On June 15, 2022, the United Kingdom will introduce a strict civil liability standard for violations of UK financial sanctions committed after that date.  In anticipation of this important change to the enforcement powers of HM Treasury’s Office of Financial Sanctions Implementation (OFSI), the OFSI enforcement and monetary penalties for breaches of financial sanctions guidance (Monetary Penalties Guidance) has been updated and will take effect from June 15.  OFSI Director, Giles Thomson, also has outlined OFSI’s enforcement approach in light of these imminent changes in a blog post.

For more information on how these developments could impact your organization, contact the author of this post, Alexandra Melia, in Steptoe’s Economic Sanctions team in London.

Continue Reading UK Updates Sanctions Enforcement Guidance in Readiness for Imminent Introduction of Strict Civil Liability for Financial Sanctions Breaches

On December 8, 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $133,860 settlement with an unnamed individual for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s settlement notice, the individual, who was located in the United States, received four payments in his personal bank account on behalf of an Iranian company for the sale of Iranian-origin cement clinker to a company in a third country.

OFAC also found that the individual coordinated the payment and the shipment of goods with a family member at the Iranian company. The settlement notice remarks that, although the payments involved a family member, they fell outside of the general license for personal remittances, at 31 CFR § 560.550, which only applies to “noncommercial” activity.

Continue Reading OFAC Enters into Rare Settlement with Individual over Iranian Payments and Facilitation

On August 25, 2020, the US Department of Commerce’s Bureau of Industry and Security (BIS) published a final decision by the Undersecretary, affirming an Administrative Law Judge’s (ALJ) imposition of a US $ 31.4 million civil monetary penalty on Nordic Maritime Pte. Ltd., a Singapore-based marine seismic company, and its chairman (together, the “Respondents”), for knowingly exporting highly controlled equipment to Iran. This final decision follows the Undersecretary’s previous decision vacating and remanding the initial penalty as disproportionate to that imposed in similar cases (Remand Order). Our previous blog post discussing this unusual action is available here.

By way of background, the ALJ, in his initial recommended decision and order (RDO) dated February 7, 2020, found the Respondents liable for violating the Export Administration Regulations (EAR), and recommended a civil monetary penalty of US $ 31.4 million. The Respondents then appealed the ALJ’s decision to the Undersecretary, whose first decision, including the Remand Order, was published in March 2020. In that decision, the Undersecretary affirmed the ALJ’s findings on liability, but vacated the penalty and remanded it back to the ALJ for reexamination because the “analysis of damages in the RDO [was] incomplete.” The Undersecretary also listed a number of cases settled with proportionally lower penalties to guide the ALJ on remand. The ALJ then ordered additional briefing focused on the penalty amount, and reinstated the original penalty with a fuller justification in a subsequent RDO dated July 15, 2020. The Undersecretary affirmed the US $ 31.4 million civil monetary penalty in its entirety.

Continue Reading BIS Undersecretary Affirms USD 31.4 Million Penalty on Singaporean Company for Iran Sanctions Violations

On June 5, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published four new Iran-related frequently asked questions (FAQs) regarding Executive Order (EO) 13902 of January 14, 2020, “Imposing Sanctions with Respect to Additional Sectors of Iran.”

In relevant part, EO 13902 authorizes sanctions against any person the Secretary of the Treasury, in consultation with the Secretary of State, determines to operate in the construction, mining, manufacturing, or textiles sectors in Iran (and any additional sectors that may in the future be designated by the US government). In addition, EO 13902 authorizes sanctions against any persons or foreign financial institutions engaged in sanctionable activity related to the targeted sectors such as providing material assistance to a blocked person or knowingly engaging in a significant transaction in connection with a targeted sector.

Continue Reading OFAC Clarifies Sanctions on Iranian Domestic Humanitarian / Safety Activity

On January 31, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) lifted sanctions on China-based COSCO Shipping Tanker (Dalian) Co., Ltd. (COSCO Dalian), five affiliates, and one individual who were named as Specially Designated Nationals (SDNs) in September 2019 for knowingly engaging in a significant transaction for the transport of oil from Iran. Despite last week’s reprieve, another COSCO subsidiary, COSCO Shipping Tanker (Dalian) Seaman and Ship Management Co., Ltd., as well as several affiliates and their executives, remain on the SDN List.

