Florida Aviation Company Settles With OFAC on Sudanese Sanctions Violations

A Florida-based aviation investment management company was fined about $210,000 after it committed 12 violations of U.S. sanctions against Sudan, Treasury’s Office of Foreign Assets Control said in a Nov. 7 notice. The company, Apollo Aviation Group, which has since been bought by The Carlyle Group and is now Carlyle Aviation Partners, committed the violations in transactions involving the lease of three aircraft engines, the notice said. Apollo allegedly leased the engines to a United Arab Emirates company, which subleased the engines to a Ukrainian airline, which installed the engines on an aircraft wet leased to Sudan Airways.

At the time of the sale, U.S. people and companies were blocked from doing business with Sudan’s government or exporting items to Sudan, OFAC said. Although Apollo included in its contract with the UAE company that the engines were barred from being shipped to countries sanctioned by the U.S., Apollo “did not ensure the aircraft engines were utilized in a manner that complied with OFAC’s regulations.” The company did not “periodically monitor” or verify the lessee’s and sublessee’s “adherence to the lease,” OFAC said. “As a result, Apollo learned where its engines had actually flown only after the engines were returned to Apollo at the end of the lease.”

Two of the engines were wet leased -- an agreement whereby the lessor operates the aircraft on behalf of the lessee -- to Sudan for about four months in 2014 and 2015 before the lease expired and they were returned to Apollo, OFAC said. Apollo leased the third engine in May 2015 for about four months before it was “removed at the request of Apollo,” the agency said. The request came after Apollo discovered that its first two engines had been installed for Sudan Airways and soon realized its third engine was also being used in Sudan, the notice said. Apollo discovered the leasing information after receiving engine records after the lease for the first two engines expired in March 2015.

OFAC said Apollo was a company with “extensive technical knowledge” at the time of the violations, “with in-depth industry expertise, and longstanding presence in the mid-life commercial aviation sector.” The company was involved in “acquiring, refurbishing, marketing, and leasing” commercial jets and reportedly had $2.5 billion of “aviation assets” by the end of 2015 with offices in the U.S., Ireland and Singapore.

OFAC said the violations constituted a non-egregious case and said Apollo voluntarily self-disclosed the violations. The base civil penalty for the violations was $360,000, but the company was fined $210,600 due to several mitigating factors, including the fact that no Apollo personnel had “actual knowledge” of the violations, the fact that Apollo had not received a penalty in the previous five years and Apollo’s willingness to implement “remedial measures” and invest in “additional compliance personnel.” The company also provided OFAC with information in a “clear, concise, and well-organized manner.”

Aggravating factors included the fact that the violations harmed a U.S. sanctions program’s objectives, the fact that Apollo was a “large and sophisticated entity” and Apollo's failure to monitor customers’ compliance with the lease contract.

As part of the settlement agreement, Apollo confirmed to OFAC that it has stopped the conduct that led to the violations, took steps to “minimize the risk of recurrence” and improved its compliance program. Improvements include enhanced “Know-Your-Customer screening procedures,” improved employee training on U.S. export laws and a new practice of “obtaining U.S. law export compliance certificates from lessees and sublessees.”

OFAC said the enforcement notice highlights the importance of compliance by companies operating in “high-risk industries” and encouraged them to adopt “on-going, risk-based compliance measures, especially when engaging in transactions concerning the aviation industry.” The action also highlights the importance of “Know Your Customer screening procedures” and implementing compliance measures “that extend beyond the point-of-sale and function throughout the entire business or lease period.”