Iranian Sanctions

The firm, which is in the truck business, agreed to a $1,709,325 settlement for 63 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR), which were voluntarily self-disclosed and non-egregious violations. The base penalty is therefore $2,713,214 for selling $5,426,428 worth of products. The violations occurred between October 2013 and February 2015.

Here’s the “what” of what happened:

In June and October 2014, a DAF dealer based in Hamburg, Germany, placed two orders with DAF via its wholly owned subsidiary in Germany (“DAF Germany”) for 51 trucks. Even though the final paperwork associated with these transactions identified the ultimate end-customer as an unnamed party in Russia, the Hamburg-based dealer resold the trucks to a buyer in Iran. A former employee/manager of DAF Germany had, at a minimum, reason to know that the trucks were intended for Iran rather than for Russia. The Hamburg-based dealer initially requested a price quotation from, and then placed an order with, DAF Germany for trucks with particular specifications for an Iranian company located in Iran. The then-employee/manager of DAF Germany informed the Hamburg-based dealer that DAF Germany could not sell trucks destined for Iran. That same day, the Hamburg-based dealer submitted a pricing request for a new order of trucks purportedly destined for a customer or end-user in Russia with virtually identical specifications as the earlier order intended for Iran. Although the new pricing request was submitted on the same day on which DAF Germany refused the Iran-related purchase order and the proposed purchase involved the same types of trucks, with the same specifications, and the same delivery point as those included in the Iran-related purchase order, DAF Germany — including the former employee/manager — failed to conduct an adequate inquiry and processed the order.

Separately, DAF Trucks Frankfurt, a directly owned DAF dealer, received two trucks from DAF in October 2013 that were intended for resale to a company in Germany. After the original buyer cancelled the order, DAF Trucks Frankfurt sold the two trucks to a trader based in the Netherlands, which in turn resold the trucks to two buyers in Iran. DAF’s investigation showed that an employee of DAF Trucks Frankfurt knew or had reason to know that the two trucks sold to the Netherlands-based trader were intended for resale to buyers in Iran. Among other things, the Netherlands-based trader sent drafts of its invoices, which referenced the buyers in Iran, to a DAF Trucks Frankfurt employee.

Additionally, in June 2014, DAF sold 10 trucks to an authorized DAF sales dealer located in Sofia, Bulgaria. The Bulgarian authorized dealer subsequently sold and delivered the 10 DAF trucks to an affiliated rental company, which in turn sold the 10 trucks to a buyer in Iran. The Bulgarian authorized dealer’s parent company disclosed that a used truck sales manager employed by DAF introduced that authorized dealer to the Iranian buyers of the 10 trucks and knew or should have known that the trucks were intended for Iran prior to introducing the parties. A DAF investigation found that the sales manager ignored warning signs indicating the trucks were destined for Iran and failed to take reasonable steps in response to the warnings.

And OFAC considered the following factors in determining the penalty:

OFAC considered the following to be aggravating factors:

  1. DAF personnel — specifically, employees in DAF Germany and DAF Trucks Frankfurt and a DAF used trucks sales manager — failed to exercise a minimal degree of caution or care when they ignored warning signs regarding potential sales involving OFAC-sanctioned countries and allowed goods to be sold to customers that they knew or had reason to know intended to re-sell the goods to buyers in Iran;
  2. in each case, a DAF employee had knowledge or reason to know the goods were being re-sold to buyers in Iran;
  3. DAF’s exportation of goods from Germany to Iran conferred millions of dollars in economic benefits on Iran; and
  4. PACCAR, DAF’s parent company, is a large sophisticated entity that engages extensively in international business.

