OFAC Reaches Settlement With US Company for Iran-Related Shipping Violations

The Treasury’s Office of Foreign Assets Control reached a settlement of about $870,000 with a New York-based shipbroking company that OFAC said violated weapons-related sanctions five times. The company, MID-SHIP Group LLC, violated the Weapons of Mass Destruction Proliferators Sanctions Regulations by negotiating contracts among ship owners and charterers worth about $470,000 between February and November 2011, OFAC said May 2. The ships used in the transfers were owned by the Islamic Republic of Iran Shipping Lines (IRISL), which was sanctioned by OFAC in 2008.

Although the charter agreements were negotiated by MID-SHIP’s subsidiaries in China and Turkey, the company’s accounting was performed in the U.S., and its New York office received commission payments from the contracts handled by its subsidiaries, OFAC said.

During the violations, MID-SHIP senior management became aware of an “increase in the level of scrutiny applied by” financial institutions with regard to OFAC compliance, according to the settlement agreement. Senior executives regularly sent emails throughout the company warning of OFAC restrictions on certain payments and telling employees to begin placing an “OFAC clause” into all contracts. Despite this, MID-SHIP did not implement its own sanctions compliance program, OFAC said, assuming that the clause was sufficient legal protection.

In December 2010, a senior executive sent a company email that stressed the importance of the clause and urged all global offices to use it. “Many brokers outside the [New York] office may think [the OFAC clause] is not needed for them as their clients do not trade to/from the USA,” the email said, according to OFAC. “This is not a correct assumption.” The executive also mentioned two “big concerns” about the increased scrutiny: money transfers being “held up” and “fighting with the US government/bank to get the money released,” the agreement said. While the email “highlighted concerns” related to OFAC compliance, the agreement said, the company did not “appear to have taken any additional steps or measures to determine whether” its transactions with vessels “were subject to U.S. sanctions.”

In another instance in October 2011, a client tried to send a payment of roughly $190,000 to MID-SHIP’s subsidiary in China through MID-SHIP's account at a U.S. bank, but the transaction was blocked because it included the name of a sanctioned ship, the “M/V Haadi.” An employee from MID-SHIP China asked the client to resend the money without including the name of the ship, OFAC said, but the client refused to leave out the name of the ship. MID-SHIP management settled the payment by requesting that the client send the money in euros, according to OFAC.

As part of the settlement with OFAC, MID-SHIP agreed to several “compliance commitments,” including stopping the conduct that led to the sanctions, implementing a compliance program, conducting risk assessments, placing internal controls to stop future sanctions violations, appointing an OFAC compliance officer that “regularly publishes OFAC compliance statements to all [MID-SHIP] offices,” and conducting compliance testing and auditing and training. MID-SHIP must also annually “submit a certification” to OFAC annually for five years “confirming that [MID-SHIP] has implemented and continued to maintain the sanctions compliance measures.”