Archive for the ‘Treasury Dept’ Category

OFAC Dings U.S. Defense Contractor for Sanctions Violations, Inadequate Screening

2018/12/23

By: Thad McBride on December 12, 2018

POSTED IN INTERNATIONAL TRADESANCTIONS (OFAC)

  • Penalties imposed for violations of U.S. sanctions on Russia and Ukraine
  • Violations identified during pre-acquisition due diligence on contractor
  • Denied persons screening was conducted but missed prohibited parties

In late November 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Cobham Holdings, Inc. agreed to pay $87,507 to settle violations of U.S. sanctions on Ukraine and Russia.

Violations Identified During Pre-acquisition Due Diligence

According to OFAC, the violations were committed by Cobham’s former subsidiary, Metelics, prior to the sale of Metelics to MACOM. It was MACOM that identified the violations during due diligence related to its acquisition of Metelics. And it was presumably MACOM that required Cobham to make the voluntary disclosure to OFAC that led to the penalty in this matter.

The penalty is small by recent OFAC standards. (For example, it is about 620 times less than Societe Generale paid to OFAC as part of its global settlement of sanctions violations.)

But as a cautionary tale, the Cobham matter is important to any exporter.

Products Sold to Entity Blocked Under U.S. Sanctions

According to OFAC, during a six-month period in 2014 and 2015, Metelics sold products through distributors in Canada and Russia to a blocked entity under U.S. sanctions. That entity – Almaz Antey Telecommunications LLC (AAT) – was not explicitly named as a blocked party on the OFAC List of Specially Designated Nationals and Blocked Persons (the SDN List).

Yet AAT was nonetheless a blocked person because it was 51 percent-owned by a party – JSC Almaz-Antey – that was named on the SDN List. As OFAC has made abundantly clear, any entity that is owned 50 percent or more by one or more blocked persons is a blocked entity itself.

Any blocked person, whether named on the SDN List or not, is effectively off limits to U.S. companies and individuals.

Screening Challenges Lead to Violations

The chronology of this matter demonstrates the challenges exporters face when screening third party business parties.

According to OFAC, on June 18, 2014, Metelics agreed to sell products to AAT through a Canadian distributor. On June 19, Metelics screened AAT against its prohibited parties screening software. At that time, JSC Almaz-Antey was not a prohibited party – and thus neither was AAT.

On June 27, Metelics shipped products to AAT. In connection with that shipment, Metelics again conducted denied parties screening and identified no match for AAT.

None of this is surprising or problematic from OFAC’s standpoint because JSC Almaz-Antey was not designated as an SDN until July 16, 2014. That is when things get more interesting.

On July 31, 2014, Metelics made another shipment to AAT. In connection with this shipment, Metelics again conducted denied parties screening for AAT and again did not identify any matches – even though JSC Almaz-Antey, the majority owner of AAT, was now named on the SDN List.

Based on this, OFAC deemed the screening effort to be insufficient. OFAC emphasized that Metelics proceeded with shipment to AAT “despite the inclusion of two uncommon terms [‘Almaz’ and ‘Antey’] in the names of both the SDN and [AAT].” OFAC’s statement suggests that the screening software should have identified at least a potential match, which Metelics would presumably have reviewed further before continuing with the transaction.

Notably, there is no indication that Metelics somehow set the software or screening mechanism to avoid identifying a match with AAT. In fact, in its press release, OFAC states that the screening software was set-up to identify “fuzzy” search criteria yet missed the similarities between AAT and JSC Almaz-Antey.

It thus appears that Metelic was not entirely to blame for these apparent violations. Yet in explaining the penalty in this case, OFAC also notes that Metelics “was subject to a consent agreement for violations of the International Traffic in Arms Regulations [ITAR]… resulting from recurring compliance failures.” Arguably those ITAR compliance failures should have made Metelics particularly vigilant about protecting against failures with its screening system.

While OFAC does not name the provider of the screening software in this case, the agency does state that “[p]ersons employing sanctions screening software should take steps to ensure it is sufficiently robust.” In other words, simply because a company uses software to conduct screening does not mean that software is adequate to protect against violations.

Analysis

This may be a tough lesson for exporters to absorb.  It’s not clear that many exporters conduct quality control checks of their screening software. The raison d’etre for such software is to identify actual or potentially prohibited parties based on name similarities. That is exactly what Metelics expected its software to do.