The September 2019 designations disrupted parts of the global shipping market, leading to a significant increase in some rates. OFAC’s announcement came several days before the scheduled expiration on February 4, 2020 of a general license authorizing US persons to engage in transactions for the maintenance or winding down of certain transactions with COSCO Dalian.

Continue Reading OFAC Removes Secondary Sanctions on COSCO Division Targeted for Iran Oil Imports

On January 23, 2020, the US State Department and the Office of Foreign Assets Control (OFAC) named six companies based in Hong Kong, China, and Dubai as Specially Designated Nationals (SDNs) under Executive Order (EO) 13846 for engaging in transactions involving Iran’s petroleum sector and the National Iranian Oil Company (NIOC).

OFAC’s designations target two Hong Kong-based trading companies, Triliance Petrochemical Co. Ltd. (Triliance) and Sage Energy HK Limited; Shanghai-based Peakview Industry Co. Limited; and Dubai-based Beneathco DMCC. The four companies are accused of transferring millions of dollars to NIOC, which was previously designated as an SDN, for Iranian petroleum purchases.

Concurrently, the State Department announced the designation of Triliance and another Hong Kong company, Jiaxiang Industry Hong Kong Limited, and China-based Shandong Qiwangda Petrochemical Co. Ltd. (Shandong Qiwangda). for knowingly engaging in a significant transaction for the purchase, acquisition, sale, or transport of petrochemical products from Iran, following the expiration of China’s Significant Reduction Exception in May 2019. The designations also included two executive officers of Triliance and Shandong Qiwangda.

Continue Reading OFAC Hits Companies in Hong Kong, China, and Dubai with Secondary Sanctions for Iran Oil Trading

On January 14, Germany, France and the UK initiated the dispute resolution mechanism in the Joint Comprehensive Plan of Action (JCPOA) based on Iran’s decision to pull away from its obligations under the agreement. While the European participants see the dispute resolution mechanism as a way to keep the JCPOA alive, triggering the mechanism also serves as the first of several steps that must be taken before UN and EU sanctions could potentially be reimposed. Though the reimposition of sanctions is far from inevitable, it is important to understand the functioning of the dispute resolution mechanism in order to anticipate the timeline of any possible future developments.
Continue Reading Germany, France and the UK begin the JCPOA’s Dispute Resolution Mechanism Process – A Gateway for the Reimposition of UN and EU sanctions?

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On January 10, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) named Beijing-based Pamchel Trading Beijing Co. Ltd., its Seychelles-based affiliate, and a Chinese vessel and vessel operator as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13871 of May 8, 2019, for engaging in significant transactions involving Iran’s metals sectors. OFAC also designated 13 Iranian steel and iron manufacturers, an Oman-based supplier, and three Iranian aluminum and copper companies under EO 13871. The announcement signaled an increasingly aggressive posture toward Iran’s metals industry and the foreign firms who engage with it.

Concurrently, the US President issued a new EO (EO 13902) authorizing sanctions on, among others, persons operating in the construction, mining, manufacturing, or textiles sectors of the Iranian economy; persons who knowingly engage “in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with” those sectors; and persons who have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” any person designated as an SDN under the EO or entities owned 50% or more by them. Notably, the EO also authorizes sanctions on correspondent and payable-through-accounts of foreign financial institutions that have “knowingly conducted or facilitated any significant financial transaction” involving activities targeted by the EO.

