OFAC News and Regulations

Aviation Company’s Recent Settlement With OFAC Highlights The Need For End Use Verification

OFAC and the Apollo Aviation Group recently announced a settlement of alleged violations of Sudanese Sanctions Regulations.

Between 2013 and 2015, Apollo Aviation Group leased three of their aircraft engines to a company based in the United Arab Emirates (UAE). The lease agreement included a clause that forbade the lessee from further subleasing the engines out.

However, Apollo failed to follow through on enforcing that clause. They also had not procured an end use document—in this case, an export compliance certificate—from their lessee. Unfortunately, this oversight ended up leading to a compliance violation, when the lessee subleased those engines to another company, based in Ukraine—which then installed them on an aircraft leased to Sudan Airways. This chain of events resulted in 12 alleged violations of the Sudanese Sanctions Regulations.

The Office of Foreign Assets Control (OFAC) and Apollo settled on these alleged violations, to the amount of $210,600. This is far lower than the $3 million maximum monetary fine that Apollo could have been subject to, because of mitigating circumstances that OFAC took into account.

The first of these was that Apollo voluntarily self-disclosed to OFAC as soon as they became aware of potential violations. They also cooperated with OFAC during the course of the investigation, and presented any and all information they needed in a concise and organized manner. In addition, Apollo went on to implement a number of remedial measures to help minimize the possibility of future violations—including improved Know Your Customer (KYC) screening procedures, enhanced employee training on U.S. export law, and procuring end use statements (in this case, export compliance certificates) from lessees and sublessees.

All told, there are valuable lessons to be learned from this case. The most significant one, especially for an organization that operates in a high-risk industry and on an international scale, is the importance of end-to-end compliance. To quote OFAC, this settlement “highlights the importance of companies operating internationally to implement Know Your Customer screening procedures and implement compliance measures that extend beyond the point-of-sale and function throughout the entire business or lease period.”