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OFAC sanctions Iranian officials in plot to kidnap American citizen in the U.S.
On September 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13553 against four Iranian intelligence operatives who allegedly targeted a U.S. citizen and Iranian dissidents in a wide-ranging campaign to silence critics of the Iranian government. According to OFAC, a senior official led a network that plotted to kidnap a U.S. journalist, which failed and led to the indictment of members of the network. OFAC also noted that this network has played a key role in the Iranian government’s brutal human rights abuses against Iranians. As a result of the sanctions, “all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
OFAC settles with Romanian bank for Iranian and Syrian sanctions violations
On August 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $862,318 settlement with a Romania-based bank and its U.S. parent company to resolve 98 apparent violations of OFAC’s Iran and Syria sanctions programs. According to OFAC’s web notice, the bank processed 98 commercial transactions totaling more than $3.5 million through U.S. banks on behalf of parties located in Iran and Syria. OFAC considered various aggravating factors in arriving at the settlement amount, including that the bank (i) demonstrated “a reckless disregard for U.S. sanctions regulations by failing to implement appropriate controls to comply with applicable U.S. regulations with respect to payments it processed” that had a “sanctions nexus that transited the U.S. financial system” or “after the bank became a foreign subsidiary of a U.S. person”; (ii) knew, or had reason to know, “it was processing payments on behalf of persons in Iran and Syria because of underlying finance and trade documents in its possession that referenced those countries”; and (iii) conveyed more than $3.5 million in economic benefit to Iranian and Syrian persons, thus causing harm to the integrity of U.S. sanctions programs and their associated policy objectives.
OFAC also considered various mitigating factors, including that the bank voluntarily self-disclosed the apparent violations and the apparent violations constitute a non-egregious case. OFAC also determined that the bank (i) has not received a penalty notice from OFAC in the preceding five years; (ii) cooperated with OFAC’s investigation, conducted a lookback, and entered into a tolling agreement; and (iii) has undertaken remedial measures to ensure sanctions compliance. As such, OFAC noted that under its Economic Sanctions Enforcement Guidelines, the base civil money penalty amount is applicable in this matter with the final settlement amount reflecting OFAC’s consideration of general factors.
OFAC issues Iran general license and related FAQs
On August 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Iran General License (GL) M-1, “Authorizing the Exportation of Certain Graduate Level Educational Services and Software,” which authorizes accredited graduate and undergraduate degree-granting academic institutions in the U.S. to engage with Iranian students in online educational services and exploration of software through September 1, 2022, provided certain criteria are met. OFAC also published an updated FAQ related to GL M-1 (see 853). Effective August 24, GL M-1 supersedes and replaces GL M.
OFAC sanctions international oil smuggling network
On August 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against several individuals and businesses allegedly involved in an international oil smuggling network supporting Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, senior IRGC-QF officials use proceeds from the designated persons’ involvement in Iranian oil exports, including through the shipment of Iranian oil to foreign customers, to help fund the group’s destabilizing regional activities. Director Andrea M. Gacki noted the “sales rely on key foreign intermediaries to obscure the IRGC-QF’s involvement” and stressed that OFAC “will continue to disrupt and expose anyone supporting these efforts.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons are blocked. OFAC’s announcement further noted that OFAC regulations generally prohibit U.S. persons from participating in transactions with designated persons, adding that “foreign financial institutions that knowingly facilitate significant transactions for, or persons that provide material or certain other support to, the persons designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property or interests in property under U.S. jurisdiction.”
