A Singapore-based oilfield services company agreed to pay $415,350 to settle potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations.

The U.S. Treasury Department Office of Foreign Assets Control ("OFAC") found that, through two subsidiary companies, COSL Singapore Ltd ("COSL Singapore") violated OFAC regulations by "exporting or attempting to export 55 orders of oil rig supplies from the U.S. to Singapore and the United Arab Emirates." OFAC determined that COSL Singapore then "re-exported or attempted to re-export" the same supplies to oil rigs located in Iranian waters. According to OFAC, COSL Singapore failed to self-disclose the alleged violations.

In assessing the settlement amount, OFAC considered that COSL Singapore (i) failed to act with an appropriate level of caution by exporting goods to Iran, (ii) facilitated the development of Iran's energy resources, and (iii) did not have an OFAC compliance program at the time of the transactions. Despite these "aggravating factors," OFAC determined that the misconduct was "non-egregious," and also considered COSL Singapore's (i) lack of prior sanctions, (ii) implementation of an OFAC compliance program in response to the violations and (iii) cooperation throughout the OFAC investigation.

Commentary / James Treanor

Like OFAC's settlement last week with Blue Sky Blue Sea, Inc., the penalty agreed on with COSL Singapore highlights the risks associated with goods and services transshipped through non-sanctioned jurisdictions like Singapore, on their way to Iran or other markets subject to strict OFAC prohibitions. These enforcement actions illustrate the emergence of Singapore as an important transshipment hub for Iran, alongside countries such as the United Arab Emirates that have long been known as potential gateways to Iran.

U.S. companies doing business with exporters and foreign customers should have policies and procedures in place to prohibit and prevent the illegal transshipment of goods and services to Iran and other sanctioned countries. In particular, financial institutions and other companies should take care to ensure that they are protected by contractual provisions prohibiting counterparties from using borrowed funds or purchased goods and services to further any dealings with Iran and other targets of U.S. sanctions – whether directly or indirectly, via transshipments and other evasive practices. Indeed, OFAC remarked in its enforcement release statement that COSL Singapore's U.S. suppliers had in some cases included in their purchase order quotations specific language warning that their goods could not be shipped or re-exported to countries subject to U.S. sanctions, including Iran. This specific language may account for the fact that it is COSL Singapore facing an OFAC penalty and not its U.S. suppliers.

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