Archive for the ‘Iran’ Category

Illegal Exporting of IED Components Lands Singapore Native in Prison

Thursday, June 8th, 2017 by Danielle McClellan

By: Ashleigh Foor

Illegal exporting of goods lands Singapore native, Lim Yong Nam (aka Steven Lim), 43, in a lot of trouble. Forty months in prison kind of trouble to be exact. On December 15, 2016 Lim plead guilty to charges of conspiracy to defraud the US.

The conspiracy involved Lim’s and others’ involvement in the shipment of thousands of radio frequency modules from a Minnesota-based company to Iran.  The frequency transmitting technology used in these modules is related to that which connects office computers and printers wirelessly. The same technology is also used for remote detonation systems. Connected with the right antenna, the wireless capabilities can stretch 40 miles. But this technology was not shipped with the intention of setting up networks in an office building. Of the 6,000 modules shipped from Minnesota to Iran, 14 were later found in Iraq in unexploded improvised explosive devices (IEDs). According to case files, IEDs were the main source of American casualties in Iraq from 2001-2007.

Charges were first filed against Lim in June 2010, when he plead guilty to falsifying documents and breaking US law in order for 6,000 modules to ship from Minnesota to Singapore and finally to Iran through 5 shipments.  Lim admitted that he and his co-conspirators were aware of US restrictions on shipments to Iran and made false statements to indicate Singapore as the final destination.

After reaching Singapore, these shipments were combined with other electronic devices and stored with a freight forwarding company before being re-exported to Iran. There is no evidence of Lim having any physical contact with the modules.

From 2008 to 2009 several of these modules originating from Minnesota were found in Iraq being used for the remote detonation system for IEDs. With US request for extradition, Indonesia detained Lim in 2014. After being extradited to the US in 2016, Lim plead guilty to charges of conspiracy against the US and will be deported after his sentence.

Interestingly, the Minnesota supplier has not been charged for any violations related to the exports in question.

Company Fined $500K for 56 ITSR Violations by OFAC

Thursday, March 30th, 2017 by Danielle McClellan

By: Danielle McClellan

United Medical Instruments, Inc. (UMI) agreed to a settlement of $515,400 with the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) based on 56 alleged violations of the Iranian Transactions and Sanctions Regulations (31 C.F.R. Part 560). Between 2007 and 2009 it was found that UMI sold medical imaging equipment with knowledge that the goods were going to be reexported from the United Arab Emirates to Iran. The total value of the goods associated with the transactions was approximately $2,493,597.

OFAC considered the following to be mitigating factors:

  1. The alleged violations occurred due to the actions of a single UMI employee rather than a systemic pattern of company-wide conduct;
  2. UMI took remedial action in response to the alleged violations, including by voluntarily ceasing transactions involving Iran and by implementing new procedures and updating its compliance program to prevent the recurrence of similar sanctions violations;
  3. UMI has not 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 alleged violations;
  4. UMI cooperated with OFAC’s investigation by providing timely responses to OFAC’s correspondence and by entering into multiple statute of limitations tolling agreements; (5) UMI is a small business, as determined by the size standards set forth by the Small Business Administration; and (6) based on the financial condition of UMI, including significant financial difficulties experienced by the company in recent years, additional mitigation is warranted.

Settlement: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170228.aspx

OFAC Radically Expands Its Extraterritorial Jurisdiction with B Whale Ruling

Thursday, March 2nd, 2017 by Danielle McClellan

By: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, Clif.Burns@bryancave.com, 202-508-6067

(Source: Export Law Blog. Reprinted by permission.)

The recent decision by the Office of Foreign Assets Control (“OFAC”) to issue a finding of violation, but no fine, against B Whale, a member of the Taiwanese TMT Shipping Group represents a new high (or low, depending on your point of view) for OFAC’s general belief that it has jurisdiction over anyone anywhere in the world.  At issue was the transfer of Iranian oil from an Iranian vessel in international waters to a Monrovian-registered Liberian-flag ship owned by a Taiwanese company without any branches or business operations in the United States.

