The U.S. Department of the Treasury’s Office of Foreign Assets Control recently announced that it reached a settlement with SkyGeek Logistics, Inc, a New York-based aviation product supply company, to resolve allegations that the company engaged in six apparent violations of U.S. sanctions laws. OFAC reported that SkyGeek agreed to pay $22,172 to settle potential civil liability for apparent violations of the Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”) related to four shipments and two attempted refunds provided to Flavic FZE and Mirage Air Craft Services Sole Proprietorship LLC after the companies were added to the List of Specially Designated National and Blocked Persons (“SDN List”) in 2023 and 2024, respectively. According to OFAC, the settlement amount reflects the agency’s determination that SkyGeek’s apparent violations were non-egregious in nature and were voluntarily self-disclosed. The settlement amount also reflects SkyGeek’s cooperation with OFAC investigators.
OFAC reported that Flavic and Mirage, two United Arab Emirates-based aircraft parts suppliers, had placed orders with SkyGeek before their respective U.S. designations. On November 2, 2023, the date that Flavic was designated by OFAC, Flavic placed and paid for three additional orders with SkyGeek. However, SkyGeek’s sanctions protocols allegedly failed to detect that Flavic was subject to sanctions because its screening software was not programed to detect same-day designations. On December 28, 2024 (56 days after it was added to the SDN List), Flavic informed SkyGeek that it had ceased operations, then cancelled its outstanding orders and requested a refund. When processing Flavic’s refund, SkyGeek’s compliance protocol failed again to detect the potential sanctions violation, this time because the company’s compliance program did not require a re-screen of previously approved clients. When SkyGeek initiated a Flavic’s refund for $16,842.21 in January 2024, the payment was reportedly blocked by a downstream bank.
Mirage had also placed an order with SkyGeek months before its designation – an order that was only partially fulfilled before the company was designated. Before Mirage’s designation on February 23, 2024, the company canceled its remaining order in January 2024. However, following its designation, Mirage requested a refund for the cancelled portion of the order. While SkyGeek reportedly began rescreening customers before issuing refunds in February 2024, its compliance protocol failed to detect that Mirage was subject to U.S. sanctions. As a result, SkyGeek attempted to process a $669.42 refund for Mirage – a payment that was ultimately blocked by a downstream bank. Between March 4 and March 8, 2024, SkyGeek also allegedly shipped four orders valued at $3,429.76 to Mirage.
In reaching its settlement with SkyGeek, OFAC considered certain aggravating factors, including the company’s failure to maintain adequate sanctions compliance controls and OFAC’s determination that SkyGeek had reason to know that its refunds and shipments were intended for blocked persons because Flavic’s refund was processed more than 56 days after it was added to the SDN List and Mirage’s refund was attempted 25 days after it was designated. OFAC also considered mitigating factors, including the vast improvements made by SkyGeek and its parent company to their sanctions compliance program, including their employ of a new software vendor that reportedly conducts customer screenings before and throughout the ordering process, the use of a more robust search logic for sanctions screenings, and enhanced training for their employees.