On August 24, 2026, the U.S. Department of the Treasury announced Operation Economic Outcast, a whole-of-government campaign designed to intensify pressure on Iran by further economically isolating the Iranian regime and the Islamic Revolutionary Guard Corps (IRGC). As the war with Iran approaches its six-month mark, Secretary of the Treasury Scott Bessent stated, "it is no longer acceptable to operate in the gray spaces of this conflict," describing the campaign as a clear warning shot to countries that maintain economic ties to Iran. U.S. government officials are reportedly engaging their foreign counterparts to establish timelines for certain countries to shut down Iran-related activities, although few details have been publicly released. Operation Economic Outcast expands the U.S. government's toolkit for targeting Iran by broadening the sectors in which secondary sanctions can be imposed, giving U.S. authorities greater flexibility to pressure non-U.S. persons engaged in significant transactions with Iran. The practical significance of that expanded authority, however, will depend heavily on how aggressively and selectively the U.S. government deploys it in practice.

Operation Economic Outcast involves coordinated action between the Departments of the Treasury, State, and Defense and includes four major components:

1. Expansion of Secondary Sanctions: Pursuant to Section 1(a)(i) of Executive Order (E.O.) 13902, Treasury added five new sectors of the Iranian economy as potential targets of secondary sanctions: aviation, digital assets, gold, shipping, and technology. As a result, the Office of Foreign Assets Control (OFAC) is authorized to impose blocking sanctions on any person or entity that "operates" in such sectors, secondary sanctions (i.e., correspondent banking restrictions) on any foreign financial institution that engages in any "significant" transaction with a person blocked under those authorities, or blocking or secondary sanctions in connection with the supply of significant goods or services used in connection with those sectors. 
   
   These additions build on existing sanctions targeting Iran's automotive, shipping, shipbuilding, energy, iron, steel, aluminum, copper, construction, mining, manufacturing, textiles, financial, and petroleum and petrochemical sectors. Secretary Bessent stated that the five additional sectoral sanctions are intended to target the "most vital lifelines that [Iran] exploits in other countries." By designating five additional sectors, Treasury exposes a broader range of individuals, entities, financial institutions, and others to potential secondary sanctions. OFAC has not yet defined "significant goods or services" in the context of the newly sanctioned sectors, though it may do so in the future through regulation or guidance. 
2. Designation of 60 Entities, Individuals, and Vessels: OFAC sanctioned approximately 60 entities, individuals, and vessels worldwide for supporting the Iranian government's procurement of nuclear or missile technology, ability to generate oil revenue, or cyber operations. These designations were made pursuant to OFAC's authority under multiple E.O.s. Notably, while the action included designations for "operating" in certain sanctioned sectors of the Iranian economy, these designations were not based on any of the new determinations sanctioning additional sectors of the economy. Designations outside of Iran covered parties primarily in the Middle East and East Asia and particularly focused on the diversion of sensitive goods to Iran, front companies that serve as "shadow banking networks" for Iran, and shipping facilitators that enable the transport and delivery of Iranian crude oil to markets in East Asia, including vessel brokers and bunkering service providers. OFAC issued a wind-down general license related to only one of the designations, which targeted a cooking oil refinery based in France. 
3. Suspension of Certain General Licenses: OFAC indefinitely suspended five general licenses issued under the Iranian Transactions and Sanctions Regulations (ITSR) that previously authorized (1) certain educational activities by U.S. persons in third countries under 31 CFR § 560.544; (2) certain non-commercial personal remittances under 31 CFR § 560.550; (3) services related to conferences held in the United States or third countries under 31 CFR § 560.554; (4) professional and amateur sporting activities and exchanges under Iran General License F; and (5) certain academic exchange programs under Iran General License G. At the same time, OFAC issued General License BB, a wind-down license authorizing certain transactions that were previously authorized under these suspended general licenses through 12:01 am ET on September 8, 2026. 
4. Updated Guidance on Activities Related to the Strait of Hormuz: Replacing its May 1, 2026 alert, OFAC issued updated guidance stating that U.S. and non-U.S. persons may face sanctions or penalties for engaging with the Iranian government or its representatives, including the designated Persian Gulf Strait Authority, Persian Gulf Marine Insurance Company, or HormuzSafe Marine Services Authority in exchange for safe passage through the Strait of Hormuz. OFAC indicates that it will broadly interpret "engaging with" such entities to include "accepting insurance or other services" and "responding to information demands for guarantees of safe passage," even if there is no payment or exchange of value made for those services. The alert also indicates that maritime service providers could similarly incur sanctions risk by providing services to vessels that have engaged in sanctionable conduct while attempting to transit the Strait of Hormuz. As a result, OFAC strongly encourages such service providers to conduct enhanced due diligence on vessels attempting such transit.

Key Takeaways

• Broader Blocking and Secondary Sanctions Power, but Practical Impact Depends on Implementation. Operation Economic Outcast expands the U.S. government's ability to target both companies and financial institutions engaged in commerce with Iran, including through broader blocking and secondary sanctions exposure for five additional sectors. Such sector-based targeting does not, by itself, impose new sanctions prohibitions. Nearly all dealings with Iran are already prohibited for U.S. persons and non-U.S. persons when there is sufficient U.S. nexus and non-U.S. persons already face designation risk for virtually all dealings with Iran, even when there is no U.S. nexus. Sector-based targeting also does not necessarily, by itself, provide OFAC with new sanctions authorities it does not already have. For example, OFAC has sanctioned Iranian crypto exchanges as recently as this summer, having already issued guidance that Iranian digital asset exchanges meet the definition of an "Iranian financial institution" under 31 CFR § 560.324.
  
