The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has issued a Finding of Violation to Aero Sky Aircraft Maintenance, Inc. (Aero Sky), of San Antonio, Texas. The company that negotiated and entered into a contract and contingent contract with Mahan Air in violation of the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594 (GTSR).

On 12 October 12, OFAC designated Mahan Air, an Iranian commercial airline company, pursuant to Executive Order 13224 for providing financial, material and technological support to the Islamic Revolutionary Guard Corps-Qods Force. Accordingly, Mahan Air is identified on OFACs List of Specially Designated Nationals and Blocked Persons.

OFAC determined that in 2016, Aero Sky breached 594.201(a) of the GTSR by dealing in the property and interests in property of Mahan Air when Aero Sky negotiated and entered into a contract and a second contingent contract with Mahan Air.

On December 19, 2016, after multiple rounds of negotiations with Mahan Air representatives, Aero Sky entered into a Memorandum of Understanding (MOU) with Mahan Air and two other parties. The MOU called for the parties to, among other things, make reasonable efforts to collaborate in order to provide future non-exclusive maintenance and repair services to Mahan Air and to enter into a joint venture agreement. The MOU also included an appendix that stated that the MOU was contingent, in part, upon Mahan Air being removed from OFAC’s SDN List.

Aero Sky was aware that Mahan Air was an entity identified on the SDN List. Prior to the negotiations of, and entry into, the contingent contract with Mahan Air, Aero Sky consulted legal counsel, who reviewed OFAC’s website and determined that Mahan Air was listed as a Specially Designated Global Terrorist on OFAC’s SDN List. Nonetheless, Aero Sky mistakenly determined that its negotiation of, and entry into, a contingent contract with Mahan Air was permitted under the scope of Iran General Licence I (“GL I”), "Authorising Certain Transactions Related to the Negotiation of, and Entry into, Contingent Contracts for Activities Eligible for Authorization Under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services" (and yes, it really does have all those Blyton-esque capital letters). OFAC implemented GL I on March 24, 2016, and subsequently revoked GL I on June 27, 2018.

At the relevant time, GL I authorised certain transactions related to the negotiation of, and entry into, contingent contracts for activities eligible for authorisation under the then-Joint Comprehensive Plan of Action Statement of Licensing Policy. However, GL I explicitly and specifically excluded transactions and dealings with any person whose property or interests in property were blocked pursuant to any part of 31 C.F.R. chapter V other than part 560.

At all times during which Aero Sky engaged in the conduct associated with the Violations, Mahan Air was designated (and continues to be designated) pursuant to Executive Order 13224 and the GTSR—a part of 31 C.F.R. chapter V other than part 560. GL I did not authorise Aero Sky to enter into negotiations and a contract or contingent contract with Mahan Air. Therefore, Aero Sky dealt with a person whose property or property interests were blocked without authorization from OFAC in breach of § 594.201(a) of the GTSR. OFAC determined that Aero Sky did not voluntarily self-disclose the breaches.

The determination to issue a Finding of Violation to Aero Sky reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors Affecting Administrative Action (the “General Factors”) as outlined in OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, including, as noted above, the company’s subsequent insolvency and dissolution. OFAC is not aware of any successor entity.

OFAC considered the following to be aggravating factors in this case:
(1) Aero Sky engaged in a reckless violation of the law by failing to exercise a minimal degree of caution or care by negotiating and entering into a contingent contract with an entity on the SDN List;
(2) A senior Aero Sky executive had actual knowledge of, and participated in, the conduct that led to the Violations; and
(3) Aero Sky undermined the policy objectives of the GTSR by dealing in blocked property or property interests of a high-profile entity identified on the SDN List —Mahan Air.

Mahan Air was designated in 2011, approximately five years prior to the Violations. As OFAC has publicly documented on numerous occasions, Mahan Airsupports terrorism by providing, among other things, financial, material and technological support to the Islamic Revolutionary Guard Corps-Qods Force and support to the Iranian government’s destabilising activity in the Middle East.

FAC considered the following to be mitigating factors in this case:

(1)Aero Sky has not been subject to a inding of Violation or penalty notice from OFAC in the five years preceding the date of the transaction giving rise to the Violations; and
(2) Aero Sky was a small company in poor financial condition that dissolved after the breaches.

This enforcement action demonstrates that any individuals or entities engaging in dealings or transactions with persons, regions or countries subject to U.S. economic and trade sanctions in accordance with a specific or general licence issued by OFAC should ensure they carefully review, and fully comply with, all of the terms and conditions of those licences.

The execution of a contract or contingent contract by a person subject to OFAC’s jurisdiction with a person whose property and property interests are blocked is prohibited, unless authorised by OFAC or exempt by law.

Furthermore, this enforcement action demonstrates the U.S. government’s commitment to enforcing sanctions in response to prohibited dealings with designated Iranian airlines, such as Mahan Air.

For example, on July 23, 2019, OFAC issued an Iran-Related Civil Aviation Industry Advisory to warn of deceptive practices employed by Iran with respect to aviation matters.

Edited from US Government documents.