OFAC considered the following to be mitigating factors:

  1. neither PACCAR nor DAF have received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations;
  2. at the time of the apparent violations, DAF possessed and maintained a trade sanctions compliance program that included contractual prohibitions on dealers and service partners re-selling DAF products in violation of U.S. trade sanctions;
  3. upon learning of the apparent violations, DAF took remedial action by conducting an internal investigation regarding this matter; terminating employees involved in some of the apparent violations; cancelling delivery of 20 trucks that were part of an order for a customer that appeared to have allowed other DAF trucks to be resold to buyers in Iran; providing in-person compliance training to DAF subsidiaries on an annual basis from 2015 onward; and implementing enhanced trade compliance controls — including a policy preventing direct sales agreements except for sales to final end customers — in an effort to prevent similar apparent violations from recurring; and
  4. PACCAR and DAF cooperated during the course of OFAC’s investigation, including by submitting a detailed voluntary self- disclosure; thoroughly and promptly responding to OFAC’s requests for information and by entering into a tolling agreement to extend the statute of limitations.

Some details on PACCAR’s remedial efforts:

Additionally, PACCAR and DAF have confirmed to OFAC that they have terminated the apparently violative conduct and have taken the following steps to minimize the risk of recurrence of similar conduct in the future:

• DAF hired a full-time Compliance Director who reports to DAF’s General Counsel and Chief Compliance Officer, and is responsible for developing compliance policies and procedures, advising employees about compliance, monitoring internal reports of compliance concerns and ensuring appropriate follow-up, and assisting with compliance investigations and audits;

• DAF updated its EU Trade Restrictions Compliance Manual to strengthen controls on dealer sales that might violate U.S. or other applicable trade restrictions, including by requiring more thorough end-customer and transaction due diligence;

• DAF implemented a policy that only allows direct sales agreements for sales to final end- customers and imposed a contractual ban on the resale of new trucks acquired under a direct sales agreement in the absence of an approved exception;

• DAF sent a letter to all dealers in its dealer network reminding them of their obligations to comply with U.S. and other trade sanctions and received certifications from each of its dealers regarding their compliance with all applicable trade sanctions; and

• DAF has made trade sanctions compliance training an annual requirement and has conducted such trainings at DAF’s headquarters and subsidiaries since 2016.

And the lesson you should learn from this:

This enforcement actions highlights the benefits U.S. companies can realize in conducting sanctions-related training and in taking appropriate steps to audit and monitor foreign subsidiaries for OFAC compliance. U.S. parent companies can mitigate risk to sanctions exposure by proactively establishing and enforcing a robust sanctions compliance program. Foreign subsidiaries of U.S. companies are subject to the ITSR, and their U.S. parent companies may face potential exposure to civil monetary penalties for the actions of such entities.

Link:

Enforcement Information

The Trump administration has implemented an unprecedented pressure campaign on Iran’s leaders with two objectives: First, to deprive the Iranian regime of the money it needs to support its destabilizing activities. Second, to force the Ayatollah Ali Khamenei to the negotiating table to conclude a comprehensive and enduring deal.

The comprehensive deal we seek with the Iranian regime should address four key areas: its nuclear program, its ballistic missile development and proliferation, its support for terrorist groups and proxies, and its treatment and illegal detention of U.S. citizens.

Before we reimposed sanctions and accelerated our pressure campaign, Iran was increasing its malign activity, even under the Joint Comprehensive Plan of Action. These actions included expansive missile testing and proliferation, continuing to unjustly detain American citizens, and deepening its involvement in regional conflicts.

In Yemen, Iran has provided funding, weapons and training to the Houthis, only prolonging the conflict and suffering of the Yemeni people. In Syria, Iran supports a regime that has killed hundreds of thousands, has displaced millions of its own citizens, and continues to spread violence throughout the country. In Lebanon, Iran uses Hezbollah to provoke conflict with Lebanon’s neighbors, imperil the Lebanese people and generate instability.

U.S. pressure is reversing these trends. The regime and its proxies are weaker than when our pressure began. Iranian-backed militias have stated that Iran no longer has enough money to pay them as much as in the past and has enacted austerity plans. Iran’s proposed military budget for 2019 included a 28% cut to its defense budget and a 17% cut to its terror branch, the Islamic Revolutionary Guard Corps.

