Iran Sanctions Cases Ebb in Run-Up to Congressional Vote

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As President Barack Obama presses Congress to approve a nuclear power agreement with Tehran, new U.S. prosecutions of Iranian sanctions violations have tapered off.

The reasons are unclear. Iran may be making fewer attempts to skirt sanctions imposed in recent years, the Justice Department could be building cases that aren’t yet ready to be filed in court or the government could be moving slowly to avoid drawing attention to Iranian conduct at a sensitive time.

Three significant cases have been brought this year. Two, announced in March, were corporate settlements of years-long investigations. In the third, prosecutors in April accused five individuals of procuring sensitive, military-grade electronic equipment that they shipped through a network of front companies to disguise its final destination in Iran.

Though other matters are in the pipeline, only one new case has been launched since that April indictment, according to Justice Department data.

The apparent lull has accompanied a tense period in which the Obama administration has completed multilateral talks on a pact with Iran to curb its nuclear development in return for the easing of sanctions. The White House is now trying to win congressional support for the deal in the face of outspoken opposition, particularly among lawmakers who have traditionally supported Israel’s interests.

Historic Fine

“The Justice Department continues to pursue criminal prosecutions against those that seek to circumvent U.S. sanctions involving Iran and other countries,” said spokesman Marc Raimondi in an e-mail disputing the idea that prosecutors are slowing down. “Earlier this year, the department secured the largest criminal fine in history for an International Emergency Economic Powers Act violation against a company doing business with Iran and has numerous ongoing cases in various stages of investigation or prosecution.”

With four months left in the calendar year, it’s too soon to compare this year’s output against previous years, he said.

The gradual slowdown is reflected in a tally of new prosecutions drawn from data on the Justice Department’s website and court filings. It includes new charges filed in court against companies and individuals. It excludes follow-on actions, such as guilty pleas or sentencings, and cases derived from earlier prosecutions. The tally includes cases brought against global banks accused of skirting limits on Iranian transactions. Those settlements typically take years and involve multiple agencies.

Schlumberger Case

In 2014, the department brought nine significant actions against individuals or companies for violations of Iranian sanctions, including a guilty plea from Paris-based BNP Paribas SA, which paid $8.9 billion. In 2013, Justice’s national security section initiated nine court cases. There were at least 19 actions begun in 2012, including resolutions with ING Bank NV, Standard Chartered Plc and HSBC Holdings Plc.

The most notable of this year is the one referenced by Raimondi involving a unit of oil-services firm Schlumberger Ltd. The government secured a guilty plea from for violations of Iran sanctions, and the company paid a $233 million penalty. The investigation of the case, announced in March, began in 2009, according to company disclosures. The other resolution this year was a deferred prosecution agreement with Commerzbank AG, a German lender accused of executing financial transactions on behalf of Iranian clients, which paid $259 million.

Iranian Procurement

Justice also broke up an active Iranian procurement network in April. According to that indictment in Texas, four companies and five individuals conspired to supply more than $24 million worth of sensitive electronic equipment to Iran over several years. Three defendants have pleaded not guilty, and two are believed to be outside the country.

Another new case, filed last week in North Carolina, alleges that a U.S. citizen aided Iran’s national oil company on Kish Island in February 2011.

Concerns about the handling of sanctions cases popped up in an e-mail sent by a Treasury official to a state regulator in late June, as U.S. negotiators and their Tehran counterparts inched closer to the landmark nuclear agreement.

In the e-mail, obtained by Bloomberg through a Freedom of Information Law request to New York’s Department of Financial Services, the Treasury official -- whose name is redacted -- refers to an active investigation by DFS and the Federal Reserve into violations of U.S. sanctions laws by a foreign bank.

“Given the ongoing negotiations, the situation regarding Iran is extremely sensitive at the moment,” the official wrote.

“As a result, any actions that are taken in connection with sanctions violations pertaining to Iran may have serious impacts on the ongoing negotiations and U.S. foreign policy goals and objectives. The Iranians are not going to distinguish between enforcement actions taken at the state level versus enforcement actions taken at the federal level.”

No Easing

The Treasury Department’s Office of Foreign Assets Control hasn’t eased up on its enforcement of Iranian sanctions, Elisabeth Bourassa, a spokeswoman, said in an e-mail.

“The average monthly pace of enforcement actions since April is the same as it was in the previous year-and-a-half,” she said. “Since the start of the negotiating period, OFAC imposed sanctions on more than 100 Iran-related individuals and entities, concluded more than 20 Iran-related enforcement actions, and assessed approximately $525 million in penalties.”

State regulatory enforcement of European banks has become a touchy subject among U.S. and European officials. In the nuclear agreement signed by Iran and other global powers in July, one paragraph appears to be a warning to state regulators. It says: “The United States will actively encourage officials at the state or local level to take into account the changes in the U.S. policy and to refrain from actions inconsistent with this change.”

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