The proliferation of prohibited and restricted parties – and the lists of such parties – makes it impossible for most companies to keep up-to-date with those lists on their own. That’s the reason so many companies seek software solutions to help meet their compliance obligations. It is the responsible thing to do.

Which makes it a little jarring to read the following exhortation from OFAC:

It is essential that companies engaging in international transactions maintain a culture of compliance where front line staff are encouraged to follow up on sanctions issues, including by promptly reporting to compliance personnel transactions suspected to involve sanctioned parties.

That is surely good advice but it is not clear how it pertains to the facts in the Cobham matter. There is no indication that any Metelics employee was aware of a transaction suspected to involve sanctioned parties – or that any employee ducked their head in the sand.

Nevertheless, it is useful to remember the value of periodic risk assessments during which compliance policies, procedures, and processes are reviewed. Potential weaknesses can be identified and addressed before they lead to violations.

The Bass, Berry & Sims trade lawyers work closely with clients to assist in risk assessments and other compliance exercises. Our targeted, efficient approach to such matters leads to practical, effective solutions. Feel free to contact us anytime if we can assist you.

Article: https://www.bassberrygovcontrade.com/ofac-dings-u-s-defense-contractor-for-sanctions-violations-inadequate-screening/


Reimposition of Iran Sanctions Starts

2018/12/23

On November 5, 2018 the Office of Foreign Assets Control (OFAC) began to re-impose several sanctions on Iran related to the 180-day wind-down period and the reimposition of US sanctions that had been lifted or waived in connection with the Joint Comprehensive Plan of Action (JCPOA).

The biggest change you will see is that over 700 people have been designated or identified and added to the SDN list, including those that had been recently removed from the list in connection with JCPOA. In addition, person and associated block property that was previously identified on Executive Order (EO) 13599 have been moved to the SDN list and OFAC has removed EO 13599 from its website.

An amendment to the Iranian Transactions Sanctions Regulations (ITSR) has taken affect and will reimpose certain sanctions pursuant to EO 13846 and technical changes that remove references to EO 13599.

OFAC Frequently Asked Questions: https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#630

Notice: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20181105.aspx


Epsilon vs. OFAC: Third Party Risks & “Reason to Know”

2018/10/30

By: Danielle Hatch

Before I get to the nitty gritty of this case its important to remember that companies can be held liable for sanctions violations when they export a product to a third-party in another country and know or have reason to know that the third party intends to reexport their product to Iran. Companies must do their due diligence to make sure that that third party who is receiving their products isn’t planning on sending them to Iran. Now that that’s out of the way, let’s get started.

Note: This case was between the Office of Foreign Assets Control (OFAC) and Epsilon Electronics but Power Acoustik Electronics who is a subsidiary of Epsilon who engaged in the transactions in question.

Epsilon Electronics, also doing business as Power Acoustik Electronics, Sound Stream, Kole Audio, and precision Audio has agreed to pay $1.5 million to OFAC to settle the enforcement case related to alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). OFAC’s Penalty Notice alleged that Epilson violated the ITSR when it issued 39 invoices for sales to Asra Internationals LLC from 2008 to 2012 because Epsilon knew or had reason to know that Asra was distributing its products to Iran.

In 2008 OFAC found out that Power Acoustik exported items to an address in Iran. OFAC issued a subpoena and eventually sent the company a cautionary letter in 2012. During a separate investigation, OFAC uncovered wire transfers from Asra International (company located in Dubai) to Power Acoustik totaling more than $1.1 million between 2010 and 2011. OFAC believed that these wires may have been for products that were destined to Iran and they issued another subpoena to Power Acoustik. The company explained that they had 41 sales of audio and video equipment to Asra between 2008 and 2012 which explained the wire transfers. During a further investigation, OFAC did not directly find any proof that any of the equipment was reexported to Iran by Asra but they did find a website for Asra that specified that the company provided car audio and video products to Iran. The Iran affiliate’s address on Asra’s website was the same address as the 2008 address that OFAC initially sent a subpoena to Power Acoustik for, related to the illegal shipment.

OFAC then issued a Penalty Notice to Epsilon for $4 million based on 34 non-egregious violations (those that occurred before the 2012 cautionary letter) and 5 egregious violations (occurred after the cautionary letter). Epsilon challenged OFAC’s Penalty Notice in the US District Court for the District of Columbia and lost. The company than appealed the order to the US Court of Appeals for the District of Columbia which affirmed the 34 non-egregious violations but reversed the 5 egregious violations to be non-egregious changing the penalty from $4 million to $1.5 million. The Court of Appeals found that an exporter may be found liable if it exports goods from the US to a third country, with reason to know that those goods are specifically intended for reexport to Iran, even if they never make it to Iran. The “reason to know” requirement for OFAC can be established “through a variety of circumstantial evidence” including “course of dealing, general knowledge of the industry or customer preferences, working relationships between parties, or other criteria far too numerous to enumerate.”