As we raise the cost of Iran’s expansionism and the status quo, we seek a comprehensive deal and a far more peaceful, stable relationship. We look forward to the day we can help bring the Iranian people and their neighbors the peace and prosperity they deserve.

Link:

State Department Op-Ed

Publication of Amended Iranian Sanctions Regulations Regarding the Iron, Steel, Aluminum, and Copper Sectors of Iran

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is amending the Iranian Financial Sanctions Regulations, changing the heading of the Iranian Human Rights Sanctions Regulations to the Iranian Sector and Human Rights Abuses Sanctions Regulations, and amending the renamed Iranian Sector and Human Rights Abuses Sanctions Regulations to implement Executive Order 13871, “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran.”  In connection with the issuance of these regulations, OFAC is amending several FAQs and publishing several new FAQs. These regulatory amendments are currently available for public inspection with the Federal Register and will take effect upon publication in the Federal Register on August 7, 2019.  

And here are the new FAQs:

Frequently Asked Questions Regarding Executive Order (E.O.) “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran” of May 8, 2019


666. What does E.O. 13871 do?

E.O. 13871 authorizes sanctions with respect to the iron, steel, aluminum, and copper sectors of Iran.

Section 1 of E.O. 13871 authorizes blocking sanctions on any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:
(i) to be operating in the iron, steel, aluminum, or copper sector of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sector of Iran;

(ii) to have knowingly engaged, on or after the effective date of the order, in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;

(iii) to have knowingly engaged, on or after the effective date of the order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;

(iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of any person whose property and interests in property are blocked pursuant to section 1; or

(v) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to section 1.

Section 2 of E.O. 13871 authorizes correspondent and payable-through account sanctions on foreign financial institutions (FFIs) determined to have knowingly conducted or facilitated any significant financial transaction:

(i) for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;

(ii) for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran; or

(iii) for or on behalf of any person whose property and interests in property are blocked pursuant to the order.

Sections 3-13 of E.O. 13871 contain exceptions, definitions, and other implementing provisions related to the sanctions. [08-06-2019]


667. When does E.O. 13871 become effective?

E.O. 13871 became effective upon signing. [08-06-2019] 


668. Is there a wind-down period?

Persons engaged in transactions that could be sanctioned under E.O. 13871 had a 90-day period after the issuance of E.O. 13871 to wind down those transactions without exposure to sanctions under E.O. 13871. Those persons were advised to take the necessary steps to wind down transactions by the end of the 90-day wind-down period to avoid exposure to sanctions, and that entering into new business that would be sanctionable under the E.O. on or after May 8, 2019 will not be considered wind-down activity and could be sanctioned even during the wind-down period.  The wind-down period expires on August 6, 2019. [08-06-2019] 


669. Does E.O. 13871 expand upon existing sanctions relating to trade with Iran in certain raw and semi-finished metals, such as aluminum and steel?

 

Yes. E.O. 13871 expands upon existing sanctions under section 1245 of IFCA on the sale, supply, or transfer, directly or indirectly, to or from Iran of certain materials, including raw and semi-finished metals such as aluminum and steel, as described in subsections 1245(a)(l)(B) or (C) of IFCA.

 

In addition, E.O. 13871 explicitly targets the iron and copper sectors of Iran. [08-06-2019] 


670. Are there exceptions to the sanctions imposed under E.O.13871?

Yes. The sanctions authorized under E.O. 13871 do not apply to transactions for the conduct of the official business of the United States Government or the United Nations (including its specialized agencies, programmes, funds, and related organizations) by employees, grantees, or contractors thereof. [08-06-2019] 


682. What does the August 06, 2019 regulatory amendment related to E.O. 13871 do?

The regulatory amendment: (i) implements the correspondent or payable-through account sanctions set forth in section 2 of E.O. 13871 by incorporating those provisions in the Iranian Financial Sanctions Regulations, 31 C.F.R. part 561 (IFSR); (ii) renames the Iranian Human Rights Regulations, 31 C.F.R. part 562, as the Iranian Sector and Human Rights Abuses Sanctions Regulations (ISHR); and (iii) implements the blocking sanctions set forth in section 1 of E.O. 13871 by incorporating those provisions in the ISHR. [08-06-2019]


671. How are the terms “significant transaction or transactions; significant financial services; significant financial transaction” interpreted for purposes of correspondent or payable-through account sanctions set forth in section 2 of E.O. 13871?

