Treasury targets networks facilitating illicit trade and UAV transfers on behalf of Iranian military

Overview

On April 25, 2024, the Department of the Treasury, Office of Foreign Assets Control (OFAC) announced sanctions on one dozen entities, individuals and vessels involved in financing and facilitating the clandestine sale of Iranian unmanned aerial vehicles (UAVs) for Iran's Ministry of Defense and Armed Forces Logistics (MODAFL). According to OFAC, MODAFL actively supports Russia's war in Ukraine as well as Iran's Islamic Revolutionary Guard Corps (IRGC). These designations represent another wave of sanctions in just a few weeks as the US government continues to target the Iranian UAV program. As a whole, these actions build upon the joint guidance issued by the US Department of Commerce, the US Department of Justice, the US Department of State and the US Department of the Treasury this past June to assist companies with understanding the threat posed by Iran's UAV-related activities and the steps they can take to avoid or prevent any activities that would support the further development of Iran's UAV program.

Relevant authorities

These latest actions were taken pursuant to three E.O.s:

• E.O. 13224, as amended (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism) targets terrorist financing by prohibiting contracts and transactions with certain foreign persons.
• E.O. 13382 (Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters) authorizes blocking sanctions against any foreign persons determined to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons) by a foreign person or country of proliferation concern.
• E.O. 14024 (Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation) broadly authorizes actions targeting the Russian financial services, defense, cyber and other sectors of the Russian economy.

Pursuant to these E.O.s, OFAC has designated persons and entities to the Specially Designated Nationals and Blocked Persons (SDN) List. US persons are prohibited from engaging in any transactions with SDNs and must block property of SDNs in their possession or under their control in which an SDN has an interest.

Newly sanctioned parties

OFAC designated companies, individuals and vessels as part of its comprehensive attack on the Iranian UAV program.

Sahara Thunder

According to OFAC, Sahara Thunder is the primary front company that oversees MODAFL's commercial activities related to clandestine sale of UAVs. Sahara Thunder reportedly plays a major role in designing, developing, manufacturing and selling thousands of UAVs that ultimately end up in Russia. Since late 2022, Sahara Thunder reportedly had been negotiating a deal with Russian officials to deliver and produce thousands of UAVs to a US-sanctioned facility in Russia, Joint Stock Company Special Economic Zone of Industrial Production Alabuga (SEZ Alabuga). Sahara Thunder has been designated pursuant to two separate authorities, E.O. 13224 and E.O. 14024.

Individuals identified as part of Sahara Thunder's leadership and network have also been designated as SDNs.

• Kazem Mirzai Kondori, Hossein Bakshayesh and Hojat Abdulahi Fard are being designated pursuant to E.O 13224 and E.O. 14024.
  • Abdulahi Fard is also reportedly a representative of MODAFL's subsidiary Etemad Tejarat Misagh, which has been designated pursuant to E.O. 14024.
• Sahara Thunder's shipping network has been determined to assist in the sale and shipment of Iranian commodities on behalf of MODAFL to Russia, Venezuela and the People's Republic of China. Zen Shipping & Port India Private Limited, Safe Seas Ship Management FZE, Arsang Safe Trading Co., Asia Marine Crown Agency, Coral Trading EST. and Sea Art Ship Management (OPC) Private Limited have been designated pursuant to E.O. 13224.
  • The vessels used-the CHEM, DANCY DYNAMIC, K M A and CONRAD-have been designated as SDNs as property in which Safe Seas Ship Management FZE has an interest.

Other Designations Pursuant to E.O. 13224

OFAC has also designated a vessel and two companies that are reportedly involved in the shipment of Iranian commodities for Sepehr Energy Jahan Nama Pars (Sepehr Energy). Sepehr Energy plays a leading role in Iran's Armed Forces General Staff (AFGS) commercial activities.

• Onden General Trading FZE and Saone Shipping Corporation have been designated for their involvement in shipping tens of millions of dollars of Iranian commodities on behalf of Sepehr Energy via the LA PEARL. According to OFAC, the LA PEARL has been identified as property in which Saone Shipping Corporation has an interest.

Designations Pursuant to E.O. 13382

Bonyan Danesh Shargh Private Company (Bonyan Danesh Shargh) produces UAVs, quadcopters, engines and electronic and digital parts, and is based in Iran. It has reportedly been involved in discussions regarding the SEZ Alabuga UAV facility in Russia.

• Abbas Abdi Asjerd, Seyed Mohsen Vahabzadeb Moghadam and Zahra Abdi Asjerd have been designated for being part of Bonyan Danesh Shargh's leadership.
• Hamid Eidi Ashjerdi has been designated for provision of auditing and inspection services to Bonyan Danesh Shargh.
• Mohammad Ali Moradipour has been designated for providing auditing and inspection services to Pisho Sanat.
• Iran-based firms Baran Sazan Caspian Anzali Free Zone Company (BSC), Sanaye Motorsazi Alvand Private Company (Alvand) and Pishro Sanat Aseman Sharif Private Company (Pishro Sanat) have also been designated pursuant to E.O 13382 for being owned or controlled by Abbas Abdi Asjerd.

Pouya Air was previously designated pursuant to E.O. 13224 and has been re-designated to E.O. 13382 for its transshipment of Iranian military UAVs to Russia. Additional designation of an entity pursuant to a separate authority does not change the SDN status of an entity.

• Pouya Air's aircraft, EP-PUS, has been separately designated to the SDN List. The aircraft is believed to have transported UAVs and related cargo from Iran to Russia, and has been identified as property in which Pouya Air has an interest.

Practical considerations

This wave of designations emphasizes the ongoing efforts of the US to tackle sources of support for Iran's UAV program. The US government's use of a mix of authorities to achieve its goals is evidenced by the fact that these actions were taken pursuant to three executive orders associated with sanctions programs targeting different areas (terrorist financing, WMD proliferation and the Russian economy). Companies must remain vigilant and continue to closely scrutinize their compliance diligence processes to ensure adherence as the sanctions programs evolve.

As updates occur in the programs and relevant guidance, companies should ensure those updates are reflected in their compliance policies and procedures. With these latest designations in particular, US and non-US financial institutions and companies in the UAV-manufacturing supply chain (including those providing support services such as shipping) should carefully examine transactions for red flags that may indicate the involvement of or a benefit to SDNs and otherwise sanctioned parties to assess their US sanctions exposure.

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