Up until 2011, Asra distributed to Iran exclusively, making the evidence on their website evidence for OFAC that Power Acoustik could have reasonably inferred that Asra only distributed its products to Iran. The Court of Appeals found that the final five exports didn’t fit the “reason to know” standard because OFAC did not address several emails between Acoustik’s sales team and an Asra manager between 2011-2012 which explained that their products were going to be sold from Asra’s new retail store in Dubai…causing the 5 violations to be changed.

OFAC saw the following as aggravating factors:

  1. The alleged violations constituted or resulted in a systematic pattern of conduct
  2. Epsilon exported goods valued at $2,823,000 or more
  3. Epsilon had no compliance program at the time of the alleged violations

OFAC considered the following to be mitigating factors:

  1. Epsilon has not received a Penalty Notice or a Finding of Violation in five years preceding the transactions that gave rise to the alleged violations
  2. Epsilon is a small business
  3. Epsilon provided some cooperation to OFAC, including entering into an agreement to toll the statute of limitations for one year

The important take away from this case is that, as most people already know, there is a very far-reaching interpretation of what constitutes “reason to know” when dealing with third parties and Iran (and Cuba).

Enforcement Details: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20180913_epsilon.pdf


White House Releases Frequently Asked Questions Regarding the Re-Imposition of Sanctions Relating to the Joint Comprehensive Plan of Action (JCPOA)

2018/05/30

The White House released this document to help companies understand how pulling out of the Iran nuclear deal will affect them. Some questions answer in the document are:

  • Effective May 8, 2018, what sanctions snap back into place?
  • Which sanctions will be re-imposed after the 90-day wind-down period ending on August 6, 2018?
  • Which sanctions will be re-imposed after the 180-day wind-down period ending on November 4, 2018?

Full Document: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf


Turkish Banker Receives 32 Months for Violating U.S. Sanctions Against Iran Involving Billions of Dollars

2018/05/30

By: Ashleigh Foor

On January 3, 2018, a five-week jury trial wrapped up and convicted Mehmet Hakan Atilla, 47, a resident and citizen of Turkey, to 32 months for conspiring with others in a scheme to violate U.S. economic sanctions imposed on the Islamic Republic of Iran. The violation involved billions of dollars’ worth of Iranian oil proceeds held at Atilla’s employer (Turkish Bank-1).

Atilla, a Turkish banker, Reza Zarrab, an international gold trader, and others defrauded U.S. financial institutions by using them to conduct transactions on behalf of the government of Iran and other Iranian entities which were barred by U.S. sanction. They did so by making these transactions falsely appear as if they involved food, therefore falling within humanitarian exceptions to the sanctions regime.

Atilla lied to U.S. Treasury officials about Turkish Bank-1’s activities and its supposed compliance efforts to avoid subjecting the bank to U.S. sanctions. Atilla and his co-conspirators’ deceptions led U.S. banks to unknowingly process international financial transactions in violation of the IEEPA, and to launder through the U.S. financial system funds promoting the scheme.


Treasury/OFAC Amends and Reissues North Korea Sanctions Regulations

2018/04/04

(Source: Treasury/OFAC)

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is announcing the amendment and reissuance in its entirety of the North Korea Sanctions Regulations, 31 C.F.R. part 510, in order to implement Executive Order (E.O.) 13687, E.O. 13722, and E.O. 13810, and to reference the North Korea Sanctions and Policy Enhancement Act of 2016 and the Countering America’s Adversaries Through Sanctions Act of 2017.  Pursuant to these authorities, all property and interests in property of the Government of North Korea and the Workers’ Party of Korea are blocked, and U.S. persons are generally prohibited from engaging in transactions with them without authorization from OFAC and must block property or interests in property that are in, or come within, the United States or the possession of a U.S. person.  In addition, these authorities provide the Secretary of the Treasury, in consultation with the Secretary of State, additional tools to disrupt North Korea’s ability to fund its weapons of mass destruction and ballistic missile programs.  OFAC is also publishing new and updated North Korea-related FAQs.

