OFAC Posts Recent Enforcement Actions
04/23/10 12:50 AM
On
April 23, 2010, the Office of Foreign Assets
Controls (OFAC) issued information on recent enforcement
cases:
LD Telecommunications, Inc. of Coral Gables, FL, has agreed to remit $21,671 to settle allegations of violations of the Cuban Assets Control Regulations (CACR) occurring between December 2005 and March 2006. OFAC alleged that LD Telecommunications, Inc. initiated unlicensed funds transfers for the provision of telecommunications services to Cuba. LD Telecommunications, Inc. did not voluntarily disclose this matter to OFAC.
Hilton International Co. of McLean, VA (HI), a subsidiary of Hilton Worldwide, has remitted $735,407 to settle allegations of violations of the Sudanese Sanctions Regulations (SSR). OFAC alleged that between June 2002 and February 2006 HI engaged in 142 violations of the SSR in connection with its unlicensed operation of two Hilton brand hotels in Sudan. HI voluntarily disclosed this matter to OFAC. The alleged violations were discovered and self-reported as a result of pre-acquisition due diligence directed by Hilton Hotels Corporation, which acquired HI from the UK-based Hilton Group plc. in February 2006.
Pursuant to OFAC’s Civil Penalties - Interim Policy (Nov. 27, 2007), because HI signed a statute of limitation tolling agreement covering alleged violations for which the statute of limitations would have otherwise expired prior to October 16, 2007 (the effective date of the IEEPA Enhancement Act), the settlement agreement is based on the maximum statutory penalties in place at the time the tolling agreement was signed, which in this case equaled $11,000 per alleged violation.
LD Telecommunications, Inc. of Coral Gables, FL, has agreed to remit $21,671 to settle allegations of violations of the Cuban Assets Control Regulations (CACR) occurring between December 2005 and March 2006. OFAC alleged that LD Telecommunications, Inc. initiated unlicensed funds transfers for the provision of telecommunications services to Cuba. LD Telecommunications, Inc. did not voluntarily disclose this matter to OFAC.
Hilton International Co. of McLean, VA (HI), a subsidiary of Hilton Worldwide, has remitted $735,407 to settle allegations of violations of the Sudanese Sanctions Regulations (SSR). OFAC alleged that between June 2002 and February 2006 HI engaged in 142 violations of the SSR in connection with its unlicensed operation of two Hilton brand hotels in Sudan. HI voluntarily disclosed this matter to OFAC. The alleged violations were discovered and self-reported as a result of pre-acquisition due diligence directed by Hilton Hotels Corporation, which acquired HI from the UK-based Hilton Group plc. in February 2006.
Pursuant to OFAC’s Civil Penalties - Interim Policy (Nov. 27, 2007), because HI signed a statute of limitation tolling agreement covering alleged violations for which the statute of limitations would have otherwise expired prior to October 16, 2007 (the effective date of the IEEPA Enhancement Act), the settlement agreement is based on the maximum statutory penalties in place at the time the tolling agreement was signed, which in this case equaled $11,000 per alleged violation.
Chemical Engineer Sentenced To 4 Years Imprisonment for Violating Iran Sanctions
01/13/10 11:09 PM
On
January 12, 2010, Philadelphia Daily News
reported that Ali
Amirnazmi (Amirnazmi), a chemical engineer that
had a dual U.S. and Iranian citizenship, was
sentenced to four years in federal prison for
violating Iran sanctions.
According to the prosecution, Amirnazmi, who owned TranTech Consultants, an Exton, PA company that specialized in databases for chemical companies, conspired and from 1996 to July 2008 transferred a chemical-procurement software system he developed, ChemPlan, to Iran to train Iranians to close technological gaps between Iran and its adversaries.
Amirnazmi also “worked with and at the express direction of” Iranian President Mahmoud Ahmadinejad to support Iran’s petrochemical industry. Amirnazmi entered into contracts with Iranian officials creating partnerships that would obtain large quantities of chemicals to be used in large chemical manufacturing plants in Iran. Some of the chemicals had serious dual-use potential, including use in the manufacture of solid-phase rocket propellants.
At his sentencing hearing, Amirnazmi was defiant and maintained that he never intended to break any U.S. laws and stated he had no reason to lie.
In addition to four-year sentence, the U.S. District Judge ordered Amirnazmi to serve five years of supervised release once he leaves prison, make restitution of $17,227 to a bank he defrauded and forfeit $81,277.
According to the prosecution, Amirnazmi, who owned TranTech Consultants, an Exton, PA company that specialized in databases for chemical companies, conspired and from 1996 to July 2008 transferred a chemical-procurement software system he developed, ChemPlan, to Iran to train Iranians to close technological gaps between Iran and its adversaries.
