Alfa Laval Middle East Ltd. OFAC Settlement: $415.7K

The conspiracy originated with a referral of a business opportunity in Iran by AL Tank Equipment, Inc. ("AL Tank"), a U.S. company with operations in Exton, Pennsylvania and a subsidiary of Alfa Laval Inc. ("AL U.S."), to AL Middle East. On May 27, 2015, Alborz Pakhsh Parnia Company ("Alborz"), an Iranian distributor of oil products, emailed AL Tank to inquire about purchasing Gamajet cleaning units, which are automated machines used to remove residual fuel, dirt, and sludge from storage tanks. After providing product and pricing information, AL Tank's portfolio manager referred the inquiry to AL Middle East in August 2015, stating: "We can not sell US made equipment into your country at this time."

Following the referral, an AL Middle East sales manager and the general manager of Iran-based Alfa Laval Iran Co. Ltd. ("AL Iran"), another Alfa Laval AB subsidiary, communicated with Alborz about routing sales through a Dubai company with which AL Middle East had an existing distributor relationship. Under the plan, the Dubai company would be falsely named as the end-user on export documents. In late January 2016, the AL Middle East sales manager traveled to Iran to meet with Alborz to further discuss procurement of the Gamajet units.

On February 23, 2016, the Dubai company's owner forwarded a memo from Alborz to AL Middle East sales personnel outlining a strategy for procuring U.S.-origin goods from AL Tank and reexporting them into Iran, while keeping AL Tank in the dark regarding the ultimate destination. This occurred even though Alfa Laval Group's General Counsel had sent a memo to AL Middle East and AL Iran employees on January 31, 2016, noting that "any transactions involving U.S. persons, USD, or U.S. origin/content products are still prohibited under the remaining U.S. sanctions on Iran."

Following the plan, on March 5, 2016, a senior AL Middle East sales engineer sent the Dubai company a pro forma invoice for Gamajet products worth $18,585.36. On March 26, 2016, AL Tank exported two Gamajet cleaning machines and accessories to the UAE, which the Dubai company then supplied to Alborz in Iran. After the completed export, AL Middle East began organizing additional Gamajet sales on behalf of Alborz using the same scheme: an incomplete second transaction worth $5,170 and contemplated additional purchases of approximately $181,453 were underway when the Bureau of Industry and Security (BIS) requested post-shipment verification from AL Tank on April 12, 2016, ending the conspiracy.

Based on OFAC's investigation, from on or about August 8, 2015 to on or about May 5, 2016, AL Middle East appears to have conspired with Alborz and AL Iran to export goods from the United States to Iran in apparent violation of § 560.203(b) of the ITSR, and appears to have caused AL Tank to indirectly export $18,585 worth of goods from the United States to Iran in apparent violation of § 560.203(a).

OFAC determined that AL Middle East did not voluntarily self-disclose the Apparent Violations and that the Apparent Violations constitute an egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, the base penalty applicable was $615,844, which was also the applicable statutory maximum civil penalty amount. The settlement amount of $415,695 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines. AL Middle East was jointly investigated by BIS, and AL Middle East's obligation to pay the settlement amount will be credited by the amount ultimately paid to BIS pursuant to its settlement with AL Middle East arising out of the same violative conduct.

BIS jointly investigated AL Middle East alongside OFAC. AL Middle East separately settled with BIS for conduct arising from the same violative export transactions. AL Middle East's obligation to pay the $415,695 OFAC settlement amount will be credited by the amount ultimately paid to BIS pursuant to that settlement.

Non-U.S. companies should be aware of how their activities might trigger compliance issues with U.S. sanctions, including when they place orders with U.S. affiliates or subsidiaries. This is especially true for companies operating in multiple countries as part of a larger global business organization, and particularly those with connections to both the United States and sanctioned jurisdictions. Because maintaining such links can give rise to an increased risk of violating U.S. sanctions, foreign companies should also implement appropriate measures to mitigate their risks.

Global business organizations should ensure that subsidiaries and affiliates are trained on U.S. sanctions requirements, can effectively identify red flags, and are empowered to report prohibited conduct to management. By empowering employees to identify and report prohibited conduct, global business organizations may be able to prevent the formation of and better detect conspiracies intended to undermine U.S. sanctions. Conspiracies to violate U.S. sanctions laws are particularly harmful because multiple people in a transaction work in concert to undermine compliance controls, and as a result, economic sanctions. Empowering and educating the broader workforce on sanctions compliance may neutralize or mitigate these risks.

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