OFAC claimed that this was an illegal importation of Iranian goods into the United States in violation of section 560.201 of the Iranian Transactions and Sanctions Regulations (“ITSR”).  Say what?  According to OFAC, the foreign flagged ship in international waters became a part of the United States once TMT filed a bankruptcy petition in the United States, thereby placing all its assets under the control of the bankruptcy court.  Because, you see, the ITSR defines the United States in section 560.307 of the ITSR as “the United States, its territories and possessions, and all areas under the jurisdiction or authority thereof.”  I imagine that TMT, and probably the government of Taiwan, will be somewhat surprised to learn that real property owned by TMT in Taipei is now a part of the United States.  By this logic, a bankrupt’s trucks in foreign countries would become “areas” under the jurisdiction of the United States.  Certainly these absurd results demonstrate that “area” in section 560.307 means geographic areas and not simply any physical space somewhere in the world.

I am unable to find any precedent from OFAC itself or any other court or agency for such an expansive definition of the United States   Interestingly, Congress, when defining the scope of federal criminal law, stops far short of OFAC’s definition.  The definition of “United States” in the federal criminal code is defined as “all places and waters, continental or insular, subject to the jurisdiction of the United States, except the Canal Zone.” See 18 U.S.C. § 5.  To cover ships, which are not “places and waters, continental and insular” the federal criminal codes defines the “special maritime and territorial jurisdiction” of the United States which covers ships on the high seas owned by at least one U.S. citizen or a foreign vessel with a scheduled departure or arrival in the United States “to the extent permitted by international law.”  See 18 U.S.C. § 7.  Ships owned by bankrupts aren’t either the United States or part of the special maritime jurisdiction as far as Congress was concerned.  It is hard to imagine that OFAC has the statutory authority to expand the scope of its jurisdiction in this fashion by calling every asset of a bankrupt anywhere on the face of the planet a part of “the United States.”

Not only does OFAC stretch the concept of “United States” beyond the breaking point, but also it does the same thing to the definition of “United States person.”  Whale B was found to have violated section 560.211 when it engaged in a transaction with a blocked Iranian vessel.  The violation occurred because OFAC decided that Whale B was a “United States person.” That term is defined in section 560.314 to cover a “person in the United States.”  And Whale B, a company organized under the laws of Taiwan and without any physical presence in the United States, was “in the United States” because it filed a bankruptcy case in the United States. It’s difficult to imagine where a principled limit could be drawn if filing a lawsuit in the United States means that a company is “in the United States.”  Is a company with a U.S copyright registration now “in the United States” and fully subject to U.S. sanctions? What if it has a dot com domain name issued by a U.S. registrar? Or it uses an email service that has servers in the United States?  Or it has a pending sales order it made with a U.S. company over the Internet?

And here’s one last comment on the B Whale shipwreck.  OFAC cites this as an aggravating factor: B Whale “took steps to conceal a ship-to-ship transfer of Iranian oil with an Iranian vessel on the SDN List … by … switching off the vessel’s automatic identification system during the time period corresponding with the ship-to-ship transfer.”  Apparently OFAC forgot that, because of the TMT bankruptcy, Whale B was subject to seizure and detention by foreign creditors in jurisdictions not interested in observing the automatic stay arising from the U.S. bankruptcy.  In such a situation, the more likely reason for turning off the AIS was the common practice of doing so to hide from foreign creditors, not from OFAC.

US Oil & Gas Company Fined $25 Million from BIS & OFAC

Tuesday, December 20th, 2016 by Danielle McClellan

National Oilwell Varco, Inc., a Delaware corporation, and its Canadian subsidiaries, Dreco Energy Services, Ltd (Dreco) and NOV Elmar (NOV) have agreed to pay a combined $25 Million for violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations.

The charges are as follows:

  • Between 2002 and 2005, National Oilwell Varco approved four Dreco commission payments to a UK based entity related to the sale and exportation of goods from Dreco to Iran. The four commission payments had a combined value of $2,630,091.
  • Between 2006 and 2008 National Oilwell Varco was involved in two transactions involving the sale and exportation of goods to Iran that totaled $13,596,980.
  • Between 2003 and 2007, Dreco knowingly exported (indirectly) goods from the US to fill seven orders from Iranian customers. The transactions totaled $526,480.
  • During 2007 and 2009, Dreco engaged in 45 transactions involving the sale of goods to Cuba totaling $1,707,964.
  • NOV engaged in two transactions between 2007 and 2008 involving the sale of goods or services to Cuba that totaled $103,119.
  • Finally, between 2005 and 2006 NOV engaged is a $20,928 transaction involving the exportation of goods from the US to Sudan.

