January 18, 2022

OFAC announces $5 million settlement with Hong Kong-based offshore trading company for apparent violations of ITSR

On January 7, 2022, the US Department of the Treasury’s Office of Foreign Assets Control announced a settlement of more than $5 million that was reached with Sojitz (Hong Kong) Limited (“Sojitz HK”), a company engaged in offshore trading and cross-border trade financing based in Hong Kong, China.  OFAC reports that Sojitz HK was potentially liability for apparent violations of the Iranian Transaction and Sanctions Regulations (ITSR) for using US dollars and US financial institutions to pay for Iranian-origin high density polyethylene resin (HDPE), in a series of transactions made from its bank in Hong Kong to the HDPE supplier’s bank in Thailand.  The transactions caused the US financial institutions that processed the funds to participate in financial transactions related to Iranian origin goods in violation of the ITSR.  The $5 million settlement amount is reflective of OFAC’s determination that the apparent violations were voluntarily self-disclosed and non-egregious in nature and the company’s significant remedial response and cooperation with OFAC investigators.

According to OFAC, the apparent violations occurred between 2016 and 2018 by certain Sojitz HK employees who acted intentionally in violation of company-wide policies and procedures despite repeated instructions by Sojitz HK management not to make US dollar payments that transit through the US in connection with Iran-related transactions.  OFAC reports that the noncompliant employees purchased approximately 64,000 tons of Iranian-origin HDPE paid for in 60 separate US dollar payments that totaled more than $75 million – payments that were allegedly processed and settled through multiple US financial institutions including US correspondent banks in Hong Kong and Thailand.  Because the noncompliant employees omitted the HDPE’s country of origin transactional documents and requested that the supplier make no reference to Iran on the bills of lading, Sojitz HK’s compliance personnel was unaware of the employees’ misconduct and failed to reference Iran in its fund transfer instructions.  This omission caused multiple US financial institutions to engage in unauthorized transactions of Iranian origin goods in violation of § 560.206 of the ITSR, and facilitate Iran-related transactions for Sojitz HK that would be prohibited if performed by a US persons in violation of § 560.208 of the ITSR.

When the prohibited transactions were discovered, Sojitz HK not only voluntarily self-disclosed the apparent violations to OFAC in a detailed and well-organized manner, but also undertook substantial remedial measures together with its parent company Sojitz Corporation, that included the termination of the noncompliant employees and implementation of significant enhancements to address the deficiencies its sanctions compliance program.

Department of Treasury Recent Action | OFAC Enforcement Release