Continue Reading UPDATED: OFAC Targets Chinese Firms for Iranian Metals Trade, Designates Iranian Officials, as White House Expands Secondary Sanctions with New Executive Order

On September 20, 2019, OFAC announced the designation of the Central Bank of Iran (“CBI”), the National Development Fund of Iran (Iran’s sovereign wealth fund), and an Iran-based company allegedly involved in concealing financial transactions on behalf of Iran’s military.  These designations were made under Executive Order 13224, as recently amended, which is OFAC’s main counterterrorism sanctions authority.  OFAC said in its press release that “Iran’s Central Bank has provided billions of dollars to the Islamic Revolutionary Guards Corps (IRGC), its Qods Force (IRGC-QF) and its terrorist proxy, Hizballah.”  These designations were announced in response to aerial strikes against oil facilities in Saudi Arabia, although a designation of the CBI may not come as a complete surprise given the multiple U.S. sanctions designations in the past several months of senior CBI officials including the CBI Governor for alleged involvement in financial support to the IRGC-QF and Hizballah.  President Trump tweeted that, in response to the strikes in Saudi Arabia, he had directed Secretary of the Treasury Steven Mnuchin “to substantially increase Sanctions on the country of Iran.”  Secretary of State Mike Pompeo called the attacks an “act of war.”   At a press event President Trump characterized these sanctions as “[t]he highest sanctions ever imposed on a country. We’ve never done it to this level.”  Secretary of the Treasury Steven Mnuchin specified that “this is very big — we’ve now cut off all source of funds to Iran.”

So what do these new sanctions against the CBI actually do?  To be clear, the CBI was previously subject to U.S. sanctions, including secondary sanctions that apply to non-U.S. persons.  However, these previous sanctions against the CBI were imposed only under OFAC’s authority targeting parties associated with the Government of Iran.  Now an additional layer of sanctions have been imposed on the CBI – this time under OFAC’s counterterrorism authority in EO 13224.  The conventional wisdom seems to be that this added layer of counterterrorism sanctions against the CBI will now make it unlawful or sanctionable to deliver humanitarian goods to Iran.  In practice, that could be the way things develop, as this additional sanctions designation against the CBI could heighten the already considerable level of anxiety many international banks face in considering whether to engage with Iran, by creating yet more complexity and uncertainty.  However, it is worth examining more closely the extent to which U.S. law still contemplates lawful humanitarian trade with Iran in agricultural commodities, medicine and medical devices.

Continue Reading More Sanctions on Iran’s Central Bank – What’s New This Time?

On July 22, 2019, Secretary of State Mike Pompeo announced that the US Government would impose sanctions on Chinese state-owned oil trading company Zhuhai Zhenrong Company Limited and its chief executive Youmin Li for knowingly purchasing or acquiring oil from Iran.  Zhuhai Zhenrong was previously sanctioned in 2012 due to alleged dealings with Iran, but those sanctions were far less extensive, and were removed in 2016 pursuant to the Iran nuclear deal. This action announced by Secretary Pompeo involves the addition of these parties to the Specially Designated Nationals (SDN) list, as a result of which any transactions or dealings involving US persons with these parties or their “interests in property” are prohibited, and US persons are required to freeze any such property pursuant to specific rules promulgated by the US Treasury Department’s Office of Foreign Assets Control (OFAC). In addition, Youmin Li is subject to a US visa ban.

According to the Department of State, these sanctions resulted from Zhuhai Zhenrong’s purchase or acquisition of crude oil from Iran after the expiration of China’s Significant Reduction Exception (SRE), which we have previously discussed and which allowed China to continue buying oil from Iran until May 2, 2019 without the risk of sanctions for companies and financial institutions involved in that trade. These sanctions were imposed under Executive Order (EO) 13846. Section 3(a)(ii) of EO 13846 authorizes the imposition of different types of sanctions, ranging from less severe measures to the most severe measure of designation on the SDN list, for persons determined to have, “on or after November 5, 2018, knowingly engaged in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran.” Section 3 also authorizes sanctions on a person determined to be a “successor entity to,” or, if there is some knowledge or participation in the relevant activity, a person that “owns or controls” or “is owned or controlled by or under common ownership or control with,” a person designated under Section 3 of EO 13846. 
Continue Reading US Sanctions Chinese Company for Buying Oil from Iran