OFAC reaches multiple settlements with companies that conspired to export equipment to Iran
On July 19, OFAC announced a $415,695 settlement with the United Arab Emirates (UAE)-based head regional office of a Sweden-based equipment company for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s website notice, between 2015 and 2016, the UAE company allegedly conspired with Dubai- and Iran-based companies to export equipment from the U.S. to Iran. As a result, the UAE company caused its U.S.-based affiliate to indirectly export goods to Iran by incorrectly listing a Dubai-based company on its export documentation as the end-user. The conspiracy also allegedly included the organization of additional sales of the equipment in the same manner as the initial sale, which ultimately ended when the U.S. Department of Commerce’s Bureau of Industry and Security requested post-shipment verification that showed certain products in question were reexported to Iran.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the UAE company did not voluntarily self-disclose the apparent violations; (ii) the UAE company “willfully violated the ITSR” by conspiring to export goods from the U.S. to Iran by “obfuscating the end-user’s identity from its U.S. affiliate,” thus causing the U.S. affiliate to violate the ITSR; (iii) multiple managers had actual knowledge of the conduct giving rise to the apparent violations; and (iv) the UAE company “caused harm to the integrity of the ITSR by circumventing U.S. sanctions and conferring an economic benefit to Iran’s energy sector.”
OFAC also considered various mitigating factors, including that (i) none of the relevant subsidiaries, including the UAE company, have received a penalty notice from OFAC in the preceding five years; (ii) the UAE company, through the U.S. affiliate, conducted an internal investigation resulting in numerous remedial measures, including taking disciplinary actions against participating individuals, adopting an enhanced review and screening process for Iran-related transactions, and conducting additional in-person training; and (iii) the UAE company, through the U.S. affiliate, provided substantial cooperation to OFAC during the investigation.
OFAC separately reached a $16,875 settlement with a Virginia-based U.S. subsidiary for its apparent ITSR violations arising from this matter. The Virginia subsidiary did not voluntarily self-disclose the apparent violations, but agreed to the settlement on behalf of a former Pennsylvania-based subsidiary that allegedly referred a known Iranian business opportunity to its foreign affiliate in Dubai. This foreign affiliate, OFAC claimed, then “orchestrated a scheme to export goods” from the U.S. to Iran.
FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies
On July 1, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, the FAFT updated the following two statements: (i) High-Risk Jurisdictions Subject to a Call for Action, which identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks; and (ii) Jurisdictions under Increased Monitoring, which “publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline.” Notably, Haiti, Malta, the Philippines, and South Sudan have been added to the Jurisdictions under Increased Monitoring, while Ghana has been removed from the list. Among other things, through the announcement, FinCEN further instructs financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations.
OFAC sanctions network connected to Iran, Houthis in Yemen
On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against members of a smuggling organization that allegedly contributes to funding Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and the Houthis in Yemen. According to OFAC, the group is led by an Iran-based Houthi financier and generates millions of dollars from selling commodities, such as Iranian petroleum, of which a significant amount is directed through an intricate network of intermediaries in several countries to the Houthis in Yemen. OFAC Director Andrea M. Gacki noted that financial support from the network “enables the Houthis’ deplorable attacks threatening civilian and critical infrastructure in Yemen and Saudi Arabia,” and that the attacks “undermine efforts to bring the conflict to an end and, most tragically, starve tens of millions of innocent civilians.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals, and “any entities that are owned, directly or indirectly, 50 percent or more” by the individuals that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with designated persons and foreign financial institutions that knowingly participate in significant transactions related to the designated individuals risk sanctions that could discontinue their access to the U.S. financial system or block their property or interests in property under U.S. jurisdiction.
In addition, OFAC announced the removal of sanctions on three former Government of Iran officials, and two companies who were previously connected to the handlings of Iranian petrochemical products. According to OFAC, “these delistings are a result of a verified change in behavior or status on the part of the sanctioned parties and demonstrate the U.S. government’s commitment to lifting sanctions in the event of a change in behavior or status for sanctioned persons.”
OFAC reaches $2.1 million settlement with German software company
On April 29, OFAC announced a more than $2.1 million settlement with a Germany-based software company for 190 apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC’s website notice, between June 2013 and January 2018, the company “authorized 13 sales of [company] software licenses, 169 sales of related maintenance services and updates, and eight sales of cloud-based subscription services.” Third-party resellers, which the company allegedly referred to as “pass-through entities” in Turkey, the United Arab Emirates (UAE), Germany, and Malaysia, sold the software licenses and related maintenances services and updates, OFAC noted.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) demonstrated reckless disregard and failed to exercise sufficient caution or care for U.S. economics sanctions by failing to act on audit findings regarding sanction risk or warnings from compliance, and by ignoring whistleblower complaints; (ii) failed to have an adequate compliance program for a company of its size; (iii) had information to conclude that the software and cloud services were being utilized by entities and end-users in Iran and were supported from the US; and (iv) “is a sophisticated software company with significant international operations and has numerous foreign subsidiaries.”
