A case that is unusual in one respect: the party deceived was an American company doing what a compliance programme is meant to do, and OFAC’s release says so.
What happened
Aiotec, headquartered in Berlin, sources industrial equipment for the energy sector. In 2015 an Australian company hired a US company to broker the resale of a decommissioned polypropylene plant in Australia. The US company sold it to Aiotec for $9.7 million under an agreement that barred resale to any destination subject to US sanctions or embargo.
OFAC says that two days after signing, Aiotec, its Iran-organised subsidiary and an Iranian petrochemical development company entered a separate agreement to resell the plant to the Iranian company and move it to Iran. From 2017 to 2019 the plant was shipped in parts from Newcastle, Australia to Bandar Imam Khomeini in Iran.
The paperwork
Every document the US company received described a different deal.
- End-user certificates. Aiotec supplied three, in October 2015, April 2016 and October 2017. Each named a Turkish company as the end user and a location in Türkiye as the destination. OFAC says Aiotec’s managing directors “signed multiple false end-user certificates”.
- Instructions to freight forwarders. Aiotec’s contracts with two forwarders “specifically instructed” them not to register Iran as the destination with Australian customs, and to report the UAE or Türkiye instead.
- Bills of lading. After the US company received a copy of the first page of the Iranian agreement from an anonymous source in August 2018 and confronted Aiotec, Aiotec supplied 26 bills of lading showing parts shipped to Jebel Ali in the UAE, then nine showing re-export to Mersin. OFAC says these omitted three shipments that went directly to Iran. For the final shipment, in April 2019, it supplied a house bill of lading naming Mersin, when the accurate one named the Iranian port and the Iranian consignee.
- Supporting documents. A cooperation agreement with the Turkish company, and a letter from that company confirming it was the purchaser and threatening to draw on bank guarantees that OFAC says did not exist.
The technique pages on end-user certificate fraud and third-country transshipment describe the general pattern. This case shows both in one file, with the shipping documents falsified to match.
Why a German company was liable to OFAC
The release says the transactions were subject to US jurisdiction “due to the involvement of the U.S. Company reseller”, even though Aiotec is German and the plant and its owner were in Australia. It also says Aiotec paid in euros but sent the money to US financial institutions: eleven payments totalling about $9.46 million, nine into a dollar account and two into a euro account at a London branch of a US bank. The violation OFAC identified was conspiring to cause a US person to sell and supply the plant to Iran indirectly.
The penalty
OFAC treated the case as egregious and not voluntarily self-disclosed. Under its Enforcement Guidelines, that puts the base penalty at the statutory maximum, $19.4 million in this case. The settlement was $14.55 million, and $9.55 million of that was suspended pending completion of compliance commitments. The mitigating factors OFAC listed were cooperation, including a statute-of-limitations tolling agreement and extensive documentation; its assessment that Aiotec and its Iranian affiliate are small companies with few employees and limited funds; commitments to a written compliance programme, a dedicated compliance officer and annual third-party audits; and no prior penalty in the previous five years.
Among the aggravating factors OFAC listed was that senior management “made multiple false representations to the U.S. Company over the course of four years”.
What the US company did, and what set it off
The release credits the US company’s controls. It says the company communicated the sanctions requirement in the contract and afterwards, asked for end-user certificates, shipping documents and onward sales contracts, checked the shipping documents with the shipping company directly, visited the alleged site in Türkiye and spoke to the Turkish company’s managing director. “Despite these best efforts”, OFAC says, Aiotec and its co-conspirators deceived it.
What changed the picture in the record was an anonymous source who sent the US company the first page of the Iranian agreement in August 2018. The release does not say how OFAC’s own investigation began.
What the documents in the record show
- End-user certificates that name a joint-venture partner and a place in a third country.
- Contracts with freight forwarders that dictate which destination to declare to customs.
- A house bill of lading supplied where the buyer had asked for a master bill from the carrier, and bills of lading that left out three of the shipments.