ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd), a Chinese telecoms company, has agreed with OFAC, BIS and the DOJ in the USA to plead guilty to civil and criminal charges of violating US sanctions on Iran and North Korea, and pay a combined $1.2bn in fines ($300m of which is suspended). It also agreed to a 7-year suspended denial of export privileges, and to dismiss 4 senior officials who were involved in the violations.
A 5-year-long investigation found that ZTE had conspired to evade US sanctions by incorporating US components into its equipment and illegally shipping it to Iran, and by making 283 shipments of telecoms equipment to North Korea. ZTE is also said to have used “isolation companies” to conceal the use of controlled US-components, intentionally failed to mention them on customs declarations, employed people to specifically remove incriminating evidence from internal communications, and caused its lawyers to unintentionally lie to US officials.
ZTE was first penalised by US authorities in March 2016, when US companies were prohibited from selling to it without a specific licence, and non-US companies were prohibited from selling products to it which contained a significant percentage of US-made components (see previous blog). The US Department of Commerce will recommend that the requirement for a licence to do business with ZTE be lifted if ZTE complies with the terms of its settlement agreement.
Prosecutors in the US are reported to be moving forwards with their investigation into alleged sanctions violations committed by Deutsche Boerse AG and its Luxembourg-based subsidiary Clearstream Banking SA. Clearstream is alleged to have acted as an intermediary between Iran’s Central Bank and JPMorgan by receiving interest payments and redemptions into its JPMorgan account on $1.67bn of bonds held on behalf of an Italian bank that was acting as a front for Iran’s Central Bank. There is no indication that JPMorgan knew the accounts were linked to Iran.
The prosecutors are said to be considering whether to charge Clearstream with violating US sanctions and making false statements to US regulators. If they find that Clearstream’s management knowingly withheld information, they may bring charges against individuals.
Amazon has announced that it may have violated US sanctions on Iran by processing and delivering orders of consumer products to sanctioned people and entities located outside Iran. Amazon voluntarily reported the possible violations, and has said that it will cooperate with an investigation by US regulators. It has also said it will enhance its processes designated to identify transactions associated with people designated under the Iran Threat Reduction and Syria Human Rights Act 2012.
OFAC has designated Venezuela’s Executive Vice President, Tareck El Aissami, as a Specially Designated Narcotics Trafficker. He is said to have facilitated shipments of narcotics from Venezuela, and in previous positions to have overseen narcotics shipments from Venezuela of over 1000kg on multiple occasions. His primary frontman Samark Lopez Bello has also been designated as an SDNT, along with his international network of companies, for his role in laundering drug proceeds and generating significant illicit profits on behalf of El Aissami. The details are here, and OFAC’s press release is here.
The US Treasury has increased the maximum civil penalties that may be imposed under relevant OFAC sanctions regimes to account for inflation. The increases are effective from today, and are set out in full here.
OFAC has issued a Finding of Violation to B Whale Corporation (BWC), a shipping company based in Taiwan and member of the TMT Group of Shipping Companies, for violating US sanctions on Iran. The violation occurred when BWC’s vessel, the M/V B Whale, transferred 2,086,486 barrels of crude oil from a vessel owned by the National Iranian Tanker Company, which is identified on OFAC’s SDN List. OFAC’s enforcement notice is here.
The transaction took place while BWC was involved in bankruptcy proceedings in the US. OFAC determined that BWC was a US person within the scope of its sanctions on Iran because it was present in the US for those proceedings when the transaction occurred. In addition, the vessel B Whale was subject to US sanctions because it was property under the jurisdiction of a US court, and therefore the transfer of oil constituted an import from Iran to the US.
OFAC’s found BWC’s conduct to have been aggravated by its reckless disregard for US sanctions, attempts to conceal the transfer, and the significant benefit provided by the transaction to Iran, but mitigated by its clean sanctions record and the fact that all of its assets had been liquidated in bankruptcy.
The US Treasury department today added 13 people and 12 companies to its sanctions list, freezing their assets under US control. The White House spokesman, said the sanctions were a “very, very strong stand against the actions Iran has taken”; Iran tested a ballistic missile a few days ago. The new listings are here. Among those sanctioned are those the US Treasury says support a trade network run by Iranian businessman Abdollah Asgharzadeh who is said to support Shahid Hemmat Industrial Group, a subsidiary of an Iranian entity said to run Iran’s ballistic missile programme, and a Lebanon-based network run by the Islamic Revolutionary Guard.
A few hours before they were announced, President Trump tweeted: “Iran is playing with fire. They don’t appreciate how ‘kind’ President Obama was to them. Not me!” Iran’s foreign ministry, in a statement on Friday, said the US sanctions were “illegal” and “illegitimate” and said Iran would consider imposing restrictions on American entities and individuals who “have created and helped terrorist groups . . . and killings and suppression of defenseless civilians” in the Middle East.
OFAC has issued a general licence authorising US companies to request and pay for licences from Russia’s Federal Security Service (FSB) for the export of certain IT products to Russia. A link to the new licence is here.
The FSB is responsible for authorising the import of electronic goods with encryption functions into Russia. A prohibition on transacting with the FSB, imposed in response to Russia’s alleged involvement in hacking related to the US election, was therefore having the unintended consequence of preventing US companies from exporting certain IT products to Russia. The exports themselves must still be licenced by the Bureau of Industry and Security, and payments to the FSB for licences must not exceed $5,000 per annum.