OFAC also considered various mitigating factors, including that the company (i) cooperated with OFAC’s investigation; (ii) has undertaken remedial measures, including terminating the users connected to the third-country entities, the partners who participated in the sales to Iranian companies, and five employees who were found to have “knowingly engaged in the sale of. . . products to Iran”; (iii) has prohibited downloads of software, support, and maintenance from embargoed countries; (iv) implemented a risk-based export control framework for partners that requires a stringent review of proposed sales by a third-party auditor; (v) created an upgraded compliance program; and (vi) hired new employees responsible for export control and trade sanctions compliance.
Separately, the DOJ announced that the company agreed to pay a $8 million fine and entered into a Non-Prosecution Agreement as a result of its voluntary disclosure to the DOJ and “extensive cooperation and strong remediation.” Pursuant to the agreement, the company “will disgorge $5.14 million of ill-gotten gain.”
U.S. steel manufacturer settles with OFAC for violating Iranian sanctions
On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $435,003 settlement with an Oklahoma-based steel manufacturer to resolve alleged violations of the Iranian Transactions and Sanctions Regulations. According to OFAC’s accompanying web notice, between 2013 and 2018, the company allegedly engaged with a third-party Iranian engineering company on at least 61 occasions to import engineering services. The company asserted that, while several senior officials “were involved in the process of approving each transaction and issuing checks to the Iranian engineering company,” the company’s “lack of familiarity with U.S. sanctions requirements caused its management to allow the Apparent Violations to continue until a new Chief Executive Officer was hired in October 2018.” Once management learned of the alleged violations, the company stated it ceased working with the Iranian engineering company and took several remedial measures to prevent the conduct from reoccurring.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to conduct basic due diligence regarding the transactions with the Iranian engineering company; (ii) senior management “had actual knowledge” that the company was outsourcing work to the Iranian engineering company; and (iii) the conduct caused more than $1 million in benefits to Iran.
OFAC also considered various mitigating factors, including that the company (i) had not received a penalty notice from OFAC in the preceding five years; (ii) voluntarily self-disclosed the alleged violations and cooperated with OFAC’s investigation; (iii) ceased the conduct at issue; and (iv) took remedial measures, including terminating the employee responsible for initiating and overseeing the transactions at issue, and developing and implementing an export compliance policy to provide, among other things, staff training and a requirement that all international contracting opportunities be approved by the company’s president.
Italian company settles with OFAC for violating Iranian Transactions and Sanctions Regulations
On March 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $950,000 settlement to resolve alleged violations of the Iranian Transactions and Sanctions Regulations with an Italian company that produces and reexports air pressure switches. According to OFAC’s accompanying web notice, between 2013 and 2017, the company allegedly “knowingly reexported 27 shipments of air pressure switches procured from a U.S. company intended for as many as ten customers in Iran and caused a U.S. company to indirectly export its goods to Iran.” OFAC also alleged that the company engaged in efforts to obfuscate its reexportation of goods from the U.S. to Iranian end-users by, among other things, having employees use deceptive replacement terms for Iran in communications with the U.S company in order to avoid referencing Iranian end-users, and requesting that the term “Made in USA” be removed from the switches to disguise their origin.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company willfully reexported air pressure switches even though it knew it was violating U.S. sanctions; (ii) company management “either failed to provide effective oversight of its employees and operations or chose to ignore these prohibited trade practices”; and (iii) the conduct caused over $2.5 million worth of goods to be diverted from the U.S. to Iran.
OFAC also considered various mitigating factors, including that the company (i) has not received a penalty notice from OFAC in the proceeding five years; (ii) ceased the conduct at issue and took remedial measures, including implementing a sanctions compliance program and agreeing to enhanced compliance commitments; and (iii) cooperated with OFAC’s investigation.