Ignoring Red Flags Results In $275M Penalty

On May 14, 2026, the Office of Foreign Assets Control (OFAC) entered into an Agreement with Adani Enterprises Limited (AEL), an India-headquartered multinational company, to pay $275 million to settle its potential civil liability for apparent violations of OFAC sanctions on Iran. OFAC determined that red flags should have put AEL on notice that the liquified petroleum gas (LPG) it purchased actually was from Iran and that it used U.S. banks to pay over $192 million in 32 transactions for the shipments. In calculating the penalty, OFAC found that the violations were egregious and not voluntarily self-disclosed, even though AEL took remedial actions after discovering the violations.

WHAT HAPPENED

In June 2023, AEL entered into the LPG market to provide energy to its customers in India. It used its sister company, Adani Ports and Special Economic Zone Ltd. (APSEZ), to help in the transactions. APSEZ operated a port on India’s western coast and also was new to the LPG market. To compete, it needed a discounted source to supply the LPG and through a source, contracted with a Dubai-based trading company (Dubai Supplier) to provide purportedly Omani-origin LPG.

At the time, AEL relied on APSEZ’s 2020 OFAC sanctions compliance program, which prohibited Iranian and/or sanctioned vessels and Iranian-origin cargo from entering APSEZ-controlled ports. AEL conducted its standard Know Your Customer (KYC) verification process on the Dubai Supplier and its affiliates involved in LPG sales to AEL, which identified no hits against OFAC’s List of Specially Designated Nationals (SDN) and Blocked Persons (the SDN List).

The KYC review included shipping documentation and vessel port of calls lists, and checked vessels, vessel operators, and LPG sellers against the SDN List. None of the parties involved in AEL’s LPG imports were sanctioned at the time of the LPG shipments, and none of the documentation provided to AEL contained any information explicitly pointing to Iranian origin of the LPG. However, AEL and APSEZ’s sanctions compliance program did not include other measures to account for risks arising from its dealings.

RED FLAGS SHOULD HAVE GENERATED GREATER INVESTIGATION

The agreed upon penalty of $275 million was more than 70% of the maximum statutory penalty of over $384 million. The higher penalty reflected OFAC’s determination that AEL acted recklessly because it ignored red flags about the potential risks that the transactions pointed to Iran as being the source of the LPG.

What were the ignored red flags? OFAC found that AEL “received [indications] from third parties that LPG cargos being imported by AEL may have been of Iranian-origin, and the economic, commercial, and logistical implausibility of the cargos’ origin and pricing.” It further determined that “AEL also did not conduct additional due diligence that may have revealed that the vessels carrying its LPG cargos routinely engaged in suspicious behavior such as Automatic Identification System manipulation, uneconomic or illogical vessel movements or port calls, and frequent name, ownership, and flag state changes.” It found, in addition, that AEL “knew that actions which cause a U.S. person to violate Iran sanctions, such as initiating payments processed by U.S. financial institutions, could expose the company to civil or criminal penalties under U.S. law.”

Ignoring these red flags caused substantial harm to the Iran sanctions program’s objectives by enabling Iran to derive revenue from its energy sector. The maxim - if a deal seems too good to be true, it probably is - should have been apparent in this case. Additional guidance on red flag evasion of export controls can be found in a joint alert issued by the Financial Crimes Enforcement network and the U.S. Department of Commerce’s Bureau of Industry and Security; that alert identifies certain industries as of particular concern: aircraft parts/equipment; antennas; breathing systems; cameras; GPS systems; inertial measurement; units; integrated circuits; and oil field equipment.

There were mitigating factors that reduced the penalty from the maximum statutory amount that included:

• AEL had not been penalized for sanctions violations in the previous five years;
   
• The revenue from the LPG purchases was a small amount of AEL’s total revenues;
   
• After discovery AEL provided substantial cooperation with OFAC; and,
   
• AEL implemented significant remedial measures by adopting new KYC and due diligence processes and incorporating specific risk assessments relating to the petroleum industry.

KEY TAKEAWAYS

It is clear that any person, company or financial institution that engages in international trade must have a robust sanctions compliance program. In addition to applying traditional due diligence investigations and KYC analyses to any transaction, awareness of any red flags would require a deeper investigation into the elements of the deal as well as the parties involved in the transaction; a “head in the sand” approach will not work when it comes to sanctions compliance. Even though addressing sanctions violations after the fact can reduce assessed penalties, a deeper dive into known red flags can avoid penalties altogether. And clearly, OFAC enforcement is targeting this type of conduct.

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