 

The interpretation of “significant transaction or transactions; significant financial services; significant financial transaction,” as described in the correspondent account sanctions in the IFSR, provides that the Department of the Treasury may consider the totality of the facts and circumstances and sets forth a list of broad factors that can play a role in the determination whether transactions, financial services, and financial transactions are significant, including:  (a) the size, number, and frequency of the transactions, financial services, or financial transactions; (b) the nature of the transactions, financial services, or financial transactions, including their type, complexity, and commercial purpose; (c) the level of awareness of management and whether the transactions are part of a pattern of conduct; (d) the nexus of the transactions, financial services, and financial transactions and blocked persons; (e) the impact of the transactions, financial services, and financial transactions on statutory objectives; (f) whether the transactions, financial services, and financial transactions involve deceptive practices; (g) whether the transactions solely involve the passive holdings of Central Bank of Iran (CBI) reserves or repayment by the CBI of official development assistance or the transfer of funds required as a condition of Iran’s membership in an international financial institution; and (h) other relevant factors that the Secretary of the Treasury deems relevant. (31 C.F.R. § 561.404). [08-06-2019]


683. How is the term “significant transaction or transactions” interpreted for purposes of blocking sanctions set forth in section 1 of E.O. 13871?

The interpretation of “significant transaction or transactions,” as described in the ISHR provides that the Department of the Treasury may consider the totality of the facts and circumstances and sets forth a list of broad factors that can play a role in the determination whether transactions are significant, including: (a) the size, number, and frequency of the transactions; (b) the nature of the transactions, or the goods or services for sale, supply, or transfer, including their type, complexity, and commercial purpose; (c) the level of awareness of management and whether the transactions are part of a pattern of conduct; (d) the nexus of the person that engaged in the transactions and the prohibited activities in sections 1(a)(ii) and 1(a)(iii) of E.O. 13871; (e) the impact of the transactions on the objectives of E.O. 13871; (f) whether the transactions attempt to obscure or conceal the actual parties or true nature of the transactions, or evade sanctions; and (g) other relevant factors that the Secretary of the Treasury deems relevant. (31 C.F.R. § 562.407). [08-06-2019]


684. What is the definition of the “iron sector of Iran”? 

The term iron sector of Iran means the mining, refining, processing, or manufacturing of iron or iron products in Iran. (31 C.F.R. § 561.336; 31 C.F.R. § 561.317). [08-06-2019] 


685. What is the definition of the “steel sector of Iran”?

The term steel sector of Iran means the iron-ore smelting, ferrous-scrap melting, refining, processing, or manufacturing of steel or steel products in Iran. (31 C.F.R. § 561.337; 31 C.F.R. § 562.318). [08-06-2019] 


686. What are the definitions of “iron, iron products, steel, and steel products”?

The terms iron, iron products, steel, and steel products mean any raw, semi-fabricated, fabricated, or finished form of iron, iron alloy, alloy steel, non-alloy steel, ferroalloys, pig iron, and spiegeleisen of all grades, sizes, and thicknesses, whether or not clad, plated, or coated, including in the following forms:  iron ores and concentrates, including roasted iron pyrites; pigs and blocks; ferrous products obtained by direct reduction of iron ore and other spongy ferrous products, in lumps or pellets; granules and powders; ingots, blooms billets, slabs, and beam blanks; flat-rolled products (plates, sheets, strips, and foils) either cut-to-length or in coils; bars and rods; structural profiles (beams, channels, angles, and other shapes); sheet piling; railway or tramway track construction materials; tubes, pipes, and hollow profiles; tube or pipe fittings; reservoirs, tanks, vats, and similar containers; wire, stranded wire, ropes, cables, and plaited band; castings, stampings, and forgings; and ferrous waste and scrap, including slag.  (31 C.F.R. § 561.335; 31 C.F.R. § 562.316). [08-06-2019] 


