The company, Zoltek Corp., and its Hungarian subsidiary, Zoltek ZRT, in January 2012 began purchasing acrylonitrile, a primary component of carbon fiber, from OJSC Polymir, a subsidiary of Belneftekhim, a Belarusian state-owned oil and gas company. Belneftekhim was sanctioned by the U.S. in 2007.
Under OFAC’s “50 percent rule,” all entities owned 50 percent or more by persons whose property or interests in property are blocked are also considered blocked persons. Polymir was acquired by Naftan, a subsidiary of Belneftekhim, in December 2008.
According to OFAC, Zoltek ZRT’s purchasing and logistics manager in Hungary was aware in August 2011 of Polymir’s ownership connection to Naftan, which was placed on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List, and notified Zoltek’s senior management in Missouri. The manager was told to proceed with the Polymir transactions, since the company had received assurance from its Hungarian attorneys that U.S. sanctions laws did not apply to those purchases.
OFAC noted that the discussions and approvals involved Zoltek’s CEO, chief operating officer, chief financial officer and executive vice president for production and technology.
When the company learned that Polymir was fully absorbed into Naftan, Zoltek began ordering acrylonitrile from the sanctioned company through third-party trading companies. From Feb. 25, 2015 to Oct. 27, 2015, Zoltek in the U.S. approved 13 spot purchases by Zoltek ZRT valued at about $10.39 million, OFAC said.
The sanctions violations were brought to OFAC’s attention via a voluntary self-disclosure from Zoltek in April 2016 and January 2017.
In addition to the financial penalty, Zoltek must continue to carry out comprehensive compliance training and oversight measures with employees and managers, including the CEO, and continue investments in internal controls that allow it to “identify, interdict, escalate and report (as appropriate) transactions and activity prohibited by OFAC regulations,” the agency said.