Amirnazmi also “worked with and at the express direction of” Iranian President Mahmoud Ahmadinejad to support Iran’s petrochemical industry. Amirnazmi entered into contracts with Iranian officials creating partnerships that would obtain large quantities of chemicals to be used in large chemical manufacturing plants in Iran. Some of the chemicals had serious dual-use potential, including use in the manufacture of solid-phase rocket propellants.
At his sentencing hearing, Amirnazmi was defiant and maintained that he never intended to break any U.S. laws and stated he had no reason to lie.
In addition to four-year sentence, the U.S. District Judge ordered Amirnazmi to serve five years of supervised release once he leaves prison, make restitution of $17,227 to a bank he defrauded and forfeit $81,277.
Banks Settle Charges of Violating OFAC Regulations
12/11/09 10:42 PM
On
December 11, 2009, the U.S. Department of Justice
and Credit Suisse AG (Credit Suisse)
entered into a global
settlement agreement to settle alleged
violations of the International Emergency
Economic Powers Act (IEEPA), Trading with the
Enemy Act (TWEA), the Executive Orders, and
Office of Foreign Assets Control (OFAC)
regulations.
Credit Suisse, Lloyds TSB Bank PLC (Lloyds) and several other banks have been investigated for deleting and manipulating wire transfer information to conceal illegal money transfers involving Iran, Burma, Cuba, and Libya from the mid-1990s through 2006. Credit Suisse also instructed Iranian customers on how to format dollar-denominated transactions to avoid detection by the U.S. authorities.
Credit Suisse was fined $536 million after disclosing various apparent violations in a voluntary self-disclosure. According to the Assistant Attorney General, the fine would have been much higher had Credit Suisse not cooperated fully.
Lloyds used a similar technique to manipulate information that disguised clients in Iran and Sudan who were barred from doing business in the U.S. Based on OFAC’s analysis of Lloyds’ transactions, the bank routed over 4,200 wire transfers in apparent violation of IEEPA and the OFAC regulations related to Iran, Sudan, and Libya from June 2003 through August 2006.
Lloyds indicated that it terminated these illegal activities, including ceasing U.S. dollar clearing activities for Iranian bank customers in 2003, and has cooperated fully with OFAC investigation. Lloyds has settled with OFAC for $217 million, a sum which has been deemed satisfied by its prior payment of a larger amount in satisfaction of penalties assessed by the U.S. Department of Justice.
While Lloyds did not voluntarily self-disclose the apparent violations, OFAC mitigated the total potential penalty based on Lloyds’ substantial cooperation and its prompt and thorough remedial response.
Credit Suisse, Lloyds TSB Bank PLC (Lloyds) and several other banks have been investigated for deleting and manipulating wire transfer information to conceal illegal money transfers involving Iran, Burma, Cuba, and Libya from the mid-1990s through 2006. Credit Suisse also instructed Iranian customers on how to format dollar-denominated transactions to avoid detection by the U.S. authorities.
Credit Suisse was fined $536 million after disclosing various apparent violations in a voluntary self-disclosure. According to the Assistant Attorney General, the fine would have been much higher had Credit Suisse not cooperated fully.
Lloyds used a similar technique to manipulate information that disguised clients in Iran and Sudan who were barred from doing business in the U.S. Based on OFAC’s analysis of Lloyds’ transactions, the bank routed over 4,200 wire transfers in apparent violation of IEEPA and the OFAC regulations related to Iran, Sudan, and Libya from June 2003 through August 2006.
Lloyds indicated that it terminated these illegal activities, including ceasing U.S. dollar clearing activities for Iranian bank customers in 2003, and has cooperated fully with OFAC investigation. Lloyds has settled with OFAC for $217 million, a sum which has been deemed satisfied by its prior payment of a larger amount in satisfaction of penalties assessed by the U.S. Department of Justice.
While Lloyds did not voluntarily self-disclose the apparent violations, OFAC mitigated the total potential penalty based on Lloyds’ substantial cooperation and its prompt and thorough remedial response.
OFAC Releases Economic Sanctions Enforcement Guidelines
11/09/09 04:18 PM
On
November 9, 2009, the U.S. Treasury Department’s
Office of Foreign Assets Control (OFAC) issued
“Economic Sanctions Enforcement Guidelines”
as final rule in the Federal
Register, setting forth the enforcement
guidelines that OFAC will follow in determining
a response to violations of the OFAC-enforced
U.S. economic sanctions programs.
This rule has been initially published as an interim final rule with request for comments on September 8, 2008. In response to comments received, OFAC made several changes to the final version of the rule:
More detailed discussion of the amendments and public comments can be found in the final rule, published as Appendix A to Part 501 – Economic Sanctions Enforcement.