The Regulations and the FAQs emphasize that all U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all individuals and entities within the United States, and all U.S.-incorporated entities and their foreign branches.  Furthermore, all transactions within the United States, including all financial transactions that transit the U.S. financial system, must comply with OFAC regulations.  For additional information, see FAQ 11 and 31 C.F.R. part 510, subpart G.

Violations of the North Korea Sanctions Regulations, issued under the authority of the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06 (IEEPA), and other statutes can result in substantial civil monetary penalties, referral for criminal prosecution, or both.  Each violation of the North Korea Sanctions Regulations is subject to a civil monetary penalty of up to the greater of the IEEPA statutory maximum ($289,238 as of March 1, 2018) or twice the value of the underlying transaction.  Criminal penalties of IEEPA can reach $1,000,000 and 20 years imprisonment per violation.  For additional information, see FAQ 12 and 31 C.F.R. part 510, subpart G.

For additional information regarding OFAC’s prohibitions and penalties, see Basic Information on OFAC and Sanctions.

The regulations will be published in the Federal Register, and the changes will take effect, on: March 5, 2018.

Further information about the North Korea sanctions may be found here


Treasury Publishes List of Countries Requiring Cooperation with an International Boycott

2018/02/08

Source: Federal Register

The Department of the Treasury has named the following countries as requiring or may requiring participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-01-08/pdf/2018-00123.pdf


US Firms Part Ways with China’s ZTE Monitor

2018/02/08

In early 2017 China’s largest telecommunications company agreed to pay a nearly $900 million penalty to the US after entering a guilty plea for illegally shipping goods to Iran and North Korea. ZTE was charged with 380 violations of the EAR, including (1) Conspiracy (2) Acting with Knowledge of a violation in Connection with Unlicensed Shipments of Telecommunications Items to North Korea via China and (3) Evasion. The company also entered into a settlement with OFAC for violating the Iranian Transactions and Sanctions Regulations (“ITSR”; 31 CFR Part 560). More Information on these charges can be found here.

Part of the settlement with OFAC required the company to hire an initial independent compliance monitor approved by the US government for a three-year term. The monitor is responsible for preparing the initial three annual audit reports to be provided to the US government. In addition, ZTE had to hire an independent compliance auditor, also approved by the US government, for an additional three years to prepare the remaining three annual audit reports.

Guidepost Solutions and Larkin Trade International were hired in June 2017 by the US monitor, James Stanton, a Texas civil and personal injury lawyer in charge of the oversite regime for ZTE. Stanton’s job is to help evaluate ZTE’s US export controls compliance and sanctions laws, and mitigate any future violations. US District Judge Ed Kinkeade, who presided over the ZTE sanctions case, actually rewrote the agreement to put Stanton in charge of monitoring the company before signing off on the plea deal. It has been said that Stanton has a lack of experience in US trade controls and the order naming him is sealed, leaving the reasoning behind the judge’s decision unclear. This situation is a bit of an anomaly because generally, the Department of Justice chooses an independent monitor in corporate criminal cases from candidates proposed by the company, which is how the agreement was originally written before Judge Kinkeade rewrote it. ZTE and the Justice Department agreed to Judge Kinkeade’s choice and the changes to the monitorship agreement, sources said, because the plea had already been negotiated and filed in the judge’s court and a temporary license allowing ZTE to continue to obtain US made goods was about to expire.

In December 2017, rumors broke out that Guidepost Solutions and Larkin Trade International had resigned in August 2017 from the job of actively auditing ZTE. Although the exact reason is unclear, some say it was a result of  Stanton restricting their access to ZTE documents and officials, which ultimately hindered their ability to effectively monitor the company. Stanton’s first report was due to the US government last month and this report, as well as the subsequent 2 reports will decide whether the company is liable for an additional fine of $300 million or being added to the US denial list.

Nearly all parties related to the case, including Guidepost Solutions, Larkin Trade International, Judge Ed Kinkeade, and James Stanton have all declined requests for comments based on this news. Additional details about this story and the ties between Judge Kinkeade and James Stanton can be found at https://www.reuters.com/article/us-usa-zte-exclusive/u-s-experts-resign-from-monitoring-chinas-zte-corp-sources-idUSKBN1EG03R


Treasury/OFAC Announces Settlement Agreement With IPSA International Services, Inc.

