MID-SHIP Group LLC OFAC Settlement: $871.8K (2019)

Between on or about February 18, 2011 and on or about November 14, 2011, MID-SHIP processed five electronic funds transfers, totaling approximately $472,861, that pertained to payments associated with blocked vessels identified on OFAC's SDN List.

On September 10, 2008, OFAC designated the Islamic Republic of Iran Shipping Lines (IRISL) pursuant to Executive Order 13382 of June 28, 2005, "Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters," and added IRISL to the SDN List. On that same day, OFAC identified more than 100 vessels owned or controlled by IRISL as blocked property and listed their names and International Maritime Organization (IMO) numbers on the SDN List.

In February and April 2010, MID-SHIP's subsidiaries located in China and Turkey negotiated three charter party agreements between multiple third parties regarding the transportation of goods from foreign ports to other foreign ports. These parties ultimately nominated two separate IRISL vessels — the M/V Haadi and the M/V Adrian — as the performing vessels for the respective charter party agreements. MID-SHIP was in possession of multiple documents identifying the vessels by their respective IMO numbers and connecting the vessels to Iran, and both vessels were publicly identified by name and IMO number on the SDN List by the time MID-SHIP processed the electronic funds transfers constituting the apparent violations.

MID-SHIP's culture of compliance appears to have been deficient at the time of the apparent violations. In one instance, a MID-SHIP senior manager discussed receiving an electronic funds transfer in a non-U.S. Dollar currency from a third party after learning a financial institution was holding the payment due to the inclusion of a vessel name in the remittance field. MID-SHIP managerial personnel were also aware that financial institutions had rejected at least two payments for "administrative reasons," "security reasons," or "compliance issues."

OFAC determined that MID-SHIP did not voluntarily self-disclose the apparent violations to OFAC, and that the apparent violations constitute an egregious case. Both the statutory maximum and base civil monetary penalty amounts for the apparent violations were $1,490,320. The settlement amount of $871,837 reflects OFAC's consideration of the applicable facts and circumstances pursuant to the General Factors under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.

This case illustrates the benefits companies operating in high-risk industries (e.g., international shipping and logistics) can realize by implementing risk-based compliance measures, especially when engaging in transactions involving high-risk exposure to jurisdictions or persons implicated by U.S. sanctions. This case also illustrates the benefits that companies engaging in international transactions can realize by developing and maintaining a culture of compliance where senior management sets a positive example of compliance and encourages staff to comply with the law. Companies engaging in international transactions should take note of and respond accordingly to sanctions-related warning signs, such as payments that are blocked or rejected by financial institutions for compliance or U.S. economic and trade sanctions purposes.

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