Office of Foreign Assets Control Stresses Thorough U.S. Sanctions Diligence for Energy Transactions in $275 Million Settlement

On May 18, 2026, the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) announced a $275 million settlement with Adani Enterprises Limited (AEL), an Indian company that allegedly purchased Iranian-origin liquified petroleum gas (LPG) in apparent violation of U.S. sanctions. The settlement — OFAC’s largest since 2023 — offers useful insights into OFAC diligence expectations regarding detecting and adequately adjudicating sanctions-related red flags, including for non-U.S. companies engaged in transactions with limited U.S. nexus (as was the case for AEL).

Background

AEL is an Indian multinational company that operates in the infrastructure, energy, logistics, and industrial operations sectors. From November 2023 to June 2025, AEL purchased LPG shipments from a Dubai-based supplier (the Dubai Supplier). The Dubai Supplier represented that the LPG originated in Oman and Iraq. It also provided transaction documents that appeared to support these representations. However, OFAC determined that multiple red flags should have alerted AEL to the likelihood that the LPG was in fact sourced from Iran. In connection with these transactions, AEL allegedly caused U.S. financial institutions to process 32 U.S. dollar payments totaling $192,104,044, in violation of U.S. sanctions targeting Iran. OFAC determined the apparent violations were egregious and not voluntarily self-disclosed, and even though AEL received some credit for its cooperation with the investigation, the company nevertheless incurred OFAC’s largest monetary penalty since 2023. AEL’s settlement with OFAC was announced on the same day that the U.S. Department of Justice moved to drop criminal charges in a bribery and fraud investigation against AEL’s founder, Gautam Adani.

OFAC’s settlement with AEL emphasizes its demanding expectations with respect to diligence red flags that arise in a transaction even when the transaction documentation appears facially valid. The enforcement release explains that “relying solely on counterparty documentation and warranties with respect to cargo origin may be insufficient” to mitigate U.S. sanctions risks. Instead, companies — “especially buyers of energy products and financial institutions facilitating related transactions” — should “carefully review transaction details for indications that they are dealing in products or cargoes of Iranian origin.”

The settlement also indicates that parties are expected to look beyond obvious warning signs when assessing potential red flags. OFAC’s enforcement release lists the factors it considered to warrant further diligence in this case. Certain of the enumerated red flags were relatively straightforward, such as suspiciously low transaction prices and warnings raised by third parties. However, OFAC is also taking the position that AEL should have detected and acted on warning signs that were less readily discernable — including by assessing whether facilities at the purported Omani port of origin were capable of handling the relevant cargo and by reviewing vessel transponder data. We discuss below the key red flags that, in OFAC’s view, should have prompted AEL to investigate and address the sanctions compliance issues relating to its purchases of LPG from the Dubai Supplier.