OFAC considered the violations to be egregious since senior-level executives approved the commission payments and the NOV “willfully blinded” itself of the regulation violations by continuing to approve payments and communications. NOV will pay OFAC a settlement of $5,976,028, this will be deemed satisfied with its payment of $25,000,000 in relation to its settlement agreement between OFAC, BIS, and a Non-Prosecution Agreement (NPA).

OFAC considered the following to be aggravating factors:

  1. NOV’s conduct that gave rise to the Apparent Violations demonstrated at least reckless disregard for U.S. sanctions requirements;
  2. Senior managers at National Oilwell Varco, Inc. and Dreco knew or had reason to know that their respective business transactions giving rise to the ITSR-related apparent violations involved Iran;
  3. NOV’s conduct caused harm to sanctions program objectives by providing a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan;
  4. NOV is a large and sophisticated company that is engaged in the business of providing oilfield services around the world, including regions with high sanctions risk; and
  5. NOV’s compliance program at the time of the Apparent Violations was wholly inadequate.

OFAC considered the following to be mitigating factors:

  1. NOV had not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations;
  2. NOV cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and
  3. NOV has made efforts to remediate its compliance program and agreed to further compliance enhancements.

More Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20161114_varco.pdf

Company Fined $4 Million for Exporting Seeds to Iran

Wednesday, October 12th, 2016 by Danielle McClellan

By: Danielle McClellan

PanAmerican Seed Company (PanAm) of West Chicago, Illinois, a division of Ball Horticultural Company has agreed to pay $4,320,000 to settle potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations (31 C.F.R. part 560 ITSR). Its alleged that the company exported seeds, primarily of flowers, to two Iranian distributors on 48 different occasions between May 2009 and March 2012.

PanAm and Ball Horticultural employees (including several mid-level managers) were aware of the US economic sanctions involving Iran and the requirement to apply for licenses to export the seeds to Iran. PanAm concealed the shipments by shipping the seeds to consignees based in two third countries located in Europe or the Middle East, and then the Iranian customers arranged for the re-exportation of the seeds to Iran.

The maximum penalty for the violations would be $12 million, OFAC considered the following when applying the $4 million penalty:

OFAC considered the following to be aggravating factors:

  1. PanAm Seed willfully violated U.S. sanctions on Iran by engaging in, and systematically obfuscating, conduct it knew to be prohibited;
  2. PanAm Seed demonstrated recklessness with respect to U.S. sanctions requirements by ignoring its OFAC compliance responsibilities, despite substantial international sales and warnings that OFAC sanctions could be implicated;
  3. Multiple PanAm Seed and Ball Horticultural employees, including mid-level managers, had contemporaneous knowledge of the transactions giving rise to the Alleged Violations. They were aware that the seeds were intended for reexportation to Iran, and PanAm Seed continued sales to its Iranian distributors for nearly eight months after its Director of Finance learned of OFAC’s investigation;
  4. PanAm Seed engaged in this pattern of conduct over a period of years, providing over $770,000 in economic benefit to Iran;
  5. PanAm Seed did not initially cooperate with OFAC’s investigation, providing some information that was inaccurate, misleading, or incomplete; and
  6. PanAm Seed is a division of Ball Horticultural, a commercially sophisticated, international corporation.

OFAC considered the following to be mitigating factors:

  1. PanAm Seed has not 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 Alleged Violations, making it eligible for “first offense” mitigation of up to 25 percent;
  2. The exports at issue were likely eligible for an OFAC license under the Trade Sanctions Reform and Export Enhancement Act of 2000;
  3. PanAm Seed took remedial steps to ensure future compliance with OFAC sanctions, including stopping all exports to Iran, implementing a compliance program, and training gat least some of its employees on OFAC sanctions; and
  4. PanAm Seed cooperated with OFAC by agreeing to toll the statute of limitations for a total of 882 days.

OFAC Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160913_panam.pdf

It’s Not A Good Time for Iran Violations: Company Fined Over $16 Million for Medical Supplies Exported to Iran, Sudan and Syria

Tuesday, August 9th, 2016 by Danielle McClellan

By: Danielle McClellan

Alcon Laboratories, Inc., (Fort Worth), Alcon Pharmaceuticals Ltd. (Fribourg, Switzerland) and Alcon Management, SA (Geneve, Switerland) (collectively, “Alcon”) have agreed to settle a potential civil liability with the US Department of Treasury’s Office of Foreign Assets Controls (OFAC) and with the Department of Commerce’s Bureau of Industry and Security (BIS).

