The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a hefty penalty against Aiotec GmbH, a company based in Berlin, Germany. Aiotec has agreed to pay $14.55 million as part of a settlement with OFAC. The penalty is tied to accusations that Aiotec violated U.S. sanctions laws targeting Iran.
According to OFAC, Aiotec was involved in a conspiracy between 2015 and 2019 to facilitate the indirect sale and delivery of an Australian polypropylene plant to Iran. The alleged wrongdoing didn’t end there—payments related to the sale were reportedly routed through U.S. financial institutions, further deepening the violation. OFAC claims that Aiotec’s actions were deliberate and violated the Iranian Transactions and Sanctions Regulations (ITSR).
This case is another example of how U.S. sanctions laws reach beyond American borders, holding foreign companies accountable for any connection their transactions may have to U.S. financial systems, goods, or services.
How U.S. Laws Apply to Aiotec and Other Foreign Companies
While Aiotec is a German company operating outside the U.S., the case demonstrates how U.S. sanctions can extend their reach globally. In this instance, two key “U.S. touchpoints” were highlighted by OFAC:
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- The U.S. Connection to the Sale: Aiotec allegedly caused a U.S.-based company to indirectly sell the polypropylene plant, located in Australia, to Iran. Although the plant itself was not in the United States, the involvement of a U.S. company tied the transaction to U.S. laws.
- Payments through U.S. Banks: Even though Aiotec used euros for the payments, the funds reportedly passed through U.S. financial institutions. This made the payments subject to U.S. regulations.
These connections illustrate how even indirect ties to the U.S. can trigger serious legal consequences for non-U.S. entities. OFAC’s regulations apply broadly, often capturing situations where foreign entities deal with U.S. goods, services, financial systems, or companies.
Other scenarios that could involve similar U.S. touchpoints include:
- Transactions involving goods or technology of U.S. origin.
- Payments processed in U.S. dollars, even if the businesses are outside the United States.
- Using U.S.-based service providers for financial transactions or technical support.
- Sharing resources, such as employees or infrastructure, between related U.S. and foreign entities.
The Aiotec case highlights how important it is for foreign businesses to be vigilant about the potential U.S. connections in their operations, even if they don’t believe they are working directly with U.S.-based entities.
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Why Compliance is Essential for Non-U.S. Entities
The Aiotec enforcement action demonstrates the risks for foreign companies that fail to understand or comply with U.S. export control and sanctions regulations. For Aiotec, the violation stemmed from its participation in a conspiracy to sell the Australian polypropylene plant to Iran. Iran is subject to strict U.S. sanctions, and any transactions involving the country must comply with U.S. laws, especially if U.S. goods, services, or financial systems are involved.
The penalties in this case were severe, but they also serve as a warning to other foreign businesses. OFAC pointed out that the violation was considered “willful,” meaning Aiotec allegedly acted with knowledge of the laws or intentionally disregarded them.
To help prevent such violations, the U.S. government has published guidelines for foreign-based businesses. These guidelines emphasize the need for compliance programs that address U.S. sanctions and export control laws. For example, foreign companies should:
- Monitor any dealings that involve U.S. goods, technology, software, or financial institutions.
- Conduct thorough checks on customers and partners to ensure they are not subject to U.S. sanctions.
- Review payments carefully to see if they might involve U.S. banks, even if the currency is not U.S. dollars.
The case of Aiotec shows that failing to account for these factors can have costly consequences. Non-U.S. companies operating globally are especially vulnerable to sanctions risks because U.S. regulations often reach beyond American borders.