This rule has been initially published as an interim final rule with request for comments on September 8, 2008. In response to comments received, OFAC made several changes to the final version of the rule:
- The definition
of “voluntary self-disclosure” was amended to
clarify that when a third party required to
report an apparent violation fails to do so, but
a person that has committed an apparent violation
and is subject to any of the OFAC sanctions
("Subject Person") reports the violation to OFAC,
the notification will still be considered a
voluntary self-disclosure. However, in those
cases where the third party does notify OFAC
before a final enforcement response to the
violation, a Subject Person’s notification will
not be considered a voluntary self-disclosure
even if it precedes the third party’s
notification.
- The definition
of “voluntary self-disclosure” was also amended
to clarify that a self-initiated notification to
OFAC made at the same time as another government
agency learns of the apparent violation (either
through disclosure or otherwise) does qualify as
voluntary self-disclosure if the other aspects of
the definitions are met. This change is intended
to cover self-disclosures made to OFAC and
another government agency simultaneously.
- Similarly, if a
Subject Person notifies another government agency
of an apparent violation as required by that
agency, the notification may be considered a
voluntary self-disclosure by OFAC, based on a
case-by-case determination.
- On the requested
clarification on Suspicious Activity Report (SAR)
filing, OFAC responded that the filing of a SAR
does not itself preclude a determination of
voluntary self-disclosure for a subsequent
self-disclosure to OFAC of the same transaction,
unless OFAC learns of the apparent violation
prior to the self-disclosure filing.
- Regarding party
cooperation and tolling agreements, the final
rule eliminates any reference to statute of
limitations waivers. Furthermore, with respect to
whether a Subject Person’s refusal to enter into
a tolling agreement should be considered an
aggravating factor in assessing the person’s
cooperation, the final rules states that a
Subject Person’s unwillingness to enter into a
tolling agreement will not be considered against
the Subject Person. On the other hand, if a
Subject Person is willing to enter into a tolling
agreement, it may be considered a mitigating
factor.
- For the purposes
of calculating a penalty in cases involving a set
of “substantially similar violations,” OFAC
clarified that the penalty reduction of up to 25%
for a Subject Person’s first violation will
generally apply to the entire set of
“substantially similar violations” and not solely
to the first of those violations.
- OFAC also
amended the final rule to make clear that
determination of appropriate enforcement response
is not limited to prior formal determinations of
sanctions violations. Thus, prior cautionary
letters, warning letters, and evaluative letters
will be considered in determining OFAC sanctions,
if any. This particular amendment specifies that
consideration of a Subject Person’s sanction
history will be limited to the five years
preceding the transaction giving rise to the
apparent violation.
- On the issue of attorney-client privilege or the attorney work product doctrine, the final rule was amended by eliminating the reference to “failure to furnish the requested information” and instead referring to a “failure to comply” with a request for information. The language is intended to specify that OFAC will not seek penalties in cases where responsive information is withheld on the basis of apparently applicable and properly invoked privilege.
- The Enforcement
Guidelines also clarify the base penalty amounts
for transactions within the scope of the Trading
With the Enemy Act (TWEA), which are capped at
the $65,000. In non-egregious cases involving
apparent violations of TWEA, when the apparent
violation is disclosed through a voluntary
self-disclosure, the civil penalty is capped at
the $32,500. Non-egregious violations of TWEA not
voluntarily disclosed are capped at the $65,000.
- The penalty for
failure to maintain records in conformance with
the requirements of OFAC regulations is set at a
maximum of $50,000.
More detailed discussion of the amendments and public comments can be found in the final rule, published as Appendix A to Part 501 – Economic Sanctions Enforcement.
Director of Singapore Company Sentenced for Iran Embargo Violations
11/06/09 04:15 PM
On
November 5, 2009, a federal court in Brooklyn,
NY sentenced Laura
Wang-Woodford, a U.S. citizen and a director of
Singapore-based Monarch Aviation Pte, Ltd.
(Monarch), to 46 months’ incarceration for
conspiracy to violate the U.S. trade embargo by
exporting controlled aircraft components to
Iran.
Monarch has been engaged in imports and exports of military and commercial aircraft components for over 20 years.
Wang-Woodford was arrested at San Francisco International Airport in December 2007 after arriving on a flight from Hong Kong and has remained incarcerated ever since. Originally, Wang-Woodford was charged along with her husband Brian D. Woodford in a 20-count indictment returned in the Eastern District of New York on January 15, 2003. A superceding indictment charging Wang-Woodford with operating Jungda International Pte. Ltd (Jungda), a Singapore-based successor to Monarch, was returned on May 22, 2008. Brian Woodford, a U.K. citizen who served as chairman and managing director of Monarch, remains a fugitive.