687. What is the definition of the “aluminum sector of Iran”?

The term aluminum sector of Iran means the mining, refining, processing, or manufacturing of aluminum or aluminum products in Iran.  (31 C.F.R. § 561.332; 31 C.F.R. § 562.313). [08-06-2019] 


688. What are the definitions of “aluminum” and “aluminum products”?

The terms aluminum and aluminum products mean any raw, semi-fabricated, fabricated, or finished form of aluminum or aluminum alloy of all grades, sizes, and thicknesses, including in the following forms:  ores and concentrates (e.g., bauxite and alumina); unwrought aluminum including ingots, slabs, and billets; powders and flakes; wrought aluminum including bars, rods, profiles, plates, sheets, strip, foil, tubes, and pipes; tube or pipe fittings; reservoirs, tanks, vats, and similar containers; wire, stranded wire, ropes, cables, and plaited band; castings, stampings, and forgings; waste and scrap, including slag, and any aluminum and aluminum products produced from the melting or recycling of aluminum scrap.  (31 C.F.R. § 561.331; 31 C.F.R. § 562.312). [08-06-2019] 


689. What is the definition of the “copper sector of Iran”?

The term copper sector of Iran means the mining, refining, processing, or manufacturing of copper or copper products in Iran.  (31 C.F.R. § 561.334; 31 C.F.R. § 562.314). [08-06-2019] 


690. What are the definitions of “copper” and “copper products”?

The terms copper and copper products mean any raw, semi-fabricated, fabricated, or finished form of copper or copper alloy of all grades, sizes, and thicknesses, including in the following forms:  ores and concentrates; copper mattes; cement copper (precipitated copper); refined, unrefined, wrought, or unwrought copper; billets; cathodes; bars, rods, profiles, plates, sheets, strips, foil, tubes, and pipes; tube and pipe fittings; powders and flakes; reservoirs, tanks, vats, and similar containers; wire, stranded wire, ropes, cables, and plaited band; castings, stampings, and forgings; and waste and scrap, including slag.  (31 C.F.R. § 561.333; 31 C.F.R. § 562.314). [08-06-2019]

Links:

OFAC notice

Iranian Financial Sanctions Regulations

New FAQs

On Wednesday, OFAC added:

ZARIF, Mohammad Javad (a.k.a. ZARIF KHONSARI, Mohammad Javad; a.k.a. “ZARIF, Javad”), Iran; DOB 08 Jan 1960; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Male (individual) [IRAN-EO13876].

to their Iran sanctions program.

And Treasury issued the following press release:

Treasury Designates Iran’s Foreign Minister Javad Zarif for Acting for the Supreme Leader of Iran

WASHINGTON – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took action today against the Iranian regime’s Foreign Minister, Mohammad Javad Zarif (Javad Zarif), pursuant to Executive Order (E.O.) 13876 because Zarif acted or purported to act for or on behalf of, directly or indirectly, the Supreme Leader of the Islamic Republic of Iran. 

On June 24, 2019, the President issued E.O. 13876 imposing sanctions on the Supreme Leader of the Islamic Republic of Iran and the Supreme Leader’s Office (SLO), and authorizing sanctions on others associated with the Supreme Leader or the SLO.  Concurrently, Treasury added the Supreme Leader of Iran, Ali Husseini Khamenei, to OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) under this new authority.

