U.S. Fines Thai Company SCG Plastics $20 Million Over Alleged Iran Sanctions Violations

Treasury says SCG used certain shipping and documentation practices to conceal that the products it sold were made in Iran

· Thai company SCG Plastics has agreed to pay about $20 million to settle allegations that it used the U.S. financial system to receive hundreds of millions of dollars for products made in Iran, in violation of U.S. sanctions.

· SCG Plastics, part of Bangkok-based SCG Chemicals, is no longer an operating business after its assets and liabilities were transferred to Thai Polyethylene, another subsidiary of the parent company, in January 2022.

· Since at least 2009, SCG Plastics allegedly purchased, marketed and resold plastic resin products made by an Iranian joint venture, owned in part by its parent company and the National Petrochemical Company of Iran, which is part of the government, to its customers in East Asia.

· Joint venture, called Mehr Petrochemical Co., produces high-density polyethylene resin that is commonly used to make injection-molded plastics.

[ABS News Service/20.04.2024]

Thai company SCG Plastics has agreed to pay about $20 million to settle allegations that it used the U.S. financial system to receive hundreds of millions of dollars for products made in Iran, in violation of U.S. sanctions.

The settlement, announced by the Treasury Department on Friday, comes as the U.S. increases its measures against Iran and cracks down on sanctions evasion amid growing geopolitical tensions in the Middle East. The Biden administration on Thursday imposed a new wave of sanctions and export controls on Iran in response to Tehran’s recent air attack on Israel.

The U.S. has broad sanctions against Iran, prohibiting any U.S. companies from dealing with the government of Iran and its entities. U.S. sanctions and restrictions also generally extend to non-U.S. companies that use U.S. dollars for transactions, which are generally processed by U.S. financial institutions acting as correspondent banks.

“We have also vigorously enforced our sanctions, including by levying historic fines and exposing sanctions evasion schemes and networks. Our actions make it harder and costlier at every turn for Iran to continue its destabilizing behavior,” U.S. Treasury Secretary Janet Yellen said in a statement Thursday announcing the new sanctions.

SCG Plastics, part of Bangkok-based SCG Chemicals, is no longer an operating business after its assets and liabilities were transferred to Thai Polyethylene, another subsidiary of the parent company, in January 2022. Thai Polyethylene also entered into an agreement with the Treasury to maintain U.S. sanctions compliance commitments for five years.

Representatives for SCG Chemicals didn’t immediately respond to a request for comment.

Since at least 2009, SCG Plastics allegedly purchased, marketed and resold plastic resin products made by an Iranian joint venture, owned in part by its parent company and the National Petrochemical Company of Iran, which is part of the government, to its customers in East Asia, according to Treasury’s Office of Foreign Assets Control, which implements and enforces U.S. economic sanctions.

The joint venture, called Mehr Petrochemical Co., produces high-density polyethylene resin that is commonly used to make injection-molded plastics, such as food and beverage containers, as well as shampoo and cleaning product bottles.

OFAC alleged that SCG Plastics regularly issued invoices to customers that instructed them to make U.S. dollar-denominated payments to its bank in Thailand. These U.S. dollar-denominated payments were processed by U.S. correspondent banks.

Between 2017 and 2018, U.S. correspondent banks processed $291 million in wire transfers for sales of Iran-made products for SCG, Treasury said. SCG also allegedly initiated wire transfers in U.S. dollars on behalf of the Mehr joint venture to pay for the venture’s debts.

OFAC also alleged that to process these payments, SCG used certain shipping and documentation practices that obfuscated the fact that the products were made in Iran. These included listing “Middle East” as the country of origin instead of Iran, and listing shipments as being from the United Arab Emirates, rather than Iran, on commercial invoices.

Treasury said these are seen as “hallmarks of deceptive practices” used by people to obscure Iran’s involvement in prohibited transactions and intended to evade detection by the U.S. financial institutions processing the transactions.