Daniela Melendez, a new Associate at The Volkov Law Group, rejoins us for another blog post on DOJ’s first corporate prosecution for violations of the Iran Sanctions Program.  Daniela can be reached at [email protected].

The Justice Department has touted the upcoming wave of corporate prosecutions for criminal sanctions violation as the era of “The New FCPA.” DOJ’s reference is intended to communicate a strong message – companies are going to be prosecuted for sanctions violations, akin to FCPA prosecutions where companies are required to pay a fine, and enter a guilty or a deferred or non-prosecution agreement.  DOJ is backing up its warning by assigning 25 new prosecutors to the National Security Division to work on corporate sanctions prosecutions.

In its first action under this new enforcement policy, DOJ announced a recent prosecution of a company, Suez Rajan Limited, for violations of the Iran Sanctions Program stemming from its purchase of Iran oil.  Under the plea agreement, Suez Rajan entered a guilty plea to a conspiracy to violate the International Emergency Economic Powers Act (IEEPA).  The District Judge sentenced Suez Rajan to a term of 3 years’ probation and payment of a $2.5 million fine.

In addition to Suez Rajan, DOJ entered into a Deferred Prosecution Agreement (“DPA”) with Empire Navigation, the operator of the vessel carrying the contraband oil cargo.  Under the DPA, Empire Navigation agreed to cooperate and transport the contraband oil to the United States while incurring the significant expenses stemming from the vessel’s voyage to the United States.

Suez Rajan plead guilty under seal on April 19, 2023, while law enforcement arranged with Empire Navigation to seize the Iran oil involved in the illegal transaction.  The shipment involved a multimillion-dollar of crude oil by the Islamic Revolutionary Guard Corps (IRGC), a designated foreign terrorist organization, that was bound for another country. This is the first-ever criminal resolution involving a company that violated sanctions by facilitating the illicit sale and transport of Iranian oil and comes in concert with a successful seizure of over 980,000 barrels of contraband crude oil.

The contraband oil cargo is now the subject of a civil forfeiture action in the U.S. District Court for the District of Columbia. The United States’ forfeiture complaint alleges that the oil aboard the vessel is subject to forfeiture based on U.S. terrorism and money laundering statutes.

The complaint alleges a scheme involving multiple entities affiliated with Iran’s IRGC and the IRGC-Qods Force (IRGC-QF) to covertly sell and transport Iranian oil to a customer abroad. Participants in the scheme attempted to disguise the origin of the oil using ship-to-ship transfers, false automatic identification system reporting, falsified documents and other means. The complaint further alleges that the charterer of the vessel used the U.S. financial system to facilitate the transportation of Iranian oil.

Interestingly, DOJ’s complaint alleges that the oil constitutes the property of, or provided a “source of influence” over, the IRGC and the IRGC-QF, both of which have been designated by the United States as foreign terrorist organizations, and that the oil facilitated money laundering. The documents allege that profits from oil sales support the IRGC’s full range of malign activities, including the proliferation of weapons of mass destruction and their means of delivery, support for terrorism and both domestic and international human rights abuses.

DOJ’s resolution underscores the risks that U.S. companies, or its foreign subsidiaries, face when pursuing opportunities with third parties that act on behalf of their company, as well as the need for controls to prevent employees from breaching sanctions compliance controls.