Arrest of Huawei CFO Meng Wanzou Points to an Increase in Prosecutions for Violating US Sanctions Against Iran
Federal prosecutors in New York arrested Meng Wanzhou, the Chief Financial Officer of Huawei Technologies, a global manufacturing company based in China. Arrested in Canada, Wanzhou now faces extradition and prosecution in the United States.
While prosecutors haven’t yet announced what criminal charges they are bringing against Wanzhou, it is widely believed that the charges are related to allegations that Huawei is violating sanctions the U.S. government recently imposed on Iran.
For the past year, U.S. officials have been investigating whether Huawei has violated sanctions prohibiting the sale of American-made goods to certain countries, including Cuba, Iran, Sudan, and Syria. Earlier this year, Chinese manufacturer ZTE pleaded guilty to violating American sanctions that prohibit the export of American-made goods to Iran, and the company was fined $1.19 billion. Many believe Wanzhou, other Huawei executives, and perhaps Huawei itself will face similar charges.
Individuals and organizations suspected of violating American sanctions can be prosecuted under 50 U.S.C. § 1705(a), the law that makes it a federal crime to “willfully” violate certain laws and regulations governing international emergencies, such as sanctions on foreign countries and restrictions on international trade. In addition to civil penalties, an individual who violates this law can be fined up to $1 million and sentenced to prison for up to twenty years.
The Export Administration Regulations (“EAR”) is the regulation that implemented sanctions against Cuba, North Korea, Iran, Sudan, and Syria. The Iranian sanctions specifically prohibit importing goods from Iran, exporting goods to Iran, and the “re-exportation” of goods to Iran from a third country. In other words, the law prohibits foreigners from getting around ban on exporting goods to Iran by importing American-made products to other countries and then selling them to Iran.
Our firm has helped business executives who were facing similar federal charges for violating US sanctions against Iran stay out of prison. We have been successful by focusing on certain defenses available to people charged under this law.
In re-exportation cases, the government must prove beyond a reasonable doubt that a person or corporation knew or had reason to know that the re-exportation was “intended specifically for Iran.” This means that a company selling American-made goods isn’t guilty of violating the sanctions against Iran just because a purchaser subsequently takes those goods to Iran unless the company somehow knew the goods would end up there.
The law also doesn’t apply when the American-made goods in question are “substantially transformed into a foreign-made product” or when they are “incorporated into a foreign-made product” wherein the American product only constitutes “less than 10 percent of the total value of the foreign-made product.” This is a powerful defense for individuals and companies that export products containing American raw materials to countries under sanctions.
The news of Wanzhou’s arrest and the investigation into Huawei is significant. While the federal government has charged individuals with violating sanctions before, the arrest of a top executive of a major global corporation reflects a new, more aggressive approach to prosecuting sanctions violations.
If you have been notified that you or your company are the target of a federal investigation into sanctions violations, or if you believe you may be subject to such an investigation, contact our firm to speak with one of our experienced attorneys. We have over twenty years of experience defending individuals and corporations against federal prosecutions, including those charged with violating sanctions against Iran.