OFAC Compliance

Chinese logistics company added to OFAC SDN list for business dealings with sanctioned Iranian airline

On May 19, 2020, the Office of Foreign Assets Control (OFAC) added Chinese-based Shanghai Saint Logistics Limited (Shanghai Logistics) to its Specially Designated Nationals (SDN) list for business dealings with Mahan Air.

Mahan Air is an Iranian airline itself designated by the U.S. since 2011 for “providing financial, material and technological support to the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).”

Background
Initially sanctioned because it knowingly transported operatives, weapons, and funds on flights to Iran and Syria, the sanctions against Shanghai Logistics seem to have been triggered, in part, due to Mahan Air’s business dealings related to Iran’s commitment to propping up Venezuelan president Nicolás Maduro’s allegedly illegitimate and corrupt regime. OFAC’s announcement specifically lists services such as freight booking, sales, financial, administrative, marketing support, and freight reception that Shanghai Logistics provided to Mahan Air flights between China and Iran.  

While China’s Foreign Ministry spokesman Zhao Lijian stated in a press briefing that “it is legitimate and legal for parties in the international community to engage in mutually beneficial cooperation with Iran that is in accordance with international law,” the U.S. views the matter differently. 

As a result of the designation, all property and interests of Shanghai Logistics in the United States, or in the possession or control of U.S. persons, are blocked and must be reported to OFAC. Additionally, any U.S-based individuals or entities, as well as foreign financial institutions, found guilty of doing business with, or knowingly facilitating the transfer of funds toMahan Air, run the risk of being at the receiving end of an OFAC designation. 

Why it matters—the vicious cycle of corrupt regimes
In this instance, OFAC determined that Mahan Air was transporting Iranian technicians and technical equipment to Venezuela, using materials sourced from China, all in an effort to help Maduro revive his country’s energy industry.  

The U.S. also claims the Government of Venezuela is reportedly paying for this support with gold directly from the Central Bank of Venezuela. 

Export compliance is a complex web
The export compliance history of Mahan Air is worthy of an article in and of itself, but the key takeaway from this story is a reminder that U.S. and international sanctions are always evolving. With the current business landscape much more global than in the past, organizations are facing increasing pressure to ensure due diligence takes place in order to avoid being added to OFAC’s SDN list, or even multiple government watch lists. Never mind the fact that we are in the midst of a global pandemic, this is something no business wantseven in the best of times. 

A footnote—Mahan Air and its links to the COVID-19 pandemic
While not related to the sanctions placed against Shanghai Saint Logistics Limited, there appears to be a curious COVID-19 twist to Mahan Air. Despite announcing it had suspended flights from China to Iran on January 31, 2020, the airline continued operations between select Chinese cities until March 4 

Though claiming they were simply providing humanitarian assistance to China post the January 2020 announcement, given that Iran itself was facing their own shortages of Personal Protective Equipment (PPE), and other critical medical supplies, some allege these flights were, in fact, repatriation flights Mahan deliberately obfuscated. This includes at least one journey from Wuhan to bring back Iranian students, which may have played a role in making Iran the Middle East’s COVID-19 hotspot.