US sanctions relief starts Syria’s eventual banking return

The recent granting of limited sanctions relief to Syria by the United States could kickstart the Middle Eastern country’s eventual return to global banking. 

Decades spent isolated from the global banking system means Syria’s banks will need to reskill their compliance staff, not least to manage the current complex anti-money laundering and countering the financing of terrorism (AML/CFT) and sanctions landscape. 

Local correspondent banking partners will need to “up their due diligence game” to demonstrate they are a “safe pair of hands”, according to Luma Zitani, a financial crime practitioner and Syria expert.  

The US designated Syria as a state sponsor of terrorism in 1979. Since then, it has been subject to serious restrictions imposed by the Patriot Act (2001) and a series of sanctions imposed by executive order, starting in 2004 and escalating in 2011 when its civil war began. Unpicking these sanctions will be difficult, Zitani said.

Someone aptly compared this complexity to “a bit of a tangled Christmas light, and you’re trying to slowly unravel it without cutting the strings and without breaking the lights”, she added.

“It’s been built over such a long period of time, even before the last 14 years triggered the massive escalation. It crosses multiple regulatory regimes and requires a large team to manage.”

The effect of GL 25

Last week, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published General License 25 (GL 25), which allows some activities for a limited time. It does not, however, revoke OFAC sanctions targeting Syria. 

GL 25 authorises parties to engage in transactions prohibited by the Syrian sanctions regulations (31 CFR Part 542), including: exporting financial and other services to Syria; making a “new investment” in Syria; and engaging in transactions related to Syria-origin petroleum or petroleum products, law firm Latham & Watkins explained in a client alert.

“GL 25 is a major first step to implement President Trump’s announcement on May 13 regarding the cessation of sanctions on Syria. GL 25 will facilitate activity across all sectors of the Syrian economy, without providing relief to terrorist organisations, perpetrators of human rights abuses and war crimes, drug traffickers, or the former Assad regime. It does not allow for transactions that benefit Russia, Iran or North Korea — key supporters of the former Assad regime,” said OFAC in a statement.  

This relief could be removed at any time, Zitani noted.

Unravelling sanctions

This “first step” follows other small steps taken in 2022 and early 2025 (under the Biden administration) that brought relief to areas of Syria not controlled by former President Bashar al-Assad and allowed transactions with the Syrian government and personal remittances, respectively. There will be much more to unravel.

“The old regime has gone. Why do we still have sanctions in place? [It’s] because some of the sanctions were imposed on named individuals within the Assad regime, including Assad and his family and their cronies. A lot of them were against the ‘Government of Syria’,” Zitani explained.

“If you’re targeting the state and all its operators, that means that even if the people who are sitting behind the state have changed, they’re still the state — and that is what’s slowly being worked on.

“GL 25 suspending some of the asset freezes on a whole list of individuals and entities [and] suspending the designation of the government-owned Commercial Bank of Syria under section 311 of the US Patriot Act is a way to start that unpicking,” she added.

Caesar Act relief

Additionally, the US Department of State has issued a 180-day waiver of mandatory 2019 Caesar Syria Civilian Protection Act (Caesar Act) sanctions, to allow US investment in key sectors of the Syrian economy. 

The US’s Financial Crimes Enforcement Network (FinCEN) has also provided relief under the Patriot Act that permits US financial institutions to open and maintain correspondent accounts for the Commercial Bank of Syria, subject to certain restrictions.

The Caesar Act introduced comprehensive secondary sanctions, which put dealing with Syria on a par with Iran — if not higher — for third countries. It effectively said that non-US persons who materially supported the Syrian government could themselves be a target of sanctions, Zitani explained. 

More relief planned

The US envoy to Syria, the first since 2012, last week announced he no longer considered the country to be a state sponsor of terrorism. Special envoy, Thomas Barrack, told a small group of journalists in Damascus “the issue was ‘gone with the Assad regime being finished’ but that Congress had a six-month review period”.