The control that failed was a signed letter.
The contracts
From August 2010 to November 2011 TransTel, a Singapore subsidiary of CSE Global, took contracts and purchase orders from Iranian companies to deliver and install telecommunications equipment for energy projects in Iran and its territorial waters. It hired third-party vendors, including several Iranian companies, to supply goods and services for the work.
The letter
TransTel and CSE Global kept dollar and Singapore-dollar accounts at a non-US bank in Singapore. On 20 April 2012 TransTel’s managing director and CSE Global’s group chief executive signed a “Sanctions — Letter of Undertaking” to the bank: “In consideration of [the Bank] agreeing to continue providing banking services in Singapore to our company, we, CSE TransTel Pte. Ltd … hereby undertake not to route any transactions related to Iran through [the Bank], whether in Singapore or elsewhere.”
The transfers
Less than two months later, by June 2012, TransTel was originating dollar transfers from its dollar account for its Iranian business. Between 4 June 2012 and 27 March 2013 it sent 104 dollar wires worth more than $11.1 million to vendors for the Iranian projects, including Iranian parties, and all were processed through the United States. None referred to Iran, the projects or any Iranian party. OFAC says this caused at least six financial institutions to export financial services to Iran. See third-country bank accounts and Singapore.
The penalty
Egregious and not self-disclosed, which put the base at the statutory maximum of $38.2 million; the settlement was $12.0 million. Aggravating: TransTel “willfully and recklessly” caused the violations and “systematically obfuscat[ed]” its conduct, “including by materially misrepresenting to its bank that it would not route Iran-related business through the bank’s branch in Singapore or elsewhere”; senior management had actual knowledge and an active role; and the transfers benefited Iran’s oil, gas and power industries. Mitigating: a clean five-year record, remediation and substantial cooperation.
What the record shows
- A written undertaking is a signal, not a control. The bank asked, the company promised, and the dollar leg went through New York anyway.
- The dollar was the problem, not the goods. Compare Danfoss and how US sanctions reach non-US companies.