BILL ANALYSIS Ó AB 978 Page 1 Date of Hearing: May 8, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 978 (Blumenfield) - As Amended: April 25, 2013 Policy Committee: Banking and Finance Vote: 11-0 JEDE 8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires the Commissioner of Financial Institutions to ensure state-chartered financial institutions are in compliance with the federal Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 and associated regulations, and states the bill will become inoperative if either Iran is removed from the Department of State's list of countries supporting terrorism or if the President certifies Iran has stopped trying to make a nuclear weapon. FISCAL EFFECT Minor absorbable costs to the Department of Financial Institutions to monitor compliance with federal law. COMMENTS 1)Purpose. According to the author, California continues to aid Congress in its efforts to increase economic pressure on Iran to cease its pursuit of nuclear weapons. The author argues the serious and urgent nature of the threat from Iran demands that states, together with the federal government, do everything possible to prevent Iran from acquiring nuclear weapons capability. The author adds AB 978 would ensure state-chartered banks are reviewed regularly for compliance with federal Iran sanctions developed to stem the flow of funds to Iran and terrorists groups as identified by the federal government. 2)Background . Financial institutions in the U.S. and California, AB 978 Page 2 irrespective of state or federal charters, must comply with sanctions established by federal statute and/or Presidential executive order. The mere fact that a bank or credit union is regulated by a state regulator does not lesson, nor detract from their compliance responsibilities with these and a multitude of other federal laws. A failure of these entities to comply with the myriad of sanctions or the United States Treasury Department's Office of Foreign Assets Control list could result in severe federal penalties. The Iran Sanctions Act, requires the U.S. Department of the Treasury to prohibit, or impose strict conditions on, an account in this country or a payable-through account for a foreign financial institution that the U.S. Department of the Treasury finds knowingly facilitates the efforts of Iran to acquire or develop weapons of mass destruction, or provides support for organizations designated as foreign terrorist organizations. This includes the efforts of the Central Bank of Iran or any other Iranian financial institution, Iran's Islamic Revolutionary Guard Corps and other individuals or third parties. 3)Previous legislation . a) AB 1650 (Feuer/Blumenfield), Chapter 573, Statutes of 2010, prohibits California governments from contracting with companies doing restricted business in Iran. b) AB 2160 (Blumenfield) Chapter 479, Statutes of 2012, prevents investments in Iran from counting as assets that would otherwise be considered when judging the financial solvency of insurers to do business in California. 1)There is no registered opposition to this bill. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081