“Javad Zarif implements the reckless agenda of Iran’s Supreme Leader, and is the regime’s  primary spokesperson around the world.  The United States is sending a clear message to the Iranian regime that its recent behavior is completely unacceptable,” said Treasury Secretary Steven T. Mnuchin.  “At the same time the Iranian regime denies Iranian citizens’ access to social media, Foreign Minister Javad Zarif spreads the regime’s propaganda and disinformation around the world through these mediums.”   

While OFAC is taking today’s action against Zarif under E.O. 13876, this new authority, additional information indicates that Javad Zarif oversees a foreign ministry that has coordinated with one of the Iranian regime’s most nefarious state entities, the IRGC-Qods Force (IRGC-QF), which is designated pursuant to terrorism and human rights authorities.  Zarif’s Ministry of Foreign Affairs and its high ranking officials have engaged in and funded efforts to influence elections, some of which have involved the IRGC-QF.  Additionally, senior officials of Iran’s Ministry of Foreign Affairs sought to facilitate the release of two IRGC-QF operatives from a foreign country by making payments to foreign judiciary officials.

Sanctions Implications

All property and interests in property of this individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.  OFAC’s 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. 

In addition, persons that engage in certain transactions with the individual designated today may themselves be exposed to designation.  Furthermore, any foreign financial institution that knowingly conducts or facilitates a significant transaction for or on behalf of the individual designated today could be subject to U.S. correspondent account or payable-through sanctions.

Links:

OFAC Notice

Treasury Press Release

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

Catering

Interline transfer and codeshare agreements

Refueling contracts

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:

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.

Treasury

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
  • Maintenance
  • Airline ground services
  • Catering
  • 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.

Links:

OFAC Notice

Civil Aviation Advisory

Treasury Press Release

Yesterday, OFAC added the following person:

LI, Youmin, China; DOB 19 Jul 1973; POB Jilin, China; nationality China; Gender Female; Passport G48428458 (China) issued 14 Feb 2011 expires 13 Feb 2021; National ID No. 120103197307196727 (China) (individual) [IRAN-EO13846]. 

and entity:

ZHUHAI ZHENRONG COMPANY LIMITED (a.k.a. ZHU HAI ZHEN RONG CO; a.k.a. ZHU HAI ZHEN RONG COMPANY; a.k.a. ZHU HAI ZHEN RONG COMPANY LIMITED; a.k.a. ZHUHAI ZHEN RONG COMPANY; a.k.a. ZHUHAI ZHENRONG CO), No. 121 Datunli Chaoyang District, Beijing 100108, China; No. 20 Gongbei Oiaoguang Road, Zhuhai, Guangdong 519020, China [IRAN-EO13846].

to their Iran sanctions program.

And the State Department explains why:

Today, the United States is taking further action as part of our maximum economic pressure campaign against the Iranian regime by imposing sanctions on the Chinese firm Zhuhai Zhenrong Company Limited and its chief executive for knowingly purchasing or acquiring oil from Iran, contrary to U.S. sanctions. We said we would fully enforce our sanctions, and we are backing this up with real action. The announcement today will help deny the regime critical income to fund terror around the world, engage in foreign conflicts, and advance its ballistic missile development. The Iranian regime must cease these destabilizing activities.

Zhuhai Zhenrong Company Limited knowingly engaged in a significant transaction for the purchase or acquisition of crude oil from Iran. The transaction in question took place after the expiration of China’s Significant Reduction Exception (SRE) on May 2, 2019, and was not covered by that SRE. Among other things, the imposition of these sanctions blocks all property and interests in property of Zhuhai Zhenrong Company Limited that are in the United States or within the possession or control of a U.S. person, and provides that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in. Additionally, the United States is imposing several restrictions as well as a ban on entry into the United States on Youmin Li, a corporate officer and principal executive officer of Zhuhai Zhenrong Company Limited. To implement my action today, the Department of the Treasury is adding Zhuhai Zhenrong Company Limited and Youmin Li to its List of Specially Designated Nationals and Blocked Persons.