Between 2008 and 2011 Alcon exported end-use surgical and pharmaceutical products from their United States location to their sister companies in Switzerland and then along to distributors in Iran, Sudan and Syria. The charges are broken down as follows:

OFAC Charging Details

On 452 occasions Alcon violated the Sudanese Sanctions Regulations (SSR) when they sold and exported medical supplies to distributors in Sudan. On 61 occasions they violated the Iranian Transactions and Sanctions Regulations (ITSR) when they sold and exported their products to Iranian distributors. Alcon will pay $7,617,150 related to the OFAC violations. The statutory maximum monetary penalty amount was $138,982,584 and the base penalty amount for the Apparent Violations was $16,927,000.

OFAC considered the following to be aggravating factors in this case:

  1. Alcon demonstrated reckless disregard for U.S. sanctions requirements by having virtually no compliance program, despite significant business involving the exportation of goods from the United States to Iran and Sudan, and by failing to take adequate steps to investigate a third-party freight forwarder’s cessation of shipments to Iran on behalf of Alcon;
  2. Alcon and its then-senior management knew of the conduct giving rise to the Apparent Violations; and
  3. Alcon is a sophisticated multinational corporation with extensive experience in international trade.

OFAC considered the following to be mitigating factors in this case:

  1. The harm to U.S. sanctions program objectives was limited because the exports involved medical end-use products that were licensable under the Trade Sanctions Reform and Export Enhancement Act of 2000, and in fact had been previously and subsequently licensed by OFAC for Alcon;
  2. Alcon has no prior OFAC sanctions history, including receipt of a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations, making it eligible for “first violation” mitigation of up to 25 percent;
  3. Alcon took remedial action by ceasing the unlicensed exports to sanctioned countries, initiating an internal investigation of the Apparent Violations, and instituting a robust compliance program that now includes:
    1. Updated or newly-created corporate export and trade sanctions compliance documents,
    2. Enhanced trade compliance training, and (c) enhanced compliance procedures for requesting OFAC licenses; and (4) Alcon substantially cooperated with OFAC’s investigation, including by providing detailed and well-organized information and entering into several statute of limitations tolling agreements with OFAC.

BIS Charging Details

Alcon has received 100 charges of Acting with Knowledge of a Violation, 45 charges of Unlicensed Reexports to Syria, and 43 Charges of Unlicensed Exports to Iran. In the cases of unlicensed exports, Alcon Pharmaceuticals (Switzerland) sent orders and invoices to Alcon labs (United States) with instructions to ship the orders to warehouses and distribution centers that it used in various countries, most specifically Switzerland. The facilities would receive the products and then Alcon Pharmaceuticals transferred and/or forwarded the items to Iran and Syria without required government licenses.

Alcon collectively has been accessed a civil penalty from BIS in the amount of $8,100,000, all of which is due, and will accrue interest if not paid on time. Alcon must also pay the penalty amount due to OFAC in a timely manner and comply with all of the terms related to the OFAC Settlement Agreement.

OFAC Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160705_alcon.pdf

BIS Information: https://efoia.bis.doc.gov/index.php/component/docman/doc_download/1068-e2466?Itemid=

Export Business Manager Pleads Guilty to Attempted Illegal Exports to Iran

Friday, May 27th, 2016 by Danielle McClellan

By: Danielle McClellan

Asim Fareed (age 51) of North Brunswick, NJ operated an export business in Somerset, NJ that agreed to ship items purchased by customers in Iran. Fareed provided false documentation to the US Department of Commerce for export purposes between 2013 and 2015. He created invoices that contained false information related to the identity and geographic location of the purchasers of the goods. The items were supposed to be shipped from the US to the UAE and then onto Iran. The items never were actually shipped.

