OFAC: Know Your Equipment Lease End-User

Apollo Aviation Group, which is now part of Carlyle Aviation Partners Ltd., has agreed to pay a $210,600 civil penalty to settle 12 alleged violations of the Sudanese Sanctions Regulations, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) said.

The violations began on July 30, 2013, when Apollo leased two aircraft engines to a company in the United Arab Emirates, which in turn subleased the engines to a Ukrainian airline that installed them on an aircraft leased to Sudan Airways.

At the time of the violations, Sudan Air was listed on OFAC's Specially Designated Nationals and Blocked Persons (SDN) List for its ownership by the Sudanese government. U.S. persons and companies are generally prohibited from exporting to entities on the SDN List.

OFAC did not name the United Arab Emirates company or the Ukrainian airline in the settlement agreement.

Apollo's agreement with the company in the United Arab Emirates included a provision prohibiting the lessee from maintaining, operating, flying or transferring the engines to any countries that are subject to U.S. and UN sanctions. However, OFAC said Apollo "failed to monitor or otherwise verify the actual whereabouts of these aircraft engines during the life of its leases."

Sudan Air used the two engines from November 2014 to February 2015, before they were returned to Apollo in March 2015.

Before it was discovered that the engines had been installed on the Sudan Air plane, Apollo in late May 2015 had already leased a third aircraft engine to the United Arab Emirates company, which followed the same pattern of subleasing it to the Ukrainian airline for an aircraft leased to Sudan Air. Apollo ordered the engine returned in September 2015.

OFAC said Apollo could have been assessed a maximum $3 million civil penalty for the sanction violations, but the company filed a voluntary self-disclosure with the agency and the violations were considered "non-egregious."

The agency also noted Apollo implemented internal measures, including the addition of compliance personnel, systems and company-wide training on U.S. export laws, to prevent further sanctions violations.

In addition, OFAC praised Apollo for providing information related to the violations "in a clear, concise and well-organized manner."

OFAC said the Apollo enforcement action "highlights the importance of companies operating in high-risk industries to implement effective, thorough and ongoing, risk-based compliance measures, especially when engaging in transactions concerning the aviation industry."

In July, OFAC issued an advisory to the civil aviation industry to warn of deceptive practices used by Iran to get around U.S. and UN sanctions to support its aviation industry. Although the advisory focuses on Iranian aviation, the agency said participants in the civil aviation industry should be aware that others subject to U.S. sanctions may use similar deceptive practices.

OFAC removed Sudan Air from the SDN List on Oct. 12, 2017.

The Carlyle Group CG completed the acquisition of Apollo on Dec. 19, 2018. Apollo was established in 2002 by Bill Hoffman and Robert Korn and had about $5.6 billion in assets at the time of the acquisition.

Image by Carrie Z from Pixabay