Apollo Aviation Group, LLC OFAC Settlement: $210.6K

Apollo appears to have violated §§ 538.201 and 538.205 of the SSR when it leased three aircraft engines to Company 1, an entity incorporated in the United Arab Emirates, which then subleased the engines to Company 2, a Ukrainian airline, which then installed the engines on aircraft wet leased to Sudan Airways. At the time of the transactions, Sudan Air was identified on OFAC's SDN List as meeting the definition of "Government of Sudan." Section 538.201 prohibited U.S. persons from dealing in any property or interests in property of the Government of Sudan, and § 538.205 prohibited the exportation or reexportation, directly or indirectly, of goods, technology, or services from the United States or by U.S. persons to Sudan.

Starting on July 30, 2013, Apollo leased Engine 1 and Engine 2 to Company 1, which subleased them to Company 2. Company 2 installed the engines on an aircraft wet leased to Sudan Air, which used them for approximately four months from on or about November 2014 to on or about February 2015. Starting in late May 2015 — prior to Apollo's discovery that Engine 1 and Engine 2 had been installed on a Sudan Air aircraft — Apollo delivered Engine 3 to Company 1, which subleased it to Company 2 for installation on another aircraft wet leased to Sudan Air. Sudan Air used Engine 3 for approximately four months, from on or about May 2015 to on or about September 2015, when it was removed at Apollo's request. At all relevant times, Company 1 and Company 2 were owned and managed by an affiliated group of individuals.

Although Apollo's lease agreements with Company 1 contained a provision prohibiting the lessee from maintaining, operating, flying, or transferring the engines to any countries subject to United States or United Nations sanctions, Apollo did not obtain U.S. law export compliance certificates from lessees and sublessees and did not periodically monitor or verify adherence to that provision during the life of the lease. As a result, Apollo learned where its engines had actually flown only after they were returned at the end of the lease. In August 2015, a post-lease review of engine records from the expired Engine 1 and Engine 2 lease led to discovery of the apparent violations. Upon further inquiry, Apollo discovered Engine 3 was on an aircraft wet leased to Sudan Air and demanded and confirmed its removal.

The statutory maximum civil monetary penalty applicable in this matter is $3,000,000. OFAC determined that Apollo voluntarily self-disclosed the apparent violations and that the apparent violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, the base civil monetary penalty amount applicable in this matter is $360,000. The settlement amount of $210,600 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This enforcement action highlights the importance of companies operating in high-risk industries implementing effective, thorough, and ongoing risk-based compliance measures, especially when engaging in transactions in the aviation industry. Participants in the civil aviation industry should be aware that jurisdictions subject to OFAC sanctions may employ deceptive practices, including practices similar to those documented in OFAC's July 23, 2019 advisory to the civil aviation industry focused on Iran. This action also highlights the importance of companies operating internationally implementing Know Your Customer screening procedures and compliance measures that extend beyond the point-of-sale and function throughout the entire business or lease period.

Apollo confirmed to OFAC that it has taken the following steps to minimize the risk of recurrence: improved its Know Your Customer screening procedures in keeping with global best practices; enhanced employee training on U.S. export law, including by making employees aware of the screening process used by the company; and began obtaining U.S. law export compliance certificates from lessees and sublessees.

As noted in OFAC's Framework for Compliance Commitments, U.S. companies can mitigate sanctions risk by conducting risk assessments and exercising caution when doing business with entities that are affiliated with, or known to transact with, OFAC-sanctioned persons or jurisdictions, or that otherwise pose high risks due to their joint ventures, affiliates, subsidiaries, customers, suppliers, geographic location, or the products and services they offer.

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