus from US and foreign FIs. Accordingly, FinCEN proposes to prohibit covered FIs, including banks, broker-dealers in securities, money services businesses, and mutual funds, from engaging in any transmittal of funds involving a Sub-Agent. The A7 NPRM would also require covered FIs to notify affected persons associated with a transmittal of funds where the FI knows or has reason to believe the transmittal involves a Sub-Agent, and to adopt a risk-based approach in determining the due diligence measures necessary to comply with these requirements. To limit the compliance burden, FinCEN proposes to identify known Sub-Agents through a list shared with covered FIs via its secure FI-Portal, and to confine the prohibition to listed entities. Public comments on the A7 NPRM are due November 4, 2026.

FinCEN also issued an alert to assist FIs in detecting, identifying, and reporting suspicious activity involving the A7 Network (the A7 Alert). The A7 Alert describes how the A7 Network operates, noting that it comprises three Russia-based companies (A7 Limited Liability Company, A71 Limited Liability Company, and A7 Agent Limited Liability Company) and hundreds of Sub-Agents that provide the network with access to correspondent banking relationships and foreign-currency liquidity. The A7 Alert also discusses the network’s use of the A7A5 stablecoin as an internal accounting mechanism for tracking the Sub-Agents’ fiat transactions in a “mirror trading system.” FinCEN further identified nondispositive indicators of A7 Network activity organized around three themes: (i) the use of Sub-Agents, (ii) mis-invoicing and invoice falsification, and (iii) digital asset abuse. Notable red flags include:

• Customers conducting transactions with suspected shell companies located in the Kyrgyz Republic or other jurisdictions of concern for A7 Network activity.
• Customers engaging in certain activity involving, or providing email addresses associated with, certain domains affiliated with the A7 Network, including muzpan.com and sodkamus.com.
• Documentation associated with a customer’s transactions that appears to have been modified or wholly created using artificial intelligence; for example, by displaying incorrectly formed letters, garbled wording, or malformed seals or other iconography.
• Customers that offer, have traded in, or have historic direct or indirect exposure to trades denominated in the A7A5 token or in derivative tokens based on the A7A5 token.

When filing a SAR relating to the conduct described in the A7 Alert, FIs should include the key term “FIN-2026-A7NETWORK” in SAR field 2 and the narrative.

Additionally, OFAC designated the A7 Network as a transnational criminal organization, blocking all of its property and interests in property. OFAC previously designated both the A7 Network’s leader, Ilan Mironovich Shor, and the issuer of the network’s ruble-backed stablecoin, Old Vector LLC.

Compliance takeaways

The actions taken in furtherance of Operation Economic Outcast create heightened compliance and sanctions risks for US and non-US persons. To mitigate these risks, persons subject to US jurisdiction or with exposure to the US financial system should update their AML and sanctions risk assessments, due diligence, and transaction-monitoring controls to reflect Treasury’s actions. US persons should also assess whether they have exposure to shipping in the Strait of Hormuz, currently rely on any of the suspended GLs, or have exposure to the A7 Network. US persons doing business with Samudra should complete the wind-down of such business before GL EE expires on October 23, 2026. US persons that previously relied on the five initially suspended GLs, or on GLs CC, DD, or 37, should confirm that they have ceased all affected activities. Non-US persons that are not subject to US AML and sanctions laws should nonetheless assess their exposure to these new measures and determine whether continuing relevant operations could expose them to penalties or secondary sanctions risk. Persons with UK exposure or dealings involving Iranian banks should likewise assess the impact of the UK’s new licensing policy for designated Iranian banks and the expiration of GL INT/2025/7628424.

US and non-US persons should also bear in mind that FinCEN’s whistleblower program reaches beyond BSA-covered FIs to any company with sanctions exposure, and that FinCEN is expressly soliciting tips from non-US persons, including insiders. Companies should assume that a significant Iran-related compliance issue known internally may also become known to FinCEN. With final whistleblower program rules expected, companies should confirm that internal escalation channels are visible, credible, and responsive, and that sanctions and AML reports are triaged promptly. Anti-retaliation discipline is equally essential; any adverse action against an employee who has raised such concerns should first be reviewed with counsel.

If you have questions about navigating Treasury’s operation against Iran or complying with the above-discussed restrictions, please contact your McDermott Will & Schulte lawyer or one of the authors.