  Instead, naming the five new sectors is a signal of OFAC's targeting focus in the weeks and months ahead. Companies, both inside and outside Iran, that have a connection to Iranian aviation, digital assets, gold, shipping, or technology companies now face higher risk of sanctions designation. Non-U.S. banks with non-sanctioned Iranian clients in these sectors may face higher risk as well. OFAC may, in coming weeks, provide additional guidance on the definition of each of these sectors and the "significant goods or services" used in connection with these sectors, similar to past OFAC guidance on the scope of sanctioned sectors and similar terms under E.O. 13902 and under Executive Order 13599, which may provide further signals of targeting priorities going forward. 
• Warning Period to Encourage Withdrawal from Iran. While OFAC announced the 60 designations at the launch of Operation Economic Outcast, none of them involved the newly targeted sectors of the Iranian economy, suggesting that the United States is giving potential sanctions targets an opportunity to leave the Iranian market and possibly keeping some options open for leverage in the ongoing negotiations with various countries. Notably, OFAC specifically highlighted China, Bangladesh, and countries in Southeast Asia for receiving Iranian oil, which could foreshadow future designation priorities. Even so, in this action, OFAC avoided designating major Chinese entities involved in the Iranian oil trade such as so-called "teapot" refineries, instead targeting a few Chinese owners and operators of vessels transporting Iranian oil and a few smaller Chinese companies for diversion of sensitive items.
• FinCEN's Banque Misr UAE Action. Treasury's actions on August 28, 2026, three days after the campaign launch, against the United Arab Emirates branches of the Egyptian bank Banque Misr, among other targets, suggest that enforcement efforts will increasingly focus on banks and financial intermediaries in third-country jurisdictions tied to Iran. In this instance, FinCEN issued a notice of proposed rulemaking, pursuant to section 311 of the USA PATRIOT Act, that finds the five United Arab Emirates-based branches of Banque Misr (Banque Misr UAE) to be a primary money laundering concern and proposes imposing special measures that would (1) prohibit U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, Banque Misr UAE; (2) require U.S. financial institutions to take reasonable steps not to process a transaction for the correspondent account in the United States of a foreign banking institution if such a transaction involves Banque Misr UAE; and (3) require U.S. financial institutions to apply special due diligence to their foreign correspondent accounts that are reasonably designed to guard against their use to process transactions involving Banque Misr UAE. The practical effect of this Section 311 action, assuming it is finalized, is to effectively cut Banque Misr UAE off from the U.S. financial system by preventing it from maintaining direct correspondent banking relationships with U.S. financial institutions but also by requiring U.S. banks to guard against indirect or nested access held by Banque Misr UAE through other foreign financial institutions. Given the central role of U.S. correspondent banking in U.S. dollar clearing and cross-border payments, the action will substantially constrain Banque Misr UAE's ability to transact internationally, even where a particular transaction does not otherwise have a direct U.S. nexus. Notably, Egypt-based Banque Misr, and its branches and operations in countries other than the United Arab Emirates, are expressly excluded from the action.
• Suspension of General Licenses Intended to Help Ordinary Iranian People. OFAC is aware that a comprehensive embargo on goods or services or restrictive blocking sanctions on a country's central bank can have an unintended consequence on "non-targeted populations," i.e., ordinary people. OFAC has traditionally sought to mitigate these consequences through general licenses. For example, OFAC's Afghanistan (Taliban), Cuba, North Korea, Russia, Venezuela, and Yemen (Ansarallah) sanctions programs all include an authorization allowing the transmittal of non-commercial remittances from the United States to individuals in the sanctioned jurisdiction. It may be that such authorizations provide incidental benefit to sanctioned governments, banks, or groups; however, the U.S. government has generally considered it more important to minimize the impact of sanctions on ordinary people than prevent any such incidental benefit to sanctioned governments. Following the launch of Operation Economic Outcast, that is no longer the case for Iran. U.S. persons can no longer lawfully send personal remittances back to Iran or support U.S. and non-U.S. persons engaged in such activity, making Iran the only jurisdiction in the world without access to this economic lifeline. Operation Economic Outcast also suspends general licenses related to education, academic exchanges, amateur and professional sports, and public conferences. These general licenses already excluded persons on the Specially Designated Nationals and Blocked Persons List (SDN List), so, legally, their impact falls solely on non-sanctioned persons ordinarily resident in Iran. For now, the U.S. government has left several similar general licenses in place, including those related to humanitarian trade (food, medicine, medical devices); certain activities of non-governmental organization (NGOs); gift parcels; telecommunications and mail; and certain services, software, and hardware incident to communication (i.e., connection to the Internet). 

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Timothy P. O'Toole, totoole@milchev.com, 202-626-5552

Leah Moushey, lmoushey@milchev.com, 202-626-5896

Melissa Burgess, mburgess@milchev.com, 202-626-5914

Collmann Griffin, cgriffin@milchev.com, 202-626-5836

Caroline J. Watson, cwatson@milchev.com, 202-626-6083

Arooshe P. Giroti, agiroti@milchev.com, 202-626-6060

Peter Kentz, pkentz@milchev.com, 202-626-5891

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