Lecturer in Law Babak Boghraty Discusses Sanctions Deal with Iran

With decades of experience in global compliance and risk management, Boghraty urges a cautious approach to business with the country.

On July 14, 2015, officials from Iran, the United Nations Security Council (UNSC), and the European Union (EU) announced the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program, more commonly known as the Iran Nuclear Deal. All sides reached the landmark nuclear nonproliferation agreement after nearly two years of negotiations. Under the terms of the deal, Iran will reduce its stockpiles of enriched uranium by 98 percent, halt use of more than two-thirds of its centrifuges, and submit to comprehensive inspections to ensure its cooperation. In return, the UNSC and EU agreed to lift certain sanctions against Iran following a report from the International Atomic Energy Agency verifying Iran’s compliance with the terms of the agreement.

After the UNSC and the EU approved the deal, it became subject to a sixty-day review period in the US Congress. With the agreement currently under debate in Congress and the likelihood that some economic sanctions against Iran will soon be lifted, Babak Boghraty (’89), lecturer in law at BU School of Law and instructor in several courses on global compliance, urges caution to businesses interested in establishing ties with Iran.

Mr. Boghraty began his career as a commercial litigator, first in Miami, then Los Angeles. In 1992, he became involved in litigation against the Department of Justice over the scope of extraterritorial application of US laws to foreign individuals and business entities. “At the time, the term ‘compliance’ was not yet in use in the way that we understand it today,” he says, “but there was a new focus on extraterritorial enforcement, and that introduced me to global compliance and risk management.”

This new trend presented not only challenges for multinational businesses, but also opportunities. In the late 1990s, when Congress exempted food and medicine from economic sanctions, Boghraty returned to his home country of Iran and helped establish an enterprise with the aim of bringing US agribusiness back to the country. In time, this became a rare commercial bridge between the two countries, and re-introduced American technology to cope with such challenges as water scarcity and climate change.

Since returning to BU Law as a faculty member in 2013, Boghraty has regularly taught courses in global compliance and helped develop a massive open online course (MOOC) in compliance. “My area of focus involves global compliance, which includes sanctions, but also money laundering and export controls, among other areas,” Boghraty says. “However, the foundation for my experience in these areas is Iran; and, because of geopolitical trends, my interests are converging.”

For businesses interested in establishing ties with Iran, Boghraty advises a careful approach. After the 1979 revolution, Iran’s economy was put under state control. The private sector became almost non-existent. Although the economy has increasingly privatized since then, most businesses are still controlled by the government and the ruling elite. As a result, the country’s regulatory system is haphazard at best. “Once sanctions are lifted the main issue will be corruption,” he says. “Iran has been in economic and cultural isolation for the past 30 years. One consequence of that isolation is internal corruption.”

US law prohibits corrupt payments to foreign government officials or to companies controlled by a foreign government. “US businesses will need to conduct thorough due diligence to make sure they aren’t dealing with individuals or companies with government ties,” Boghraty says. “That can be especially difficult in Iran, where the lack of access to reliable information makes it very difficult to enter responsibly.”

For those businesses willing and able to navigate the system, there are rewards. In 2005, Goldman Sachs included Iran in the “Next Eleven,” a group of countries that present the highest growth prospects in the next decades. “A country like Iran, with rich natural resources, a highly educated population and access to the Caspian Sea and Persian Gulf, presents exceptional growth opportunities,” Boghraty says.

The opportunities, however, present a precarious situation for the Iranian people. While the increased availability of foreign-made goods—especially medicines and agricultural products—will produce marked relief in the people’s every day lives, Boghraty notes that there is danger in global enterprises rushing in to do business before understanding the environment. “The people with the best contacts will not necessarily be the best people to work with, from both a compliance perspective and a humanitarian perspective,” he says. “If capital and technology are fed mainly through the government and through the ruling elite, there is little chance the people will reap much benefit from Iran’s growth prospects.”

Through robust anti-corruption enforcement, targeted sanctions, and other tools available to Europe and the US, it is possible to ensure that capital and technology re-entering Iran is properly channeled. “Large companies must avoid the gold-rush mentality that can be so tempting in an emerging market,” Boghraty says. “They must take their time to ensure that they empower local leaders who are truly committed to their communities. Only then we can hope for a better future for the Iranian people—and lasting change.”