On Tuesday, OFAC issued an advisory about Iran’s Civil Aviation industry and the deceptive practices it uses. Here are some highlights – the introductory section:
Subject: Deceptive Practices by Iran with respect to the Civil Aviation Industry
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing this Advisory to highlight for the civil aviation industry, including parties providing services to the industry, Iran’s deceptive practices with respect to aviation matters. Industry parties who engage in or support unauthorized transfers of U.S.-origin aircraft or related goods, technology, or services to Iran, or who conduct business with designated Iranian airlines, risk OFAC enforcement or sanctions actions.
In particular, both U.S. and non-U.S. persons1 operating in the civil aviation industry face potential civil and criminal consequences for violating OFAC’s sanctions programs, including by engaging in unauthorized transfers of U.S.-origin aircraft or related goods, technology, or services to Iran. Additionally, non-U.S. persons could be designated or made subject to other sanctions actions for engaging in unauthorized activities with persons designated in connection with Iran’s proliferation of weapons of mass destruction, support for international terrorism, or human rights abuses (collectively, “designated Iran-related persons”)—including, as of the date of this Advisory: Mahan Air, Caspian Air, Meraj Air, Pouya Air, Dena Airways, Al-Naser Airlines, Syrian Air, Dart Airlines, Khors Aircompany, Kyrgyz Trans Avia, Qeshm Fars Air, and UM Air—as well as any Iranian individual or entity on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List)2 (other than a non-designated Iranian depository institution), such as Iran Air.3
Persons considering continued aviation business with Iran need to understand the role that many Iranian commercial airlines play in supporting the Iranian regime’s efforts to foment regional violence through terrorism, its weapons programs, and other destabilizing activity to include exploiting its own people through brutal human rights abuses against women, political opponents, and others. Iran has routinely relied upon Iranian commercial airlines to fly fighters and materiel to international locations in furtherance of Iranian state-sponsored terror operations. In conducting these flights, certain Iranian commercial airlines enable Iran’s military support for the Assad regime by delivering lethal materiel including weapons shipments, prolonging the brutal conflict and the suffering of millions of Syrians.
Iran employs deceptive schemes—as described in this advisory—to illicitly procure U.S.- origin aircraft parts from across the world. These efforts, often directed by senior level Iranian officials, constitute a deliberate and persistent pattern to deceive and exploit legitimate businesses, financial institutions, and governments.
Treasury is committed to continued action to target the resources Iran uses to suppress its people, sponsor terrorism, and engage in human rights abuses and other destabilizing activities. General sales agents4 and other entities that continue to provide services to U.S.-designated Iranian airlines like Mahan Air remain at risk of sanctions actions. Potentially sanctionable activities—when conducted for or on behalf of a designated person—could include:
• Financial services
• Reservations and ticketing
• Freight booking and handling
• Procurement of aircraft parts and
• • •
Airline ground services
Interline transfer and codeshare agreements
equipment • • Maintenance
Since early 2018, the United States has designated 10 entities that have provided support to Mahan Air, including front companies procuring spare aircraft parts;5 general sales agents providing services in Malaysia,6 Thailand,7 and Armenia;8 and Qeshm Fars Air,9 which helps Mahan Air facilitate the IRGC-QF’s malign activities.
The civil aviation industry should be alert to deceptive practices used by some Iranian persons, designated airlines, and their agents or affiliates to acquire unauthorized U.S.- origin aircraft or related goods, technology, or services subject to U.S. jurisdiction in violation of U.S. sanctions prohibitions.
Maintenance and Temporary Sojourn Licensing:
Maintenance of the Safety of Flight Statement of Licensing Policy and Temporary Sojourn General License. OFAC will continue to evaluate civil aviation-related license applications under the safety of flight statement of licensing policy found in the ITSR at 31 C.F.R. § 560.528. To the extent exporters believe that proposed transactions qualify for the safety of flight statement of licensing policy in 31 C.F.R. § 560.528, exporters may submit applications pursuant to that provision and must clearly describe how the proposed activities fall within its parameters. Applications should include a complete listing of all goods (including, for example, parts, components, accessories, attachments, systems, and equipment), technology, and services being proposed for export. Please note that General License J-1, which authorizes the reexportation to Iran of certain civil aircraft on temporary sojourn remains in effect.11 In addition, exporters should review the Export Administration Regulations to determine whether a BIS license is required in addition to OFAC authorization.
Deceptive Practices Used To Acquire Aircraft and Related Goods, Technology, or Services in Violation of the ITSR, GTSR, or WMDPSR. Some of the deceptive practices that Iranian persons and their agents and affiliates have used to acquire U.S.- origin aircraft or related goods, technology, or services in violation of the ITSR, GTSR, or WMDPSR include the following:
• Using front companies and other pass-through entities in third countries in Europe, the Middle East, Africa, and Asia to conceal or obfuscate the ultimate Iranian beneficiary of U.S.-origin aircraft and aviation-related materials or foreign-made aircraft containing 10 percent or more U.S.-controlled content by value. For example, on May 24, 2018, Treasury designated an illicit network concealed by Turkish front companies that surreptitiously procured U.S.-origin parts for Mahan Air. This network purchased airline aviation parts from foreign vendors, with delivery to Istanbul, and then forwarded those parts, including U.S.- origin, export-controlled goods, to Mahan Air.