2017/10/16

(Source: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/OFAC-Recent-Actions.aspx)

IPSA International Services, Inc. of Phoenix, Arizona agreed to settle its potential civil liability for 72 apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced IPSA’s settlement of $259,200 on August 7, 2017. The apparent violations include, on 44 separate occasions, IPSA’s importation of Iranian-origin services into the United States in apparent violation of § 560.201 of the ITSR, and on 28 separate occasions, IPSA’s engagement in transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries’ payments to providers of Iranian-origin services in apparent violation of §§ 560.206 and 560.208 of the ITSR.  OFAC concluded that IPSA did not voluntarily disclose these apparent violations, and that the apparent violations constitute a non-egregious case.

OFAC’s web notice is included below.

ENFORCEMENT INFORMATION FOR AUGUST 10, 2017

Information concerning the civil penalties process can be found in the Office of Foreign Assets Control (OFAC) regulations governing each sanctions program; the Reporting, Procedures, and Penalties Regulations, 31 C.F.R. part 501; and the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. These references, as well as recent final civil penalties and enforcement information, can be found on OFAC’s website.

ENTITIES – 31 CFR 501.805(d)(1)(i)

IPSA International Services, Inc. Settles Potential Civil Liability for Apparent Violations of the Iranian Transactions and Sanctions Regulations: IPSA International Services, Inc. (IPSA), Phoenix, Arizona, has agreed to pay $259,200 to settle its potential civil liability for 72 apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). [FN/1] The apparent violations involve, on 44 separate occasions, IPSA’s importation of Iranian-origin services into the United States in apparent violation of § 560.201 of the ITSR, and on 28 separate occasions, IPSA’s engagement in transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries’ payments to providers of Iranian- origin services in apparent violation of §§ 560.206 and 560.208 of the ITSR.

OFAC determined that IPSA did not voluntarily disclose the apparent violations, and that the apparent violations constitute a non-egregious case. The total transaction value of the apparent violations was $290,784. The statutory maximum civil penalty amount in this case was $18,000,000, and the base civil penalty amount was $720,000.

IPSA is a global business investigative and regulatory risk mitigation firm that provides due diligence services for various countries and their citizenship by investment programs. In March 2012, IPSA entered into an engagement letter and fee agreement with a third country with respect to its citizenship by investment program (“Contract No. 1”). In October 2012, IPSA’s subsidiary in Vancouver, Canada (“IPSA Canada”) entered into a similar contract with a government-owned financial institution in a separate third country (“Contract No. 2”). While the majority of the applicants to both of these programs were nationals from countries not subject to OFAC sanctions, some were Iranian nationals. Since most of the information about Iranian applicants could not be checked or verified by sources outside Iran, IPSA Canada and IPSA’s subsidiary in Dubai, United Arab Emirates subsequently hired subcontractors to conduct the necessary due diligence in Iran, and those subcontractors in turn hired third parties to validate information that could only be obtained or verified within Iran. Although it was IPSA’s foreign subsidiaries that managed and performed both Contract No. 1 and Contract No. 2, with regard to Contract No. 1, IPSA appears to have imported Iranian-origin services into the United States because the foreign subsidiaries conducted the due diligence in Iran on behalf of and for the benefit of IPSA. With regard to Contract No. 2, IPSA also appears to have engaged in transactions or dealings related to Iranian-origin services and facilitated the foreign subsidiaries’ engagement in such transactions or dealings because IPSA reviewed, approved, and initiated the foreign subsidiaries’ payments to providers of the Iranian-origin services.

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors: (1) IPSA failed to exercise a minimal degree of caution or care when it imported background investigation services of Iranian origin into the United States and when it reviewed, approved, and initiated its foreign subsidiaries’ payments to providers of Iranian-origin services, and the frequency and duration of the apparent violations constitute a pattern or practice of conduct; (2) at least one of IPSA’s senior management knew or had reason to know that it was importing and/or engaging in transactions or dealings related to services of Iranian origin; (3) the transactions giving rise to the apparent violations resulted in economic benefits to Iran, and the conduct underlying the apparent violations is not eligible for OFAC authorization under existing licensing policy [FN/2]; (4) IPSA is a commercially sophisticated company operating internationally with experience in U.S. sanctions; and (5) IPSA’s OFAC compliance program was ineffective in that it did not recognize or react to the risks presented by engaging in transactions that involved Iranian-origin background investigation services.

