Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with EGL, Inc., a Houston, TX entity for violations of the Cuban Assets Control Regulations (CACR) and the Iranian Transactions and Sanctions Regulations (ITSR). The $139,650 settlement stemmed from the activities of EGL’s foreign affiliates who extended freight forwarding services for shipments to and from Cuba and for providing similar services in relation to ten shipments containing oil rig supplies to an oil drilling rig located in Iranian coastal waters and operated by Petropars, an affiliated company of the National Iranian Oil Company.

Although promulgated pursuant to different statutory authorities, the Trading With the Enemy Act (TWEA) and The International Emergency Economic Powers Act (IEEPA), the CACR and ITSR both prohibit U.S. persons from providing or facilitating freight forwarding services to Cuba and Iran. While EGL did self-disclose the violations to OFAC, the conduct was still enough to warrant a penalty, most likely because it involved hundreds of different incidents and the ones relating to Iran services furthered the efforts of Iran to develop its petroleum resources; an activity heavily frowned upon by OFAC. OFAC cited as one of its reasons for reducing the penalty from its calculated base amount was because EGL provided its response in an “producing responsive materials in a clear and organized fashion”. As such, OFAC considered that as a sign of cooperation with their investigation.

This is yet another case of a Houston, TX entity being found to have violated OFAC sanctions regulations. I gave a talk in New York back in December about OFAC facilitation cases using real world examples of OFAC civil penalties. During the course of preparing for that talk it became apparent to me that many of the entities which paid fines ro settlements for sanctions violations were based out of Houston. This makes sense when one thinks about it. Houston is often referred to as the Energy Capital of the World, and country based sanctions, particularly those related to Iran, often target a designated country’s energy sector. Hence, Houston based entities may be more susceptible to engaging in prohibited transactions such as those EGL engaged in. As such, Houston companies particularly those in the energy sector should tighten their OFAC compliance programs to make sure they aren’t running afoul of U.S. sanctions. In short, Houston we have a problem…and it’s OFAC compliance.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.