The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement yesterday with a U.S.-based company Alfa Laval Inc. (“Alfa Laval U.S.”) and a Dubai-based affiliate company Alfa Laval Middle East Ltd. (“Alfa Laval Middle East”) today over potential civil charges for conspiracy to ship goods to the U.S. goods to Iran and facilitating a transaction to ship U.S. goods to Iran, respectively.
Alfa Laval U.S., based in Richmond, is a subsidiary of Alfa Laval AB, a Swedish-based company that exports storage tank cleaning units worldwide. The U.S. operation has a subsidiary company in Exton, Pennsylvania called Al Laval Tank, Inc. (“Alfa Laval Tank”), which was the subject of this action. In 2015, Alfa-Laval Tank received an email from Alborz Pakhsh Parnia Company, an Iranian party requesting a shipment of cleaning products to Iran. A representative of Alfa Laval Tank provided pricing and other information, and then forwarded the communication to an affiliate operation in Denmark, which then referred the matter to Alfa Laval Middle East, the UAE-based sister company. Those of you who know your sanctions laws may immediately think this is a prohibited facilitation under the Iranian Transactions and Sanctions Regulations, 31 CFR Part 560 (the “ITSR”), as it is, even if it is a bit more tenuous than a text-book facilitation case. However, there’s more.
As Alfa Laval Middle East and the Iranian customer devised a plan by which AL Middle East would ship U.S. goods to the Iranian customer, it copied the U.S.-based Alfa Laval Tank on the emails. Working with Alfa Laval AB’s Iran operations, Alfa Laval Middle East and the Iranian customer formed a conspiracy to commit sanctions violations, drawing in part on a memo provided by Alborz on how to route the transactions to make them appear to be shipments destined for Dubai end use. They did not include Alfa Laval Tank on any emails that stated they planned to commit sanctions violations. They did, however include Alfa Laval Tank on an email with a subject line “Gamajet for [Iranian customer’s name],” with Gamajet as the name of the cleaning product to be shipped. As a result, Alfa Laval could have been penalized for not only facilitating a transaction that would have been prohibited if performed by a U.S. person under the ITSR but for basically indirectly exporting to Iran as it failed to heed or largely ignored several warning signs that its goods were at risk of diversion to Iran.
OFAC deemed the Alfa Laval U.S.’s failure on behalf of its subsidiary a non-egregious violation of the ITSR, resulting in a $18,750 penalty from OFAC. The ultimately settled amount of $16,875 with OFAC reflects various aggravating and mitigating factors listed here. The Dubai company that settled with OFAC, Alfa Laval Middle East, is a subsidiary of Alfa Laval AB and faced a penalty for conspiracy and completion of sanctions violations under the ITSR. After Alfa Laval Middle East received an email from AL Tank referring an Iranian customer that wanted a shipment from Alfa Laval Tank, the Dubai-based operation fabricated a conspiracy by which Alfa Laval Tank would unwittingly ship U.S. goods to Iran. The plan, concocted with the Iranian customer, entailed listing a Dubai distributor with whom Alfa Laval Middle East did business as the end-user for the shipment from Alfa Laval Tank on its export forms. It did not tell Alfa Laval Tank that it had falsified the end-user on export forms. When Alfa Laval Tank shipped items to the “Dubai-based company,” Alfa Laval Middle East arranged for the items to, in fact, go to the customer in Iran. It ultimately enabled the shipment of $18,585 of U.S. goods to Iran and Alborz sought products to the tune of $181,453 in totality. For this conspiracy and commission of sanctions violations, Alfa Laval Middle East faced a penalty of $615,844 from OFAC. Its large settlement amount of $415,695 is the result of not just aggravating factors, but also significant mitigating factors.
Interestingly, this case ensued from a U.S. Department of Commerce Bureau of Industry & Security (BIS) Post-Shipment Verification of Alfa Laval Tank’s shipment to Dubai, with the verification concluding that the items had been reshipped from Dubai to Iran. The size of the penalty against the Dubai company is significant as it, like cases before it, drives home the substantial liability non-U.S. companies are exposed to for U.S. sanctions violations, and the magnitude of the penalties that could arise from a fairly modest shipment value – less than $18,600 here.