OFAC considered the following to be mitigating factors: (1) IPSA has no prior OFAC sanctions history in the five years preceding the earliest date of the transactions giving rise to the apparent violations; (2) IPSA undertook significant remedial measures by taking swift action to cease the prohibited activities, conducting an investigation to discover the causes and extent of the apparent violations, and adopting new internal controls and procedures to prevent reoccurrence of the apparent violations; and (3) IPSA substantially cooperated with OFAC’s investigation by conducting an internal look-back investigation for potential sanctions violations and submitting an investigation report to OFAC without receiving an administrative subpoena, promptly providing detailed additional information and documentation in a well-organized manner in response to OFAC’s multiple requests for information, and entering into a statute of limitations tolling agreement.

For more information regarding OFAC regulations, please go here.


CSE Global Limited and CSE TransTel Pte. Ltd. Pay Settlement for Apparent Violations Involving Iranian Companies

2017/10/16

By: Ashleigh Foor

A solely-owned subsidiary of CSE Global Limited (an international technology group), CSE TransTel Pte. Ltd., appears to have violated § 1705 (a) of IEEPA and § 560.203 of the ITSR and has agreed to pay a $12,027,066 settlement for the apparent 104 violations of the International Emergency Economic Powers Act 1 (IEEPA) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). The apparent violations occurred on or around June 4, 2012 through March 27, 2013 when TransTel appears to have involved at least six different financial institutions in the unauthorized exportation or re-exportation of services from the United States to Iran, a prohibition of § 560.204 of the ITSR.

OFAC concluded that TransTel did not voluntarily make known these apparent violations, which OFAC found to be grounds for a serious case. The maximum and base civil monetary penalty for the apparent violations was $38,181,161.

TransTel first signed contracts with and received purchase orders from Iranian companies starting August 25, 2010 through November 5, 2011. The purchase orders were for multiple energy projects taking place in Iran and/or Iranian territory. In order to carry out the orders to deliver and install telecommunications equipment, TransTel hired several Iranian companies to deliver these goods and services on its behalf.

Preceding these interactions with Iranian companies, CSE Global and TransTel opened separate Singapore bank accounts (the “Bank”). Then-Managing Director and CSE Global’s then-Group Chief Executive Officer signed and sent a letter titled “Sanctions – Letter of Undertaking” to the Bank with the following statement: “In consideration of [the Bank] agreeing to continue providing banking services in Singapore to our company, we, CSE TransTel Pte. Ltd … hereby undertake not to route any transactions related to Iran through [the Bank], whether in Singapore or elsewhere.”  The Bank continued to provide financial services to the company after receiving the Letter of Undertaking and around June 2012, less than two months after the Letter of Undertaking was delivered, TransTel began transferring USD funds related to its Iranian business.

On or around the dates of June 4, 2012 to March 27, 2013 Transtel appears to have violated § 1705 (a) of IEEPA and/or § 560.203 of the ITSR when it initiated 104 USD wire transfers totaling more than $11,111,000 involving Iran. Transfers from the Bank went to several different third-party contacts including Iranian vendors. There was never any mention of Iran, the Iranian projects, or any Iranian parties on documentations involved in these transactions.

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors:

(1) TransTel willfully and recklessly caused apparent violations of U.S. economic sanctions by engaging in, and systematically obfuscating, conduct it knew to be prohibited, including by materially misrepresenting to its bank that it would not route Iran-related business through the bank’s branch in Singapore or elsewhere, and by engaging in a pattern or practice that lasted for 10 months;

(2) TransTel’s then-senior management had actual knowledge of – and played an active role in – the conduct underlying the apparent violations;

(3) TransTel’s actions conveyed significant economic benefit to Iran and/or persons on OFAC’s List of Specially Designated Nationals and Blocked Persons by processing dozens of transactions through the U.S. financial system that totaled $11,111,812 and benefited Iran’s oil, gas, and power industries; and

(4) TransTel is a commercially sophisticated company that engages in business in multiple countries.

 

OFAC considered the following to be mitigating factors:

(1) TransTel has not received a penalty notice, Finding of Violation, or cautionary letter from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations;

(2) TransTel and CSE Global have undertaken remedial steps to ensure compliance with U.S. sanctions programs; and

(3) TransTel and CSE Global provided substantial cooperation during the course of OFAC’s investigation, including by submitting detailed information to OFAC in an organized manner, and responding to several inquiries in a complete and timely fashion.

This enforcement action reflects compliance obligations for all companies that conduct business in OFAC-sanctioned jurisdictions or process transactions through or related in any way to the United States. Prior to signing agreement letters, representatives should be certain they and their company are willing and able to abide by rules set forth.