Aiotec GmbH OFAC Settlement: $14.6M (2024)

An Australia-incorporated company hired a U.S. company (the "U.S. Company") to broker the resale of a decommissioned polypropylene plant (the "Plant"). The U.S. Company identified Aiotec as a purchaser, and on November 27, 2015, the parties entered into a sale agreement for $9.7 million that explicitly prohibited resale to any sanctioned jurisdiction. Two days later, on November 29, 2015, Aiotec, its Iran-organized subsidiary Aiotec Middle East Co. ("Aiotec ME"), and Iranian petrochemical development company Petro-Iranian Downstream Industries Development Co. ("PIDID") entered into a separate agreement to resell the Plant to PIDID and transport it to Iran, unbeknownst to the U.S. Company.

Prior to signing the sale agreement, Aiotec's managing directors provided the U.S. Company with representations that the Plant would be operated in Türkiye by an Istanbul-headquartered Turkish company, including an end-user certificate representing that the Plant would be shipped to Van, Türkiye. Over the following years, Aiotec continued this deception: supplying additional false end-user certificates, instructing freight forwarders not to register Iran as the destination with Australian customs authorities (directing them instead to report the UAE or Türkiye), and providing follow-up assurances to the U.S. Company as late as October 2017 that the Plant was destined for Türkiye. Between 2017 and 2019, Aiotec exported the Plant in parts from the port of Newcastle, Australia to the port of Bandar Imam Khomeini (BIK), Iran.

When the U.S. Company received an anonymous copy of the Aiotec-PIDID Agreement in August 2018 and suspended Aiotec's site access, Aiotec produced a series of false documents in response: 26 fabricated bills of lading (B/Ls) showing UAE destinations, nine additional B/Ls falsely showing reexportation to Türkiye that omitted three direct shipments to BIK, a fraudulent cooperation agreement with the Turkish company backdated to November 29, 2015, and a letter from the Turkish company's managing director falsely confirming it was the purchaser. These misrepresentations restored Aiotec's site access, allowing it to complete the final shipment, which departed Newcastle for Iran on April 14, 2019.

Pursuant to the sale agreement, Aiotec remitted 11 payments totaling approximately $9,457,642, originating in euros, to the U.S. Company's accounts at a U.S. bank between December 4, 2015 and May 23, 2019. By conspiring with Aiotec ME, PIDID, and the Turkish Company to cause the U.S. Company to sell the Plant for supply, transshipment, or reexportation to PIDID in Iran, Aiotec appears to have violated § 560.203(b) of the ITSR.

OFAC determined that Aiotec did not voluntarily self-disclose the apparent violation and that the apparent violation constitutes an egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A, the base civil monetary penalty applicable in this matter equals the statutory maximum of $19,400,000.

The settlement amount of $14,550,000 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines, as well as Aiotec's financial circumstances and its agreement to implement enhanced compliance commitments. Of the settlement amount, $9,550,000 is suspended pending satisfactory completion of Aiotec's compliance commitments.

This case demonstrates the risks and potential costs when non-U.S. persons conduct transactions involving a sanctioned jurisdiction and U.S. persons, directly or indirectly. Even though Aiotec is a German company and the Plant and its original owner were located in Australia, the transactions at issue were subject to U.S. jurisdiction due to the involvement of the U.S. Company reseller. Furthermore, even though Aiotec initiated the financial transactions in euros, because Aiotec sent the funds to U.S. financial institutions, Aiotec exposed itself to further potential liability under the ITSR. Companies seeking to do business with Iran, or any U.S.-sanctioned jurisdiction or person, should carefully consider all potential U.S. touchpoints in their transactions.

On March 6, 2024, the U.S. Department of the Treasury, the U.S. Department of Commerce, and the U.S. Department of Justice issued a tri-seal compliance note to explain and highlight the various obligations of foreign-based persons to comply with U.S. sanctions and export control laws. This compliance note specifically discusses risks that non-U.S. persons face when they engage in conduct that causes or conspires to cause U.S. persons to violate sanctions, including obscuring or omitting references to the involvement of a sanctioned party or jurisdiction in transaction documentation.

This matter additionally highlights the particular damage apparent conspiracies can cause when multiple actors work in concert to undermine the sanctions controls of an unwitting third party. In this instance, the U.S. Company employed a sanctions compliance program and took multiple steps to confirm the true destination of the Plant, including clearly communicating sanctions requirements in the Sale Agreement and in additional communications with Aiotec; requesting documentation like end-user certificates, shipping documents, and further sales contracts from Aiotec; seeking to confirm the authenticity of the shipping documents with the shipping company directly; conducting a site visit to the alleged Plant site in Türkiye; and discussing the Plant with the managing director of the Türkiye Company directly. Despite these best efforts, Aiotec and its apparent co-conspirators were able to deceive the U.S. Company by falsifying documents and making repeated false statements.

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