Red Flags in the AEL Case

• Concerns raised by third parties. OFAC viewed warnings from third parties that the Dubai Supplier was dealing in Iranian oil as a red flag. On at least four occasions between March 2023 and February 2024, AEL was made aware of third parties’ concerns that the Dubai Supplier’s cargo may have originated in Iran. In one such case, for example, the head of AEL’s LPG unit received inquiries from a third party suggesting that the Dubai Supplier was using a specific vessel to sell Iranian-origin LPG to another customer and falsely claiming the LPG originated in Oman. AEL later went on to purchase two cargos of Iranian-origin LPG shipped on the same vessel. OFAC appeared to give little weight to AEL’s claim that it believed these allegations were being advanced by competitors seeking to prevent AEL from entering the LPG market.
• Suspicious vessel age, size, and activity. OFAC considered the questionable conduct and characteristics of vessels carrying the Dubai Supplier’s cargo to constitute another red flag. The vessels carrying the LPG routinely engaged in Automatic Identification System (AIS) manipulation (including signal spoofing and unexplained dark periods); made uneconomic or illogical vessel movements or port calls; and made frequent name, ownership, and flag state changes. The vessels also had suspicious characteristics. For example, OFAC noted that the vessel used to deliver the first shipment to AEL was 25 years old and unusually small for the transport of LPG. OFAC explained that large vessels are typically a more cost-effective means of transporting gas because they benefit from economies of scale and greater fuel efficiency. By contrast, the vessel at issue was a small “handysize” tanker with a capacity of only approximately 15,000 to 25,000 cubic meters of gas. OFAC emphasized that energy importers “must be familiar with and monitor for typologies associated with Iran’s reliance on a shadow fleet of vessels to transport its energy exports.” It explained that examples of common shadow fleet activity include “non-commercially viable activity like successive [ship-to-ship] transfers, deliberate vessel position information manipulation, fraudulent vessel identity claims, use of older, poorly maintained vessels, and nexuses to sanctioned actors or activity through opaque vessel management and ownerships structures, among others.”
• Inconsistent and implausible origin documentation. In addition, OFAC emphasized that inconsistent and implausible shipping documentation constituted a red flag. First, OFAC noted that the documents associated with the first shipment from the Dubai Supplier to AEL listed an implausible port of origin. These documents indicated that the LPG was loaded in Sohar, Oman. However, OFAC explained that that Sohar is not a significant source of Omani LPG exports, which primarily originate in Salalah, Oman. It further observed that Sohar lacked facilities capable of exporting fully refrigerated LPG at the time of the first shipment in November 2023. In addition, OFAC noted that the transaction documentation bore “indicia of falsification,” including illogical and nonsequential numbering of certificates of origin, repeated unexplained delays in postshipment issuance of documents, and use of outdated document templates. OFAC warned that “[i]mporters should conduct appropriate due diligence to corroborate the origin of energy products, including taking steps to verify the authenticity of certificates of origin issued by a relevant competent authority.” It added that such verification was particularly important when certificates of origin are “issued in jurisdictions where certain actors are known to obfuscate Iranian origin, such as Oman, United Arab Emirates, or Iraq.”
• Suspiciously low price. The Dubai Supplier’s suspiciously low prices constituted another red flag. OFAC noted that the prices, which were significantly below market value, did not appear to be commercially reasonable in light of the purported origin of the cargo, expected freight costs for shipments on vessels chartered by the supplier, and reasonable estimates for port fees and profit margins. It reminded parties to “closely scrutinize and deploy enhanced due diligence when presented with proposals offering prices significantly below prevailing market rates” and added that “[a]dditional caution is especially warranted when significantly below-market prices are being offered by entities with limited public profile or trading history, and where multiple affiliated entities are used to conduct similar transactions for unexplained reasons.” In short, OFAC explained, “[t]his case also embodies the adage ‘if a deal is too good to be true, it probably is.’”
• Prior blocks and suspicious payment instructions. Finally, OFAC viewed a prior block on an AEL payment to the Dubai Supplier and subsequent suspicious payment instructions as a red flag. In February 2024, the Dubai Supplier’s bank stopped a payment for one of the shipments due to an “internal policy.” The Dubai Supplier then instructed AEL to make payment via a new account at another Dubai-based bank and to contact specific employees at a specific branch of the new bank. Although the original bank did not explicitly indicate that the payment was blocked due to sanctions concerns, OFAC considered the block and subsequent suspicious payment instructions as a red flag.

Lessons Learned

The AEL settlement is a stark reminder to parties not to simply rely on facially valid documentation when operating in a high-risk industry like oil and gas. OFAC expects parties to be attentive to red flags that may indicate potential U.S. sanctions issues and to investigate those red flags when they arise. The settlement also emphasizes that parties’ efforts to detect and investigate red flags must go beyond the obvious warning signs and should include consideration of sector-specific signs and deviations from commercial norms and expectations, which may be a sign of sanctions risk, as part of an effective sanctions compliance framework. Even if a transaction does not present any red flags on its face, parties are still expected to conduct diligence before concluding that no issues are present. This is true even for non-U.S. companies engaged in transactions with limited U.S. nexus — as was the case for AEL in this matter, where the U.S. nexus was use of U.S. dollars. Finally, OFAC noted in the closing of the enforcement release that it is prepared to offer significant credit for prompt disclosure, rapid investigation, and significant cooperation, even where the threshold for voluntary self-disclosure credit is not met.

Sidley lawyers are actively advising many of our clients on U.S. sanctions targeting Iran, including internal investigations of apparent violations as well as establishment of risk-based U.S. sanctions compliance programs. Please reach out to our team or your regular Sidley point of contact if you have any questions on these issues.