• Iranian persons continue to circumvent U.S. sanctions and procure U.S.-origin aircraft parts through third-party suppliers from multiple jurisdictions in Europe, East Asia and the Middle East, with many parts originating from suppliers in North America and Europe. In certain cases, European suppliers maintain offices in Tehran and have instructed Iranian airlines to remit payments to accounts in third countries.
• Misrepresenting to suppliers, dealers, brokers, re-insurers, and other intermediaries that sanctions against Iran have been lifted.
• Claiming activities are authorized by OFAC without providing copies of any OFAC licenses purportedly held by the parties.
• Sourcing U.S.-origin aircraft, non-U.S.-origin aircraft containing 10 percent or more U.S.-controlled content by value, and U.S.-origin goods, technology, or services from third countries known to have strong reputations for aircraft maintenance, repair, and overhaul operations, but limited export control or sanctions enforcement capabilities.
• Using general trading firms located in free trade zones, which do not ordinarily appear to deal in aviation goods, to place orders for U.S.-origin aircraft parts or components.
• Placing orders for U.S.-origin aircraft parts or components from firms in one country for delivery to freight forwarding or logistics firms in a second country.
Intermediaries, such as escrow companies and brokers, should remain vigilant for possible falsified or fabricated documentation relating to OFAC licenses, aircraft registration information, insurance data, overflight movements, use of front companies, and other deceptive practices intended to conceal the ultimate end-users of aircraft or related goods, technology, or services. Such intermediaries should also be on heightened alert for concealed or obscured end-users when delivery of aircraft involves overflight of or stopovers in Iran.
And Treasury issued the following press release:
Treasury Advisory Highlights Iranian Airlines’ Support of Destabilizing Activity
OFAC Outlines Risks to Civil Aviation Industry of Dealing with Iranian Airlines
Washington – Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an Iran-related Advisory to inform the civil aviation industry of potential exposure to U.S. Government enforcement actions and economic sanctions for engaging in or supporting unauthorized transfers of aircraft or related goods, technology, or services to Iran or to designated Iranian airlines.
“The Iranian regime uses commercial airlines to further the destabilizing agenda of terror groups like the Islamic Revolutionary Guards Corps (IRGC) and its Qods Force (IRGC-QF), and to fly fighters from their proxy militias across the region. The international civil aviation industry, including service providers like general sales agents, brokers, and title companies, need to be on high alert to ensure they are not complicit in Iran’s malign activities,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “Lack of adequate compliance controls could expose those operating in the civil aviation industry to significant risks, including civil or criminal enforcement actions or economic sanctions.”
The advisory provides information on the role many Iranian commercial airlines play in supporting the Iranian regime’s efforts to foment regional violence through terrorism, supplying weapons to its proxy militias and the Assad regime, and other destabilizing activity. Iran has routinely relied upon certain Iranian commercial airlines to fly fighters and materiel to international locations in furtherance of Iranian state-sponsored terror operations. In conducting these flights, these Iranian commercial airlines enable Iran’s military support for the Assad regime by delivering lethal materiel including weapons shipments, prolonging the brutal conflict and the suffering of millions of Syrians.
For example, the advisory highlights Mahan Air, which plays an integral role supporting the IRGC-QF and its regional proxies by transporting foreign fighters, weapons, and funds. Mahan Air has also transported IRGC-QF Commander Qasem Soleimani, who is sanctioned under United Nations Security Council Resolution 2231 and subject to a United Nations travel ban. Since 2018, the United States has imposed economic sanctions on 11 entities and individuals that have provided support to, or acted for or on behalf of, Mahan Air, including a bank providing financial services, front companies procuring spare aircraft parts, and general sales agents providing services in Malaysia, Thailand, and Armenia. The United States also designated Qeshm Fars Air, a commercial cargo airline controlled by Mahan Air and a key facilitator of the IRGC-QF’s malign activities in Syria, in early 2019 under terrorism authorities.
General sales agents and other entities that continue to provide services to U.S.-designated Iranian airlines like Mahan Air remain at risk of sanctions actions. Potentially sanctionable activities — when conducted for or on behalf of a designated person — could include:
- Financial services
- Reservations and ticketing
- Freight booking and handling
- Procurement of aircraft parts and equipment
- Airline ground services
- Interline transfer and codeshare agreements
- Refueling contracts
The advisory also describes various deceptive practices employed by the Iranian regime to evade sanctions and illicitly procure aircraft and aircraft parts ranging from the use of front companies and unrelated general trading companies to falsifying or fabricating documentation relating to end-use or OFAC licenses. Intermediaries should be on heightened alert to the practices highlighted in this advisory.