Nordgas S.r.l. OFAC Settlement: $950K (2021)

In May 2010, Nordgas sought to purchase air pressure switches from a U.S. company with the intent of reexporting them to customers in Iran. The U.S. company informed Nordgas it could not export its U.S.-origin switches if the end-users were Iranian entities. Nordgas acknowledged the restriction and represented it would sell the switches to alternate customers in Italy. This initial request did not lead to an immediate sale but developed into a business relationship between the two entities.

In late 2012, Nordgas again sought to purchase air pressure switches from the same U.S. company, this time misrepresenting the end-user as Nordgas's Italian affiliate. To conceal its intentions, Nordgas employees began using deceptive replacement terms for Iran in correspondence and trade documentation beginning as early as September 2012, and continued using code words for several years thereafter. Nordgas also requested that the U.S. company remove the term "Made in USA" from the switches to disguise their origin. When the U.S. company offered in 2016 to ship goods directly to the stated end-user due to Nordgas's inability to process the export, Nordgas rebuffed the offer, citing logistical concerns.

In or around the period spanning March 23, 2013 to March 31, 2017, Nordgas appears to have violated §§ 560.203 and 560.204 of the ITSR by: (i) engaging in the reexportation, sale, or supply, directly or indirectly, from the United States of 27 shipments of air pressure switches to a person in a third country with knowledge or reason to know they were intended specifically for supply, transshipment, or reexportation, directly or indirectly, to as many as ten different Iranian companies; and (ii) causing a U.S. company to indirectly export goods to Iran. The total value of the air pressure switches was $2,526,783. For the final shipment, in March 2017, the U.S. company became aware of the intended reexport and requested that Nordgas return the shipment, with which Nordgas complied.

OFAC determined that Nordgas 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, 31 C.F.R. part 501, app. A, the base civil monetary penalty amount applicable in this matter is the statutory maximum of $7,689,336.

The settlement amount of $950,000 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines, as well as Nordgas's financial circumstances, its cooperation with OFAC, and its agreement to implement enhanced compliance commitments. Of the $950,000 settlement amount, $650,000 will be suspended pending satisfactory completion by Nordgas of those enhanced compliance commitments.

This action demonstrates the risks foreign companies assume when involving U.S. persons and goods procured from the United States in dealings with U.S.-sanctioned jurisdictions and entities. Foreign companies involved in such trade should understand that OFAC's prohibitions can extend not just to U.S. persons, but to their foreign trading activities as well. Obfuscating the involvement of a sanctioned country or person in a transaction by falsifying the names of end-users or other parties does not insulate either U.S. or foreign persons from potential liability.

Foreign companies should not expect their obligations with respect to U.S. sanctions to be fulfilled by their U.S. partners. In international trade transactions, each party is responsible for understanding their own obligations pursuant to OFAC regulations. Ineffective management or poor oversight of employees and sales may present a sanctions risk when company or employee sales or business practices violate U.S. economic sanctions.

Foreign companies engaging in business with U.S. partners should institute a risk-based sanctions compliance program. An effective compliance program will feature controls sufficient to identify and escalate potentially prohibited transactions initiated by its sales and other relevant personnel. It will also reflect a management commitment to institute the controls and processes necessary to prevent violations, including by seeing that employees with relevant responsibilities are appropriately supervised and that controls are in place to prevent prohibited transactions.

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