The 2008 indictment alleged that between January 1998 and December 2007, the defendants exported controlled U.S. aircraft parts from the U.S. to Monarch and Jungda in Singapore and Malaysia and then re-exported those items to buyers in Iran without the required U.S. government licenses. The parts exported included aircraft shields, shears, “o” rings, and switch assemblies. On the export documents filed with the U.S. government, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts.
At the time of her arrest, Wang-Woodford had in her possession catalogues from China National Precision Machinery Import and Export Corporation (CPMIEC) containing advertisements for military technology and weaponry, including surface-to-air missile systems and rocket launchers. CPMIEC, a Chinese company, has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) based on the company’s history of selling military hardware to Iran. Under those sanctions, all U.S. persons and entities are prohibited from engaging in business with CPMIEC.
The Bureau of Industry and Security publish on its website Lists to Check that include sanctions by various government agencies and that should be consulted by persons involved in export or re-export transactions.
Monarch has been engaged in imports and exports of military and commercial aircraft components for over 20 years.
Wang-Woodford was arrested at San Francisco International Airport in December 2007 after arriving on a flight from Hong Kong and has remained incarcerated ever since. Originally, Wang-Woodford was charged along with her husband Brian D. Woodford in a 20-count indictment returned in the Eastern District of New York on January 15, 2003. A superceding indictment charging Wang-Woodford with operating Jungda International Pte. Ltd (Jungda), a Singapore-based successor to Monarch, was returned on May 22, 2008. Brian Woodford, a U.K. citizen who served as chairman and managing director of Monarch, remains a fugitive.
The 2008 indictment alleged that between January 1998 and December 2007, the defendants exported controlled U.S. aircraft parts from the U.S. to Monarch and Jungda in Singapore and Malaysia and then re-exported those items to buyers in Iran without the required U.S. government licenses. The parts exported included aircraft shields, shears, “o” rings, and switch assemblies. On the export documents filed with the U.S. government, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts.
At the time of her arrest, Wang-Woodford had in her possession catalogues from China National Precision Machinery Import and Export Corporation (CPMIEC) containing advertisements for military technology and weaponry, including surface-to-air missile systems and rocket launchers. CPMIEC, a Chinese company, has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) based on the company’s history of selling military hardware to Iran. Under those sanctions, all U.S. persons and entities are prohibited from engaging in business with CPMIEC.
The Bureau of Industry and Security publish on its website Lists to Check that include sanctions by various government agencies and that should be consulted by persons involved in export or re-export transactions.
OFAC Issues Quarterly Report of TSRA Licensing Activities
10/15/09 12:14 PM
On
October 15, 2009, the U.S. Treasury's Office of
Foreign Assets Control (OFAC) issued its
quarterly report of licensing
activities pursuant to
Section 906(b) of the Trade Sanctions Reform and
Export Enhancement Act of 2000 (TSRA) covering
licensing activities undertaken by OFAC from
April to June 2009.
The report sets forth the number of license applications, licenses issued, license amendments issues, and applications denied by agricultural commodities, medicine, or medical devices categories, as well as by country (i.e., Iran or Sudan). The average processing time was as follows:
The report sets forth the number of license applications, licenses issued, license amendments issues, and applications denied by agricultural commodities, medicine, or medical devices categories, as well as by country (i.e., Iran or Sudan). The average processing time was as follows:
- Denial Letters - 116 days
- Licenses - 60 days
- Return Without Action (RWA) Letters - 16 days
- Overall - 49 days
Australian Bank Pays $5.75M to Settle OFAC Alleged Violations
08/25/09 08:23 AM
On
August 24, 2009, the Office of Foreign Assets
Control of the U.S. Department of the Treasury
(OFAC) announced that Australia and New Zealand
Bank Group, Ltd., of Melbourne, Australia (ANZ),
remitted $5.75 million to settle allegations
of
violating both Sudanese Sanctions Regulations
and Cuban Assets Control Regulations.
OFAC alleged that from 2004 to 2006, ANZ processed international trade financing and foreign currency exchange transactions through U.S. correspondent accounts. In the process, ANZ concealed the identities of persons targeted by the U.S. sanctions by removing their names as well as references to Sudan, thus impeding the U.S. banks’ ability to detect these violations.
The settlement agreement covers 16 transactions totaling $28 million that allegedly violated the Sudanese Sanctions Regulations, and 15 sanctions totaling $78 million that allegedly violated the Cuban Assets Control Regulations.
ANZ voluntarily disclosed violating the Cuban Assets Control Regulations but not the apparent Sudanese Sanctions Regulations violations. However, while conducting a review of the transactions, the company discovered additional violations of the Sudanese Sanctions of which OFAC was not aware.
