According to the settlement agreement, TransTel violated U.S. sanctions by paying over eleven million U.S. dollars through its U.S. dollar account at a Singapore-based bank to various third-party vendors that included Iranian companies supplying goods and services associated with Iranian contracts. These payments were processed through the U.S. CSE and TransTel made these payments despite their signed letter of undertaking to the bank whereby they undertook “not to route any transactions related to Iran through [the Bank], whether in Singapore or elsewhere.” Ultimately, these payments caused at least six separate financial institutions to engage in unauthorized exportation or re-exportation of financial services in violation of U.S. sanctions. The maximum penalty that CSE and TransTel could be subject to was $38,181,161. The parties settled for $12,027,066.
Its relevance to foreign companies involved in international trade
From a practical standpoint, U.S. dollars are often the default currency in international business transactions. OFAC generally has no jurisdiction over foreign companies outside of the U.S. transacting with OFAC-sanctioned countries (such as Iran, Libya, and Syria, to name a few) but as seen above, using U.S. dollars can create a nexus for OFAC to have jurisdiction. Foreign companies should therefore take into consideration the risk of possible penalties from U.S. authorities when paying parties in OFAC-sanctioned countries with U.S. dollars, even if those funds are not processed through the U.S. In addition to the civil penalties that OFAC can impose on foreign companies, foreign companies should be wary of other U.S. authorities such as the Department of Justice, which can impose criminal penalty for certain U.S. sanctions violations. Previously, OFAC’s target has been non-U.S. financial institutions. This settlement shows OFAC’s willingness to go after foreign companies that are not financial institutions. With increasing U.S. sanctions against other countries, it is more likely than before that companies in other foreign countries involved in international trade could be the next target.
This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Martin today. 613-747-2459 ext.308, [email protected]