The Departments of Commerce, Justice, State, and Treasury this morning issued joint guidance on Iran’s unmanned aerial systems (UAS)-related activities. The problem of Iranian drones supporting Tehran’s proxies in the region is not new. Iran-backed Houthi rebels have been using Iran’s drones against Saudi Arabia for several years, and Iran has been providing UAS technologies and training to its proxies, such as Hizballah, HAMAS, and others for more than a decade.
Russia’s war in Ukraine has resulted in a renewed urgency to ensure that Iranian drones do not use prohibited western technologies, and we judge that the joint advisory is as much a warning to US industry about conducting enhanced due diligence of potential counterparties, business partners, and intermediaries, as it is a guidance about the threats Iran’s UAS industry poses to global peace and order and the red flags of which US firms should be cognizant.
The advisory reminds US industry that Iran relies on foreign procurement to obtain technologies for its drones that it cannot produce domestically and stresses that Tehran often prefers US-origin technologies for its UAS, including electronics, guidance systems, engines and spare parts, and flight computers. It calls attention to the applicable sanctions and export restrictions and highlights possible penalties that could ensue for violations.
- Failure to comply with OFAC sanctions regulations can result in civil and criminal penalties.
- Violators of export controls under the Export Administration Regulations (EAR) can also face administrative or criminal enforcement actions. The Bureau of Industry and Security can also deny export privileges to those who violate US sanctions and restrictions against Iran.
- The Justice Department also prosecutes defendants for willful violations of sanctions and export controls.
The US government has created multiple task forces to track violations of numerous regulations, including the Disruptive Technology Strike Force and Task Force KleptoCapture to protect US advanced technologies from acquisition and exploitation by nation-state adversaries and enforce the sweeping sanctions, export controls, and economic countermeasures imposed against Russia for its invasion of Ukraine. The creation of bodies to help identify and punish violators indicates a continuously increasing focus on enforcement of sanctions and export controls and a determination to hold violators accountable.
US technology companies should be aware of and examine closely the red flags associated with efforts to evade sanctions or violate export controls, including efforts to obscure ownership, source of funds, and embargoed jurisdictions through the use of corporate vehicles, such as shell companies. If a counterparty refuses installation, training or maintenance of the technology they purchased, this may be a red flag. Be on the lookout for email or web address spoofing and examine closely the IP addresses that differ from the customer’s stated location. These are just some of the danger signs of which US firms should be aware when selling possibly sensitive technologies.
FiveBy’s expert analysts can help provide insights into your customers, your customer’s customers, and your supply chains. They can highlight jurisdictional risks, help determine end-users, identify atypical shipping routes and risky transshipment points, and discern possible anomalies in addresses provided by intermediaries that could ship sensitive, US-origin technologies to prohibited parties or designations.
Click below for a free consultation and help protect your firm.