OFAC stated that ANZ’s prompt and substantial cooperation involving extensive review of transactions, as well as the fact the company had not been subject to an OFAC enforcement action in the five years preceding the transactions served as mitigating factors in determining the penalty amount. As part of the settlement agreement, ANZ also agreed to re-design its current operations and policies to implement procedures that establish more effective controls on potential OFAC violations.
OFAC alleged that from 2004 to 2006, ANZ processed international trade financing and foreign currency exchange transactions through U.S. correspondent accounts. In the process, ANZ concealed the identities of persons targeted by the U.S. sanctions by removing their names as well as references to Sudan, thus impeding the U.S. banks’ ability to detect these violations.
The settlement agreement covers 16 transactions totaling $28 million that allegedly violated the Sudanese Sanctions Regulations, and 15 sanctions totaling $78 million that allegedly violated the Cuban Assets Control Regulations.
ANZ voluntarily disclosed violating the Cuban Assets Control Regulations but not the apparent Sudanese Sanctions Regulations violations. However, while conducting a review of the transactions, the company discovered additional violations of the Sudanese Sanctions of which OFAC was not aware.
OFAC stated that ANZ’s prompt and substantial cooperation involving extensive review of transactions, as well as the fact the company had not been subject to an OFAC enforcement action in the five years preceding the transactions served as mitigating factors in determining the penalty amount. As part of the settlement agreement, ANZ also agreed to re-design its current operations and policies to implement procedures that establish more effective controls on potential OFAC violations.
OFAC Issues Monthly Report of Alleged OFAC Violations
07/02/09 10:23 PM
On
July 1, 2009, the Treasury Department’s Office of
Foreign Assets and Controls (OFAC) issued its June
2009 report of civil
penalties imposed for alleged violations of OFAC
sanctioned regimes. The report lists the
following four settlements of alleged
violations:
- Oxbow Carbon and Minerals LLC of West Palm Beach, FL agreed to remit $276,250 to settle allegations that the company violated the Iranian Transactions Regulations occurring from November 2006 through October 2007. OFAC alleged that Oxbow engaged in transactions involving services originating in Iran and facilitated trade-related transactions by non-U.S. persons which involved the use of vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines in Tehran, Iran, without an OFAC license. Oxbow did not voluntarily disclose the alleged violations to OFAC, but OFAC noted that the company “demonstrated cooperation” during OFAC’s review of the alleged violations and has made revisions to its compliance program as a remedial measure.
- National Marine Consultants, Inc. has remitted $42,075 to settle allegations of violations of the Iranian Transactions Regulations. OFAC alleged that between March 2005 and May 2007 NMCI outsourced to an Iranian entity inspection services it was contractually bound to perform for a third-party, without an OFAC license. NMCI did not voluntarily disclose the matter to OFAC, but later cooperated with OFAC’s investigation.
- Philips Electronics of North America Corporation, a New York, NY company, has remitted $128,750 to settle allegations of violations of the Cuban Assets Control Regulations occurring between June 2004 and March 2006. OFAC alleged that PENAC acted without an OFAC license through an employee’s travel to Cuba in connection with the sale of medical equipment by a foreign affiliate of PENAC. PENAC voluntarily disclosed this matter to OFAC.
- Willbros USA, Inc. of Houston, Texas, paid $6,600 to settle an allegation of violation of the Sudanese Sanctions Regulations occurring between June 18, 2003 and December 29, 2004. OFAC alleged that Willbros willfully violated the Regulations when it entered into a contract to bid on an oil development project in Sudan, despite its knowledge that such activities violated the Regulations, by facilitating the export of goods, technology or services to Sudan and evading the prohibitions set forth in the Regulations. Willbros voluntarily disclosed this matter to OFAC. OFAC applied its 2003 Economic Sanctions Enforcement Guidelines to this violation because Willbros and OFAC agreed to settle the allegation of violation, and memorialized the tentative agreement, prior to the issuance of OFAC’s Civil Penalties Interim Policy of November 27, 2007.
List of Countries Supporting Terrorism Updated
05/18/09 01:07 AM
On May
18, 2009, the Office of Foreign Assets Control of
the U.S. Department of the Treasury (OFAC) issued
a final rule in the Federal
Register amending the Terrorism List Government
Sanctions Regulations.
The amendment removes Iraq, Libya, and North Korea from the list of countries designed as state sponsors of terrorism. Remaining on this list are Cuba, Iran, Sudan, and Syria. Except as authorized, U.S. companies may not engage in any financial transactions with the governments of those countries.
