On Tuesday, OFAC warned of the potential of civil and criminal consequences to both U.S. and non-U.S. persons for violating Iran’s sanctions programs.  This warning came with an advisory highlighting Iran’s deceptive practices with respect to civil aviation matters.  Deceptive practices including:

  • Using front companies and pass-through entities in third countries to conceal and/or obfuscate ultimate beneficial owners (UBOs)
  • Use of third-party suppliers in Europe, East Asia and the Middle East
  • Misrepresenting the status of Iranian sanctions on civil aviation – i.e. covered under JCPOA
  • Claiming OFAC licenses without providing copies or providing false copies
  • Sourcing U.S. origin aircraft, non-U.S. aircraft with 10% or more U.S. controlled content by and value and/or U.S. origin related goods, services, and technology from third countries with strong aviation capabilities, but limited export control or sanctions enforcement capabilities
  • Using general trading firms located in free trade zones to deal in aviation goods
  • Placing orders for U.S.-origin aircraft parts or components from firms in one country for delivery to freight forwarding or logistics firms in a second country

 According to OFAC, “General sale agents and other entities that continue to provide services to U.S. designated airlines … remain at risk of sanctions [enforcement] actions.”  These activities may include:

  • Financial services
  • Reservations and ticketing
  • Freight booking and handling
  • Procurement of aircraft parts and equipment
  • Maintenance
  • Airline ground services
  • Catering
  • Interline transfer and codeshare agreements
  • Refueling contracts

The “at risk” activities listed by OFAC significantly broaden the sanction restriction on Iran’s aviation industry.  Financial institutions and related businesses will need to perform enhanced due diligence on their customers, supply chain and business relationships to ensure there is no sanctions risk present.  Iran’s deceptive practices are reinforcing the need to Know Your Customer.  Protecting your business from sanctions violations is no longer simply about the industry, but also about the customer’s operational and logistical geography.

Iran has persevered to elude sanctions by way of sea and air – the international freight and railway transport community – should aware, they may be next …