OFAC Fines Italian Company for Illegal Reexports to Iran

The Office of Foreign Assets Control fined an Italian gas equipment manufacturer $950,000 for violating U.S. sanctions against Iran, OFAC said in a March 26 notice. The company, Nordgas S.r.l., knowingly reexported 27 shipments of U.S.-origin “air pressure switches” to Iran, OFAC said, and caused a U.S. company to “indirectly” export goods to Iran.

In 2010, Nordgas tried to buy air pressure switches for gas boiler systems from a U.S. company to export to Iran, but the company said the exports were illegal. Two years later, Nordgas returned to the U.S. company with a similar purchase request but “misled the company” by saying the goods would be delivered to an end-user in Italy, OFAC said. To hide the identity of the end-user, Nordgas employees used “deceptive replacement terms” for Iran in its “trade documentation” with the U.S. company, and continued to use code words for Iranian companies “for several years,” the notice said. The violations continued up until at least 2017, OFAC said, when a U.S. company “became aware” that Nordgas intended to reexport its goods to Iran and asked Nordgas to return the goods. OFAC said Nordgas returned the goods and was refunded.

Nordgas used a variety of methods to hide the ultimate destinations of its goods, including rebuffing a U.S. company in 2016 that offered to ship goods directly to Italy, citing “logistical concerns,” OFAC said. The gas equipment manufacturer also asked a U.S. company to remove the “Made in USA” labels on its switches.

Nordgas didn’t voluntarily self-disclose the violations, which constituted an egregious case, OFAC said. Aggravating factors included the company’s “willful conduct” in reexporting U.S. goods to as many as 10 Iranian companies and the fact that Nordgas’ management “had reason to know” the shipments were illegal. OFAC also said the company’s actions “undermined” U.S. sanctions on Iran by helping to ship more than $2.5 million worth of goods to the country.

Mitigating factors included that Nordgas had not received a penalty notice in the previous five years, that it stopped all shipments to Iran, that it took remedial compliance actions and that it cooperated with OFAC’s investigation.

OFAC said foreign companies should recognize that U.S. sanctions regulations extend beyond U.S. people and companies and that hiding or falsifying the names of end-users won’t “insulate either U.S. or foreign persons from potential liability.” The agency also said foreign companies shouldn’t expect their sanctions compliance obligations “to be fulfilled by their U.S. partners,” adding that each party is responsible for their own sanctions obligations. “Additionally, ineffective management or poor oversight of employees and sales may present a sanctions risk when company or employee sales or business practices violate U.S. economic sanctions,” OFAC said.