On April 19, 2024, OFAC announced the settlement of apparent violations of the Iranian Transactions and Sanctions Regulations (“ITSR”) by SCG Plastics Co., Ltd. (“SCG”), part of a multinational company headquartered in Bangkok, Thailand. The settlement agreement resolves SCG’s potential civil liability for 467 apparent sanctions violations between 2017 and 2018. SCG will pay $20 million to resolve the matter.
According to the U.S. Treasury’s Office of Foreign Assets Control, SCG received, and caused U.S. financial institutions to process, $291 million derived from the sale of Iranian-origin high-density polyethylene resin. The resin was manufactured in part by a joint venture based in Iran and owned by SCG and the National Petrochemical Company of Iran (“NPC”). The latter is a subsidiary to the Iranian Petroleum Ministry, controlled by the government of Iran. OFAC found that SCG had employed shipping and documentation practices that concealed the resin’s origin in Iran, and resulted in the enrichment of Iran’s petrochemical sector.
In 2005, SCG’s parent company, SCG Chemicals Co., Ltd., along with several partner companies, formed a joint venture with NPC in Singapore. The joint venture built a plant in Iran, and SCG purchased, marketed and sold plastic resin products from the plant. In exchange for the products sold, SCG instructed customers to remit U.S. dollar payments to SCG bank accounts in Thailand. These payments were processed by U.S. financial institutions acting as correspondent banks. In order to obfuscate the Iranian origin of the resin, SCG listed the country of origin as “Middle East” or Jebel Ali, United Arab Emirates on shipping documents and invoices, omitting the actual origin in Assaluyeh, Iran. SCG also transshipped the Iranian origin resin through the United Arab Emirates and mislabeled the port of loading as Jebel Ali. OFAC found, furthermore, that in at least ten instances, SGC paid debts owed by the NPC joint venture in U.S. dollars, stating inaccurately that the payments were for “goods” even though SCG had not purchased goods from the payees. These transactions allowed the NPC joint venture to access the international financial system while not disclosing its connection to the Iranian government.
OFAC determined that SCG had committed 467 apparent violations of § 560.203(a) of the ITSR, worth approximately $291 million. OFAC found the conduct egregious, and largely not self-disclosed. In support of its conclusions, OFAC pointed to several aggravating factors, such as SCG’s multi-year pattern of conduct aimed at concealing the origin of the resin, the relatively large portion of SCGs revenue derived from the apparent violations, and the benefit conferred upon Iran. At the same time, OFAC took into account mitigating factors such as SCG’s lack of documented violations in the five preceding years, the company’s cooperation with OFAC during the investigation, and the mitigation efforts since undertaken by SCG’s successor in interest, Thai Polyethylene Co., Ltd. (“TPE”).
These measures include the adoption of risk-based U.S. sanctions compliance policies, the creation of a permanent sanctions compliance officer position, and the implementation of sanctions screening policies and procedures. The company also conducts compliance training sessions for employees, and has instituted regular sanctions compliance audits. Additionally, TPE has entered into a separate settlement agreement with OFAC in which TPE undertakes to maintain U.S. sanctions compliance commitments for five years.