Fracht Pays $1.61 Million for Venezuela & Iran Sanctions Violations, OFAC Says

Key Takeaways

• Fine imposed: Fracht will pay $1,610,775 for sanctions violations involving Venezuela and Iran.
• Blocked counterparties: The deal involved EMTRASUR/CONVIASA and a Mahan Air aircraft, both on OFAC’s SDN List.
• Iranian crew services: The use of Iranian nationals on the flight triggered additional sanctions violations.
• Executive missteps: Fracht bypassed internal controls despite knowing the risks, resulting in nearly $1 million in payments to a blocked entity.
• Remediation: The company has since ramped up compliance staffing, invested heavily in controls, and tightened vetting of contracts and vendors.

Deep Dive

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) has fined Houston-based freight forwarder Fracht $1,610,775 after finding the company violated multiple sanctions programs tied to Venezuela and Iran. Regulators said the violations were egregious and not voluntarily self-disclosed, though Fracht ultimately cooperated and has since overhauled its compliance program.

The case traces back to an urgent May 2022 shipment of auto parts from Mexico to Argentina. Fracht, struggling to secure an aircraft, turned to a Mexico-based broker and ended up contracting with EMTRASUR, a subsidiary of Venezuela’s state-owned airline CONVIASA, which has been blocked under U.S. sanctions since 2019. The deal identified aircraft YV-3531, which wasn’t just Venezuelan. It had previously been sanctioned as property of Iran’s Mahan Air, a carrier blacklisted for terrorism and proliferation concerns. The flight also used an Iranian crew.

Despite these obvious warning signs, Fracht executives moved ahead without running sanctions screening or seeking legal review. Payments totaling $995,000 were made, the bulk of which went directly to EMTRASUR. OFAC determined these actions violated the Venezuela Sanctions Regulations, the Global Terrorism Sanctions Regulations, the Weapons of Mass Destruction Proliferators Sanctions Regulations, and the Iranian Transactions and Sanctions Regulations.

OFAC said Fracht’s leadership, including senior vice presidents, were aware of the arrangement but chose speed over compliance. That decision not only benefited Venezuela’s Maduro regime financially but also involved a plane tied to sanctioned Iranian interests.

The $1.61 million settlement was reduced from a potential maximum penalty of $2.1 million, in part because Fracht cooperated and quickly implemented sweeping compliance reforms. These included firing the executive responsible, mandating legal and sanctions review for contracts, hiring nine new compliance staff, and investing more than $1 million annually in compliance systems and training.

OFAC used the case to emphasize that freight forwarders and other intermediaries sit at the heart of global trade and can’t cut corners.

“Expediency cannot come at the expense of compliance,” the agency emphasized, warning that ignoring red flags, even under pressure to meet customer demands, can lead to serious sanctions exposure.

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