Any entity considering evading our sanctions should take notice of this action today. It underscores our commitment to enforcement and to holding the Iranian regime accountable. The United States will continue to deny funding to this regime, which uses its wealth and tremendous resources to enrich itself, deprive the Iranian people of opportunity, and fuel its destructive foreign policy. All entities must do their diligence and stay well clear of sanctioned Iranian entities and sectors. No company or nation should be willing to expose itself to the possibility of supporting Iran’s Islamic Revolutionary Guard Corps or the regime’s regional proxies.

Links:

OFAC Notice

State Department Press Release

On Thursday, OFAC added the following persons:

BORJI, Salim (a.k.a. BORJI SOUMEH, Salim); DOB 22 Dec 1964; citizen Iran; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Male; Passport B30739118 (Iran) (individual) [NPWMD] [IFSR] (Linked To: TAMIN KALAYE SABZ ARAS COMPANY).

FAKHRZADEH, Mohammad (a.k.a. FAKHR ZADEH, Mohammad), Tehran, Iran; DOB 22 May 1978; POB Malayer, Iran; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Male; National ID No. 3932714806 (Iran) (individual) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY).

KARIMI-ADEGANI, Afsaneh (a.k.a. KARIMIADEGANI, Afsaneh); DOB 06 Jul 1970; nationality Iran; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Female; Passport F35323181 (Iran) (individual) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY).

NAJAFI, Mehdi (a.k.a. MOJTAHEDNAJAFI, Seyedmehdi; a.k.a. MOJTAHEDNAJAFI, Seyedmehdi Miraliasghar; a.k.a. NAJAFI, Seyed Mehdi Mojtahed), No. 1-30th Bld# 2nd, Shahrak Farhangian Sheykh Fazlollah Nour, Tehran 1464873861, Iran; DOB 21 Sep 1971; POB Tehran, Iran; nationality Iran; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Male; Passport I15597905 (Iran); National ID No. 0054385946 (Iran) (individual) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY).

TALEBI, Sohayl (a.k.a. TALEBI, Soheyl), Vriesenhof 3000 Leuven, Belgium; DOB 28 May 1960; nationality Iran; Additional Sanctions Information – Subject to Secondary Sanctions; Gender Male (individual) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY).

and entities:

BAKHTAR RAAD SEPAHAN COMPANY (a.k.a. BAKHTAR RAAD ENGINEERING COMPANY; a.k.a. BAKHTAR RAAD SEPAHAN CO.; a.k.a. RADSEPAHAN), Number 8, Keyvan 2 Building, between 2nd & 3rd Western Avenue, Mohaberat Street, Shahinshahr, Esfahan, Iran; Additional Sanctions Information – Subject to Secondary Sanctions [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY). 

HENAN JIAYUAN ALUMINIUM INDUSTRY CO., LTD (Chinese Simplified: 河南嘉源铝业有限公司) (a.k.a. HENAN JIAYUAN ALUMINUM INDUSTRY COMPANY, LIMITED), Rm. 1402, Unit 2, Building 27, Shangwu Inner Ring Rd, Zhengdong New Area, Zhengzhou, Henan, China; No. 1402, Unit 2, Building 27, Shangwu Inner Ring Road (Zhengdong), Zhengzhou Area, Pilot Free Trade Zone, Henan, China; Website http://www.jyalco.com; Additional Sanctions Information – Subject to Secondary Sanctions; United Social Credit Code Certificate (USCCC) 914101006905518610 (China) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY). 

SANMING SINO-EURO IMPORT AND EXPORT CO., LTD (Chinese Simplified: 三明市中伊欧出口有限公司), Unit 911, Building Number 7, Hengda House, Sha County, Sanming City, Fujian Province, China; Additional Sanctions Information – Subject to Secondary Sanctions; Business Registration Number 91350400MA32K7W49G (China) [NPWMD] [IFSR] (Linked To: TALEBI, Sohayl; Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY). 