Asim Fareed agreed to enter a plea to conspiracy to provide false statements in connection to the illegal export of goods to Iran. “The Office of Export Enforcement vigorously pursues violators of our nation’s export control laws, which are in place to further and protect our national security and foreign policy.  As in this instance, we work closely with our colleagues at HSI and other law enforcement agencies in prosecuting this case,” said Jonathan Carson, Special Agent in Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office.
“This case demonstrates how far individuals will go to circumvent U.S. export laws to export goods to countries like the Islamic Republic of Iran,” said Angel M. Melendez, special agent in charge of HSI in New York. “The Iran Trade Embargo prohibits Americans from supplying goods, technology and services to Iran directly or indirectly. HSI is committed to aggressively pursuing those who conduct illegal business with Iran.”
The case was investigated by the Department of Commerce, Office of Export Enforcement and U.S. Immigration and Custom Enforcement’s (ICE), Homeland Security Investigations (HSI).  Assistant U.S. Attorney Todd K. Hinkley is prosecuting the case.
More information: https://www.justice.gov/usao-mdpa/pr/new-jersey-man-charged-conspiracy-provide-false-statements-related-export-prohibited

Singaporean Extradited for Illegal Exports Later Found in IEDs

Thursday, May 5th, 2016 by Danielle McClellan

By: Danielle McClellan

Lim Yong Nam (known as Steven Lim), a citizen of Singapore, has been extradited from Indonesia to stand trial in Washington, DC on charges of conspiracy.  He allegedly caused 6,000 radio frequency modules to be illegally exported from the US to Iran. Over the course of May 2008 and July 2010, sixteen of the modules were found in unexploded IEDs recovered in Iraq by coalition forces.

Between 2007 and February 2008 Lim and others in Singapore purchased 5 shipments of radio frequency modules from a Minnesota-based company by falsifying documents that stated the modules would stay in Singapore. When the modules were purchased they were always destined for Iran, however, Lim and his Singapore counterparts knew this would not be approved by the US government so they concealed the ultimate origin from the US manufacturer.

In 2009, when Lim was questioned by US authorities he was adamant that he never participated in any illicit exports to Iran. Communications were later found between Lim and several others regarding the US export rules and the issues with sending the modules to Iran.

Lim is currently facing the following charges:

  • One count of conspiracy to defraud the US
  • One count of smuggling
  • One count of Illegal export of goods from the US to Iran
  • One count of making false statements to the US Government
  • One count of making false statements to law enforcement

More details: https://www.justice.gov/opa/pr/singapore-man-extradited-united-states-connection-plot-involving-exports-iran-us-components

Belgium Company Pays $350,000 after Exporting Coatings, Pigments and Paints to Iran

Wednesday, April 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Chemical Partners Europe (CPE) S.A. of Brussels, Belgium has been charged with 6 counts of Evasion after exporting coatings, pigments and paints from the US to their facility in Brussels  and then to Iran. The exported items were suitable for use in nuclear facilities and had marine applications, making them subject to the Export Administration Regulations (EAR) as well as the Iranian Transactions Regulations (Governed by the Department of Treasury’s Office of Foreign Assets Control (OFAC)).

Between January 2010 and March 2011, the company purchased the coatings, pigments and paints, valued at $244,358, from a US company and concealed the fact that the ultimate destination was actually Iran. The shipper’s export declarations filed listed CPE as the ultimate consignee and Belgium as the country of ultimate destination. Once CPE received the items they transferred them directly to Iran without proper authorization.

CPE has agreed to pay $350,000 to settle the charges; they will not be debarred. Charging Letter

Executive Order Revokes Iran Sanctions…but Iran Isn’t out of The Woods Yet

Wednesday, February 3rd, 2016 by Danielle McClellan

By: Danielle McClellan

On January 16, 2016, President Obama signed an executive order revoking the 20-year system of sanctions against Iran for pursing a nuclear weapons program in the past. The new Executive Order revokes the following Executive Orders: 13574, 13590, 13622, and 13645 with regards to Iran. An amendment to Executive Order 13628 was also made.

These changes come about after it was found that Iran has continued to comply with an international nuclear agreement that required them to abstain from obtaining nuclear weapons. Part of this agreement included that the US would lift sections on Iran as long as it refrained from building a nuclear program for a decade or more.

Most of the sanctions relief will apply to non-US citizens doing business with Iran; US citizens will still be unable to do business with Iran (this has not changed). The following has occurred due to the executive order:

  • Iranian assets will also be freed up and no longer held in the internarial financial system.
  • OFAC has also removed nearly 400 Iranians from its blocked persons list
  • OFAC will grant waivers for Americans to import food, carpets and other floor coverings from Iran.
  • A presidential memorandum was signed that will allow the export of a commercial passenger aircraft to Iran on a case by case basis.

Although these changes sound nice, it’s important to remember that all other US sanctions against Iran are still in place and will continue to be in place as long as Iran’s support for terrorism, regional destabilization, human rights abuses, and ballistic missile development occur.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-01-21/pdf/2016-01325.pdf