$14.5 Million Fine for Plastics Plant Sale to Iran

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today announced a $14,550,000 settlement with a German firm involved in smuggling a plastics plant from Austraiia to Iran.

Aiotec, a Berlin, Germany-headquartered company that sources industrial equipment for the energy sector, has agreed to settle its potential civil liability for one apparent violation of the Iranian Transactions and Sanctions Regulations (ITSR).

This apparent violation of the ITSR arose from Aiotec's participation in a conspiracy between 2015 and 2019 to cause a U.S. company to indirectly sell and supply an Australian polypropylene plant to Iran, and remit payments for the sale of the plant through U.S. financial institutions.

The Sale Agreement between the U.S. company and Aiotec contained a provision stipulating that Aiotec would not resell the Plant ''to any country, person or entity or for shipment to any destination, which is subject to sanctions or embargo by the United States Government or is otherwise a prohibited destination under United States law..."

According to the settlement agreement,  Aiotec acquired the decomissioned plant on behalf of Petr-Iranian Downstream Development Co (PDID), representing to the sellers the destination was Turkiye.

Despite assurances the plant was destined for Turkey, Aiotec secretly conspired with Iranian firms, used falsified documents, and misrepresented shipping destinations.   Aiotec began  dismantling the Plant in 2016, and ultimately shipped the entire Plant in parts from the port of  Newcastle to the port of Bandar Imam Khomeini (BIK), Iran between August 2017 and April 2019.

In doing so, Aiotec entered into contracts with two freight forwarders to transport the Plant in parts to Iran. At Aiotec's behest, both contracts stipulated that the respective forwarders could not register the end user's name and address as "Iran" with Australia's customs office and should instead report the final destination as either the United Arab Emirates (UAE) or Turkiye

The U.S. Company received a copy of the first page of the Aiotec PIDID Agreement on August 2018, prompting the U.S. Company and the Australian Company to suspended Aiotec's access to the Plant, which was still being dismantled in Australia.

The U.S. Company sent Aiotec a letter confronting Aiotec with the allegation that it was exporting the Plant to Iran. In the letter, the U.S. Company specifically cited§ 560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 ("ITSR"), stating that the section "forbids the export of goods to Iran and/or the Government of Iran," and that Aiotec bad violated the terms of the Sale Agreement by apparently exporting the Plant to Iran.

The U.S. Company demanded that Aiotec submit proof that it had not exported the Plant to Iran in breach of the Sale Agreement, including by providing the bills of lading ("B/Ls") for the portions of the Plant already exported from Australia by Aiotec. 

Among the misrepresentations in response, Aiotec's outside counsel denied the authenticity of the PIDID Aiotec Agreement, stating "our client denies any intention to install the plant in Iran."  Aiotec also furnished forged bills of lading and documents representing that a Turkish firm was the ultimate buyer.

Over $9.4 million in payments were processed through U.S. financial institutions during the illicit transactions. The deception enabled the plant’s delivery to Iran in breach of international embargoes.

This settlement amount reflects OFAC's determination that Aiotec's conduct was not voluntarily self-disclosed and constituted an egregious case.

OFAC agrees to reduced payment over seven years.

The Settlement amount of $14,550,000 includes suspension of $9,550,000 "pending satisfactory completion of the Compliance Commitments," with an additional $700,000 to be suspended in $100,000 increments over seven years "on the condition that this amount shall be applied to future sanctions compliance costs..."

The out of pocket penalty for the violator is $250,000 to be paid within three months, with 27 quarterly payments of $150,000 thereafter.  

Discounting the settlement agreement by the character and capacity of the obligor, smart money says OFAC nets high six figures at best.

In April 2024, a Thai firm agreed to pay $20 million in an OFAC settlement for using U.S. banks to process $291 million in sales of Iranian high-density polyethylene resin from 2017 to 2018,

Qenos, Pty, the Austrailan polyethelene producer owned by China National Chemical Corporation has announced that it will be shuttering all its facilities after more than 60 years of operation, with plans to sell the real estate to developers.