The amendment removes Iraq, Libya, and North Korea from the list of countries designed as state sponsors of terrorism. Remaining on this list are Cuba, Iran, Sudan, and Syria. Except as authorized, U.S. companies may not engage in any financial transactions with the governments of those countries.
IEEPA Charges Filed Against an Iranian Man and Company
03/17/09 05:21 PM
On
March 16, 2009, the Department of Justice (DOJ)
issued
a press release stating that Ali
Khoshnevisrad (Khoshnevisrad) was arrested on March
14, 2009, after he arrived in San Francisco
International Airport on a flight from abroad. On
March 16, 2009, Khoshnevisrad, a citizen of Iran,
and his Iranian company Ariasa, AG (Ariasa) were
charged with purchasing helicopter engines and
advanced aerial cameras for fighter bombers from
U.S. firms and illegally exporting them to Iran
using companies in Ireland, Malaysia and the
Netherlands. One of the alleged recipients of the
U.S. goods was an Iranian military firm that has
since been designated by the U.S. as owned or
controlled by entities involved in Iran’s nuclear
and ballistic missile program.
Khoshnevisrad and his company Ariasa are each charged with two counts of unlawful export of U.S. goods to Iran and two counts of conspiracy to unlawfully export U.S. goods to Iran, in violation of the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions Regulations (ITR).
According to the affidavit in support of the criminal complaint filed in August 2008, Khoshnevisrad and Ariasa instructed a trading company in Ireland to purchase several model 250 turbo-shaft helicopter engines from Rolls-Royce Corp in Indiana. This type of engine was originally designed for a U.S. Army light observation helicopter and is now installed in civil and military helicopters. The Irish trading company purchased 17 of the engines for a total of $4.27 million, falsely stating that the helicopters would be used by the Irish company or by fake companies. The affidavit alleges that these helicopter engines were exported from the U.S. to a company in Malaysia pretending to be a book publisher, at a freight forwarding company address. From there, the engines were shipped to Iran. Among the recipients was the Iran Aircraft Manufacturing Industrial Company, known by its Iranian acronym as HESA. In September 2008, HESA was designated by the Treasury Department as an Iranian proliferator of weapons of mass destruction.
The affidavit further alleges that Khoshnevisrad and Ariasa instructed in 2006 a Dutch aviation parts company to place an order for several aerial panorama cameras from the U.S. The specific cameras were designed for the U.S. Air Force, for use on bombers, fighters and surveillance aircraft. The Dutch company was supposed to place the order with a Pennsylvania company and to ship them to an address in Iran. Khoshnevisrad, knowing that Iranian end user would be prohibited in this case, instructed the Dutch company to “give them an end user by yourself.” In August 2006, a representative of the Dutch company notified Khoshnevisrad that the cameras were received and would soon be shipped to Tehran.
The affidavit alleges that neither Khoshnevisrad nor Ariasa ever sought an authorization or a license from the U.S. Department of Treasure to export any goods or technology to Iran. If convicted, Khoshnevisrad faces a prison sentence of up to 20 years for each of the first three counts of the complaint, and a prison sentence of up to five years on the fourth count.
Khoshnevisrad and his company Ariasa are each charged with two counts of unlawful export of U.S. goods to Iran and two counts of conspiracy to unlawfully export U.S. goods to Iran, in violation of the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions Regulations (ITR).
According to the affidavit in support of the criminal complaint filed in August 2008, Khoshnevisrad and Ariasa instructed a trading company in Ireland to purchase several model 250 turbo-shaft helicopter engines from Rolls-Royce Corp in Indiana. This type of engine was originally designed for a U.S. Army light observation helicopter and is now installed in civil and military helicopters. The Irish trading company purchased 17 of the engines for a total of $4.27 million, falsely stating that the helicopters would be used by the Irish company or by fake companies. The affidavit alleges that these helicopter engines were exported from the U.S. to a company in Malaysia pretending to be a book publisher, at a freight forwarding company address. From there, the engines were shipped to Iran. Among the recipients was the Iran Aircraft Manufacturing Industrial Company, known by its Iranian acronym as HESA. In September 2008, HESA was designated by the Treasury Department as an Iranian proliferator of weapons of mass destruction.
The affidavit further alleges that Khoshnevisrad and Ariasa instructed in 2006 a Dutch aviation parts company to place an order for several aerial panorama cameras from the U.S. The specific cameras were designed for the U.S. Air Force, for use on bombers, fighters and surveillance aircraft. The Dutch company was supposed to place the order with a Pennsylvania company and to ship them to an address in Iran. Khoshnevisrad, knowing that Iranian end user would be prohibited in this case, instructed the Dutch company to “give them an end user by yourself.” In August 2006, a representative of the Dutch company notified Khoshnevisrad that the cameras were received and would soon be shipped to Tehran.
