ZAG IP, LLC (ZAG) has reached a $506,250 settlement with the Office of Foreign Assets Control (OFAC) after voluntarily disclosing violations of the Iranian Transactions and Sanctions Regulations (ITSR Part 560). In 2014 the company was focused on global sourcing and services related to raw material selection for companies in the construction industry.
ZAG signed a contract with a company based in Tanzania where they agreed to supply 400,000 metric tons of cement clinker. ZAG planned on purchasing the cement clinker from a supplier in India, unfortunately the supplier had to back out of the deal shortly before ZAG was set to provide the cement clinker to the Tanzanian company. ZAG attempted to reschedule the first shipment with the Tanzanian company but they refused to reschedule and were opposed to any delays. Worrying that they would lose the contract, ZAG’s Managing Director found a trading company in the United Arab Emirates (UAE) that could provide the cement clinker on time to their client. The UAE supplier told ZAG that the cement clinker was not subject to US sanctions on Iran and ZAG proceeded with the purchase even though they knew the cement clinker was produced by an Iranian manufactured and shipped from a port in Iran.
ZAG’s purchase of the Iranian cement clinker resulted in 5 violations of the ITSR. The value of the five transactions was $14,495,961 and the maximum monetary penalty for the violations was $28,991,922. OFAC found that ZAG’s voluntary self-disclosure and the violations themselves constituted a non-egregious case, thus the company was only issued a penalty of $506,250.
OFAC considered the following to be aggravating factors: (1) although ZAG did exercise limited due diligence, it acted with reckless disregard for sanctions requirements by failing to substantively address the U.S. sanctions prohibitions in place with respect to Iran despite contemporaneous risk indicators; (2) ZAG’s senior management was aware that ZAG was purchasing and reselling goods of Iranian origin at the time of the conduct at issue; (3) the transactions giving rise to the apparent violations conferred significant economic benefits to Iran; (4) ZAG is a commercially sophisticated company operating globally with experience and expertise in international transactions; and (5) ZAG did not have an effective OFAC compliance program in place at the time of the transactions commensurate with its level of risk.
OFAC considered the following to be mitigating factors: (1) ZAG has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transactions giving rise to the apparent violations; (2) ZAG was a small business entity as defined by the U.S. Small Business Administration’s standards; (3) ZAG undertook significant remedial measures by conducting a thorough internal investigation to determine the causes of the compliance failures associated with the apparent violations and enhancing its sanctions compliance policy and procedures, including by developing and implementing a U.S. Export Controls and Economic Compliance Manual and appointing a sanctions compliance officer; and (4) ZAG cooperated with OFAC’s investigation by providing all relevant information regarding the apparent violations in an organized fashion and by responding to OFAC’s requests for information in a timely and efficient manner.
OFAC Enforcement Details: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20190221_zag.pdf
