OFAC Fines US citizen $1.1 Million For Violating Iran Sanctions

On November 19, 2024, The Office of Foreign Assets Control (OFAC) of the United States Department of Treasury issued a penalty Notice of $1,104,408 to a US citizen referred to as “ U.S. Person-1”, for 75 violations of US sanctions on Iran, i.e., approximately valued at $561,802.

From 2019 to 2022, U.S. Person- 1 planned to purchase, operate & renovate a hotel in Iran. U.S. Person- 1 utilized the services of foreign money services businesses in Canada & Iran to execute financial transactions.

Although he was aware of US sanctions on Iran so, the imposed penalty reflects the egregious nature of the violation.

In Iran, U.S. Person- 1 orchestrated a plan to purchase, operate & renovate a 19-suite hotel on the Caspian Sea. He planned two ways to fund the project.

• U.S. Person- 1 sold real property, acquired in Iran & channeled the proceeds into the hotel project.
• Transferred additional funds from the U.S. to Iran to support the hotel’s renovations & operations.

U.S. Person- 1 maintained business & personal accounts at Bank Keshavarzi Iran and Bank Melli Iran – both are blocked entities on OFAC’s list of “Specially Designated Nationals (SDN)” & “Blocked Persons”.

Department of Justice (DOJ) also announced that U.S. Person- 1 used a Canadian money services business (MSB) to transfer money between Iran & US.

MSB sends payment through an informal value transfer system (IVTS) to people and contractors involved in a hotel project in Iran, without any physical movement of money.

This also includes fees for Iranian Government licenses or permits involved in the process. U.S. Person- 1 typically hides the source of the money by lying on the transaction records or opening a new bank account when the old one gets suspicious.

DOJ also announced that U.S. Person- 1 engaged in a complex scheme to repatriate funds from Iran to the United States and transfer Iranian real estate to family members involved in violation of U.S. sanctions.

The final stage of the repatriation process involved a wire transfer with a blank payment reference field, further hiding the transaction. U.S. Person- 1 transferred ownership of Iranian real property to their U.S. Person- 1 child without obtaining the necessary authorization.

Resultantly, U.S. Person- 1 has been charged with 75 violations of Iranian transactions & Sanctions Regulations (ITSR) 31 C.F.R. §§ 560.203, including:

• Evasion of U.S. Sanctions (560.206(a))
• Prohibited Iranian Origin of Transactions (560.207)
• Prohibited Iran’s New Investment (560.208)
• Prohibited Foreign Persons Transactions (560.211(b))
• Prohibited transactions involving blocked property

The purpose of the DOJ’s imposed penalty is to highlight the importance of U.S. sanctions on Iran & to hold accountable people or entities who attempt to circumvent them.

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OFAC’s Enforcement Actions & Compliance Considerations

US sanctions on Iran prohibit a wide range of activities, such as dealings with financial institutions & Iranian government, new investments, facilitations of transactions that will be prohibited for U.S. persons, and transactions involving Iranian goods & services.

While, OFAC has issued general licenses to authorize certain non-commercial transactions, including personal remittances (origin & destination) & property sales; these licenses have certain conditions that should be fulfilled.

An effective sanctions compliance program, as outlined in the framework, must include:

• Identifying and assessing sanctions risks associated with the organization’s business activities.
• Implementing controls to mitigate risks.
• Providing regular training to employees on sanctions regulations and compliance procedures.
• Screening transactions and customers against sanctions lists.
• Maintaining accurate records and reporting suspicious activity to OFAC.

The framework also discusses how OFAC considers these components when evaluating apparent violations and resolving investigations. FinCEN Whistleblowing Incentive Program

According to a Press Release, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has taken the initiative of a “whistleblower incentive program” to encourage reporting of violations of OFAC-enforced sanctions and \the Bank Secrecy Act (BSA).

Individuals located both internationally & domestically are eligible for monetary awards if their information leads to successful enforcement actions — resulting in penalties exceeding $1 Million.