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Apollo Aviation Group Pays $210k to OFAC for Violations of Sudanese Sanctions Program

Apollo Aviation Group, now Carlyle Aviation Partners, agreed to pay OFAC $210,600 for 12 violations of the Sudanese Sanctions Program.  Carlyle acquired Apollo in December 2018, and Carlyle was not involved in the transactions.  The broad prohibition in the Sudanese Sanctions Program were lifted on January 17, 2017, but the transactions occurred prior to the relaxation of the sanctions program. 

Apollo was a multi-strategy aviation manager with extensive industry expertise in the mid-life commercial aviation sector.  Apollo acquired, refurbished and leased commercial jet aircraft, engines and related assets.  By the end of 2015, Apollo reported to have nearly $2.5 billion of aviation assets under management.

In July 2013, Apollo leased two aircraft engines to Company 1 incorporated in the United Arab Emirates, which then subleased the engines to an Ukrainian airline, Company 2, which then installed the engines on an aircraft “wet leased” to Sudan Airways.  A wet lease is an aviation leasing arrangement under which the lessor operates the aircraft on behalf of the lessee with the lessor providing the crew, maintenance, insurance and the aircraft itself.  At the time of the transactions, Sudan Air fell within the definition of a Specially Designated National under the Government of Sudan.

Apollo’s lease agreements with Company 1 contained a provision prohibiting the lessee from engaging in business with any country subject to U.S. or UN sanctions.  Apollo took no steps to ensure that the aircraft engines were not used in violation of US or UN sanctions. 

For example, Apollo did not obtain any certifications from lessees and sublessees of compliance with US export and sanctions laws.  In addition, Apollo did not monitor or otherwise verify its lessee’s and sublessee’s adherence to the lease provision requiring compliance with U.S. sanctions laws.  Apollo only learned where its engines had actually been used after the engines were returned to Apollo at the end of the lease.

In May 2015, Apollo delivered another engine to Company1, which subleased the engine to Company 2, which installed the engine on an aircraft wet leased to Sudan Air.  For a four month period from May to September 2015, the engine was used by Sudan Air for flights to, from and within Sudan.

Around the same time, engine records, including specific information regarding their use and destinations, were returned to Apollo.  A post-lease review led to discovery that the first two engines had been installed on an aircraft that Company 2 had leased to Sudan Air.  Apollo then confirmed that the third engine was on an aircraft wet leased to Sudan Air.  Apollo then demanded that Company 2 remove the engine.

In reaching the settlement, OFAC cited Apollo’s failure to monitor or otherwise verify the use of its leased engines during the life of the leases. 

Apollo enhanced its compliance program by investing in additional compliance personnel and technology.  Apollo improved its Know Your Customer screening procedures; enhanced employee training on U.S. export law and making employees aware of the screening process; and Apollo began obtaining U.S. law export compliance certificates from lessees and sublessees.

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