The affidavit alleges that neither Khoshnevisrad nor Ariasa ever sought an authorization or a license from the U.S. Department of Treasure to export any goods or technology to Iran. If convicted, Khoshnevisrad faces a prison sentence of up to 20 years for each of the first three counts of the complaint, and a prison sentence of up to five years on the fourth count.
OFAC Issues New Economic Sanctions Enforcement Guidelines
09/10/08 11:05 PM
On
September 8, 2008, the Office of Foreign Assets
Control (OFAC) of the U.S. Department of the
Treasury published in the Federal
Register an interim
final rule, “Economic Sanctions Enforcement
Guidelines” (Guidelines). The Guidelines are
applicable to all persons subject to any of the
sanctions programs administered by OFAC,
including matters that fall under International
Emergency Economic Powers Act (IEEPA) and
Trading With the Enemy Act (TWEA).
The Guidelines establish several significant changes from the 2003 proposed rule.
First, rather than identifying “aggravating” and “mitigating” factors, the Guidelines set forth General Factors for Taking Administrative Action (General Factors) that OFAC will consider in determining an appropriate enforcement response to an apparent violation and, if a civil monetary penalty is warranted, in establishing the amount of the penalty. The Guidelines reflect a realization that in many cases, a particular factor may be considered either “aggravating” or “mitigating” (e.g. remedial action was considered a mitigating factor under 2003 rules; but, absence of remedial action considered as aggravating factor).
Some or all of the following General Factors will be considered in determining the appropriate administrative action in response to an apparent violation of U.S. sanctions by a person, and, where a civil monetary penalty is imposed, the amount of such penalty:
A. Willful or reckless violation of law,
B. Awareness of conduct at issue,
C. Harm to sanctions program objectives,
D. Individual characteristics of the subject person,
E. Compliance program,
F. Remedial response,
G. Cooperation with OFAC,
H. Timing of apparent violation in relation to imposition of sanctions,
I. Other enforcement actions taken by federal, state or local agencies against the subject person,
J. Future compliance / Deterrence effect, and
K. Other relevant facts on a case-by-case basis.
Second significant development is that the Guidelines provide for the issuance of either cautionary letters or findings of violation under certain circumstances, rather than the cautionary letters and warning letters provided for under the 2003 proposed rule and the evaluative letters provided for in the 2006 interim final rule.
Third, in recognition of OFAC’s position that enhanced maximum civil penalties authorized by the Enhancement Act should be reserved for the most serious cases, the Guidelines distinguish between egregious and non-egregious civil monetary penalty cases. Egregious cases are defined as those representing the most serious sanctions violations, based on an analysis of all applicable General Factors.
Fourth, in those cases in which the imposition of a civil monetary penalty is deemed appropriate, the Guidelines provide a new process for determining the penalty amount. This process involves first determining a base penalty amount, which is based on two considerations: (i) whether the conduct, activity, or transaction giving rise to a violation is egregious or non-egregious, and (ii) whether the case involves a voluntary self-disclosure by the subject person. The existence or lack of a voluntary self-disclosure is a major factor in establishing the penalty amount. The base penalty amount for a case involving self-disclosure reflects a 50 percent or more reduction from the base penalty amount that would otherwise be applicable.
Thus, under the Guidelines, the base penalty amount in a case determined to be non-egregious and involving voluntary self disclosure will not exceed one-half of the transaction value (capped at $125,000 per violation), while in an egregious case without voluntary self-disclosure, the penalty may reach the applicable statutory maximum.
Once a base penalty amount is determined based on the transaction value and egregiousness / voluntary self-disclosure factors, the amount may be adjusted upward or downward based on the other General Factors.
With respect to responses to apparent violations, depending on the facts and circumstances of a particular case, an OFAC investigation may lead to one or more of the following actions:
A. No action,
B. Request for additional information,
C. Cautionary letter,
D. Finding of violation,
E. Civil monetary penalty,
F. Criminal referral, or
G. Other administrative actions, including (1) License denial, suspension, modification, or revocation, and (2) Cease and desist order.
In establishing the amount of civil penalties, including for failure to furnish information or to keep records, OFAC will review the facts and circumstances surrounding an apparent violation and apply the General Factors.
Although this interim final rule is effective immediately, OFAC is soliciting comments for a 60-day period with a view of improving the Guidelines.
The Guidelines establish several significant changes from the 2003 proposed rule.
