A U.S. shipping company agreed to pay a $518,063 penalty to settle potential liability concerning alleged violations of the Iranian Transactions and Sanctions Regulations.
The U.S. Treasury Department Office of Foreign Assets Control ("OFAC") determined that the California-based American Export Lines and International Shipping Company ("AEL") had violated OFAC regulations by "transshipping used and junked cars and parts from the United States via Iran to Afghanistan on 140 occasions." In addition, OFAC said, AEL failed to self-disclose the alleged violations. OFAC concluded that in connection with the apparent violations, (i) AEL did not exercise requisite caution in transshipping goods through Iran, (ii) the AEL president and co-owner approved the shipments through Iran, and (iii) AEL provided "economic benefit" to Iran through its transshipping activities.
Notwithstanding AEL's failure to self-disclose, OFAC characterized the misconduct as "non-egregious," and noted that the firm's compliance program, remedial actions, full cooperation and lack of prior sanctions, among other factors, were mitigating elements that contributed to the determination of the settlement amount.
Commentary / Jodi Avergun
Although the commodity being shipped certainly was not valuable or important, OFAC still chose to impose a fine on a shipping company that allowed its shipments of used and junk cars to Afghanistan to transit through Iran. The fine was a small percentage of the potential total available fines that OFAC could have imposed. OFAC credited the company for cooperation with OFAC during the course of the investigation and its imposition of remedial measures, including the cessation of shipments through Iran. OFAC was pragmatic in considering the effect that a large fine could have on the overall business of the settling company – perhaps a harbinger of a more business-friendly enforcement environment. Nevertheless, this settlement serves as a good reminder that OFAC treats all sanctions violations seriously, regardless of the commodity or the impact of the transactions.
Shipping companies in particular should take care to understand the routes their vessels take, and to understand that transshipment through a blocked country such as Iran, in light of the Iranian Transaction and Sanctions Regulations, is just as bad as if the goods being shipped were being sold and delivered to Iran.
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