Unicat Catalyst Technologies OFAC Settlement: $3.9M

From at least October 2016, Unicat sourced most of its catalysts from manufacturers in China through an individual supplier (the "Supplier") who operated in both the United States and China. The Supplier would typically arrange for the export of catalysts directly from China to Unicat's customers around the world, although occasionally the Supplier would ship orders to the United States or the Netherlands for onward delivery. In 2018, the Supplier incorporated a company under the Unicat brand name in Dalian, China (the "China Office") to fulfill orders for Unicat using these same arrangements.

Unicat's Former CEO exhibited awareness, since at least 2015, of the implications of OFAC sanctions when conducting business with Iran. Nevertheless, at his direction, in August 2016 and again in July 2020, Unicat entered into distribution agreements with a regional distributor (the "Distributor") operating in the UAE and Iran to sell Unicat products to end users in Iran. Working through the Distributor, its Dutch affiliate, and the China Office, the Former CEO regularly organized and directed sales to Iran, instructing subordinate employees, partners, and affiliates to facilitate the transactions. When a Unicat supply chain manager raised sanctions concerns in connection with a July 2018 purchase order, the Former CEO advised that the Dutch affiliate could handle the order and that products could be shipped to Iran from China. In addition to catalyst sales, Unicat provided technical consultation through on-site visits to Iran on three separate occasions, including start-up assistance and supervision and guidance on the loading of catalysts into refinery reactors. Payment for these on-site services was conducted in cash to avoid detection. By late 2018, Unicat's former Board of Directors was aware the company was conducting business with Iran but failed to intervene to stop the sales or take corrective action. Employees subsequently began referring to Iran as "I" in email communications and discussed limiting distribution of shipping documents, with one logistics manager noting that "sanctions have been tougher now." Unicat sales to Iran continued through February 2021.

In May 2020, Unicat sold catalyst products to Orinoco Iron S.C.S. ("Orinoco"), a Venezuelan company located in Puerto Ordaz, Venezuela that was at the time owned by the Government of Venezuela. For this transaction, the Former CEO, the China Office, and an individual working on behalf of Orinoco elected to use unrelated third-party entities to facilitate the sale. The Former CEO also arranged to receive a portion of Orinoco's payment — $517,337.26 out of $1,370,231.37 — in the form of a credit from the China Office, which OFAC determined appeared to be an attempt to obfuscate the payment from Orinoco.

Unicat appears to have violated § 560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 ("ITSR"), on 10 occasions between October 2016 and February 2021 when it exported, sold, or supplied: (1) catalyst products from the United States to the UAE with the knowledge these goods would be reexported to end users in Iran; (2) catalyst products to Iran that it sourced from manufacturers in China; and (3) technical services for the use of catalyst products to a person in Iran. Unicat also appears to have violated § 560.208 of the ITSR on three occasions between July 2018 and February 2020 when it facilitated the sale of catalyst products through its majority-owned Dutch affiliate to Iran. Additionally, Unicat appears to have violated § 591.201 of the Venezuela Sanctions Regulations, 31 C.F.R. part 591 ("VSR"), on one occasion in May 2020 when it sold catalyst products to Orinoco. The approximate commercial value of the Apparent Violations was $2,575,817.

The statutory maximum civil monetary penalty applicable in this matter is $8,035,626. OFAC determined that Unicat voluntarily self-disclosed the Apparent Violations and that the Apparent Violations constituted 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 one-half of the statutory maximum, which is $4,017,813, equaling one-half the transaction value for each of the Apparent Violations.

The settlement amount of $3,882,797 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines. Unicat's obligation to pay the settlement amount due to OFAC shall be deemed satisfied up to an equal amount of its payments in satisfaction of its obligation to DOJ arising out of the same pattern of conduct.

The settlement amount reflects Unicat's concurrent settlement with the Department of Justice (DOJ) and the U.S. Department of Commerce's Bureau of Industry and Security (BIS) arising out of the same pattern of conduct. Unicat's obligation to pay the settlement amount due to OFAC shall be deemed satisfied up to an equal amount of its payments in satisfaction of its obligation to DOJ.

This case underscores OFAC's continuing efforts to enforce U.S. sanctions against Iran and Venezuela, and demonstrates the risks involved in dealing with sanctioned jurisdictions and persons. Such risks are especially acute for those operating in sectors that serve as a source of funds for the Iranian and Venezuelan regimes, including the petrochemical sector. Establishing and institutionalizing robust risk-based controls commensurate with a company's geographic, customer, and operational profile is particularly critical in such high-risk industries.

This matter also underscores the importance of institutionalizing a culture of compliance that can prevent employees and management from successfully directing violations of U.S. sanctions. A top-down compliance approach, where company executives and senior management demonstrate commitment to sanctions compliance, is an essential element of a compliance program. Companies should work to ensure that all relevant employees be aware of and help ensure compliance with OFAC regulations and that sufficient controls are in place to deter and prevent misconduct. Regular independent auditing to ensure a company's compliance program is operating as intended and help identify internal deficiencies and breaches can be an important element of such efforts and help identify potential violations for swift remedial and corrective action.

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