First, rather than identifying “aggravating” and “mitigating” factors, the Guidelines set forth General Factors for Taking Administrative Action (General Factors) that OFAC will consider in determining an appropriate enforcement response to an apparent violation and, if a civil monetary penalty is warranted, in establishing the amount of the penalty. The Guidelines reflect a realization that in many cases, a particular factor may be considered either “aggravating” or “mitigating” (e.g. remedial action was considered a mitigating factor under 2003 rules; but, absence of remedial action considered as aggravating factor).
Some or all of the following General Factors will be considered in determining the appropriate administrative action in response to an apparent violation of U.S. sanctions by a person, and, where a civil monetary penalty is imposed, the amount of such penalty:
A. Willful or reckless violation of law,
B. Awareness of conduct at issue,
C. Harm to sanctions program objectives,
D. Individual characteristics of the subject person,
E. Compliance program,
F. Remedial response,
G. Cooperation with OFAC,
H. Timing of apparent violation in relation to imposition of sanctions,
I. Other enforcement actions taken by federal, state or local agencies against the subject person,
J. Future compliance / Deterrence effect, and
K. Other relevant facts on a case-by-case basis.
Second significant development is that the Guidelines provide for the issuance of either cautionary letters or findings of violation under certain circumstances, rather than the cautionary letters and warning letters provided for under the 2003 proposed rule and the evaluative letters provided for in the 2006 interim final rule.
Third, in recognition of OFAC’s position that enhanced maximum civil penalties authorized by the Enhancement Act should be reserved for the most serious cases, the Guidelines distinguish between egregious and non-egregious civil monetary penalty cases. Egregious cases are defined as those representing the most serious sanctions violations, based on an analysis of all applicable General Factors.
Fourth, in those cases in which the imposition of a civil monetary penalty is deemed appropriate, the Guidelines provide a new process for determining the penalty amount. This process involves first determining a base penalty amount, which is based on two considerations: (i) whether the conduct, activity, or transaction giving rise to a violation is egregious or non-egregious, and (ii) whether the case involves a voluntary self-disclosure by the subject person. The existence or lack of a voluntary self-disclosure is a major factor in establishing the penalty amount. The base penalty amount for a case involving self-disclosure reflects a 50 percent or more reduction from the base penalty amount that would otherwise be applicable.
Thus, under the Guidelines, the base penalty amount in a case determined to be non-egregious and involving voluntary self disclosure will not exceed one-half of the transaction value (capped at $125,000 per violation), while in an egregious case without voluntary self-disclosure, the penalty may reach the applicable statutory maximum.
Once a base penalty amount is determined based on the transaction value and egregiousness / voluntary self-disclosure factors, the amount may be adjusted upward or downward based on the other General Factors.
With respect to responses to apparent violations, depending on the facts and circumstances of a particular case, an OFAC investigation may lead to one or more of the following actions:
A. No action,
B. Request for additional information,
C. Cautionary letter,
D. Finding of violation,
E. Civil monetary penalty,
F. Criminal referral, or
G. Other administrative actions, including (1) License denial, suspension, modification, or revocation, and (2) Cease and desist order.
In establishing the amount of civil penalties, including for failure to furnish information or to keep records, OFAC will review the facts and circumstances surrounding an apparent violation and apply the General Factors.
Although this interim final rule is effective immediately, OFAC is soliciting comments for a 60-day period with a view of improving the Guidelines.
OFAC Issues Updated Enforcement Information
11/28/07 11:23 AM
OFAC states that these new penalties are applicable to all enforcement actions that are pending or commenced on or after October 16, 2007 and interprets this provision to mean that the new civil penalty provisions apply to all violations with respect to which a Final Penalty Notice had not been issued as of October 16, 2007.
OFAC intends to publish revised enforcement guidelines and procedures to account for the new maximum penalty amounts set forth in the IEEPA Enforcement Act. Until that time, OFAC will continue to apply its current enforcement guidelines which are set out in the notice. As a practical matter, OFAC states that this means that prepenalty notices will generally be issued at the transaction amount. Aggravating and mitigating factors and percentages set forth in the current guidelines will continue to be applied.
However, OFAC lists the following exceptions to those rules:
- PPN Mailed - Where a prepenalty notice ("PPN") has been mailed to the cited party prior to October, 16, 2007, OFAC will not impose a penalty in excess of the PPN and will continue to apply the current enforcement guidelines to calculate the penalty amount.
- Tentative Settlement Amount Communicated and Memorialized - Where OFAC has communicated to a party that an settlement amount would be recommended internally, and the party has made a written settlement offer to OFAC, OFAC will continue to process the settlement under the terms of the communication from OFAC.
- SOL Waivers - In those cases where a party has agreed to a statute of limitations ("SOL") waiver and the SOL would have expired prior to October 16, 2007, OFAC will calculate the penalty amounts in accordance with the maximum penalty applicable at the time the waiver was signed.