SUZHOU A-ONE SPECIAL ALLOY CO., LTD (Chinese Simplified: 苏州埃文特种合金有限公司) (a.k.a. SUZHOU AIWEN SPECIAL ALLOY CO., LTD.), No.2 Weihua Road, Suzhou Industrial Park, Jiangsu Province, China; No.2, Weihua Road, Suzhou Industrial Park, Jiangsu Province 215121, China; Room 1219, Building 2, Hetai Dushi Living Plaza, No. 2, Weihua Road, Weiting, Suzhou Industrial Park, Suzhou 215000, China; Website http://www.sz-alloy.com; Additional Sanctions Information – Subject to Secondary Sanctions; Registration ID 91320594MA1MAHHR9W (China) [NPWMD] [IFSR] (Linked To: TAMIN KALAYE SABZ ARAS COMPANY). 

SUZHOU ZHONGSHENG MAGNETIC INDUSTRY CO., LTD. (Chinese Simplified: 苏州中盛磁业有限公司) (a.k.a. SUZHOU ZHONGSHENG MAGNETIC COMPANY LIMITED), Room 17002, Zhongxiang Mansion, No. 666, Xiangcheng Blvd., Yuanhe Town, Xiangcheng District, Suzhou, Jiangsu 215133, China; Zhong Xiang building, No. 666, Xiangcheng Avenue, Suzhou, Xiangcheng District 17002, China; Website http://www.zhongsheng-magnet.com; Additional Sanctions Information – Subject to Secondary Sanctions; United Social Credit Code Certificate (USCCC) 91320507582255256P (China) [NPWMD] [IFSR] (Linked To: TAMIN KALAYE SABZ ARAS COMPANY).  

 TAMIN KALAYE SABZ ARAS COMPANY (a.k.a. KALAYE SABZ ORZ COMPANY; a.k.a. TAMIN KALAYE SABZ; a.k.a. TAMIN KALAYE SABZ COMPANY; a.k.a. “KSO COMPANY”; a.k.a. “TS CO.”; a.k.a. “TS COMPANY”), No. 13, Unit 12, Sazman Ab Ave., Jenah Blvd, Tehran, Iran; Additional Sanctions Information – Subject to Secondary Sanctions; National ID No. 1463468660 (Iran); Company Number 10980302323 (Iran) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY). 

 TAWU MECHANICAL ENGINEERING AND TRADING COMPANY (f.k.a. METAALKUNDE BV; a.k.a. TAWU BVBA; a.k.a. TAWU BVBA MECHANICAL ENGINEERING AND TRADING COMPANY; a.k.a. “TAWU”), Bleidenhoek 34, 2230 Herselt, Belgium; Additional Sanctions Information – Subject to Secondary Sanctions; V.A.T. Number BE0686.896.689 (Belgium); Business Registration Number 686896689 (Belgium); alt. Business Registration Number BE0686896689 (Belgium) [NPWMD] [IFSR] (Linked To: IRAN CENTRIFUGE TECHNOLOGY COMPANY).

to the Iran and non-proliferations sanctions program.

And the State Department issued the following press release:

Today, the United States designated 12 entities and individuals based in Iran, Belgium, and China that are linked to the nuclear proliferation-sensitive activities of the Iran Centrifuge Technology Company – known by its Persian acronym, TESA.

The designations announced today under Executive Order 13382 target proliferators of weapons of mass destruction (WMD) or WMD delivery systems and their associates.  In addition to a freeze on any of their assets within the United States, the sanctioned persons and entities will be denied access to the U.S. financial system and listed online as WMD proliferators.

The United States strongly condemns Iran’s recent expansion of sensitive nuclear activities, including increasing its stockpile of low enriched uranium and enriching uranium at levels above 3.67 percent.  There is no credible reason for Iran to expand its nuclear program at this time and in this way other than as a transparent attempt to extort the international community.

Link:

OFAC Notice

State Department Press Release