ZTE Will Pay Record Fine for Sales to Iran, North Korea

Mar 10, 2017, 02:42
ZTE Will Pay Record Fine for Sales to Iran, North Korea

Early this month, the US fined ZTE of China $1.19 billion for breaking sanctions and selling electronics to the nuclear-armed North. This move made it hard for ZTE to acquire USA products such as chips and software.

According to a five-page criminal information charging document, ZTE tried to hide data regarding the illegal sales from 2013 to 2016 and then made false statements to the FBI that it was in compliance with federal law.

"While the investigation was ongoing, ZTE resumed its business with Iran and shipped millions of dollars' worth of US items there", according to a statement issued by the Department of Justice, which said ZTE continued the shipments to customers in Iran for almost six years.

"This plea agreement holds them accountable, and makes clear that our government will use every tool we have to punish companies who would violate our laws. and jeopardize our national security", Sessions added.

The US government had alleged that the Shenzhen-based company had illegally shipped telecommunications equipment to Iran and North Korea in violation of its Export Administration Regulations (EAR) and the Iranian Transactions and Sanctions Regulations (ITSR). The action marks the Treasury's Office of Foreign Assets Control's largest settlement to date with a non-financial entity.

The largest publicly traded telecom manufacturer in China reported a net loss of 2.36 billion yuan (US$342 million) for 2016, compared with a profit of CNY3.21 billion in the previous year.

Dr Zhao Xianming, who was appointed chairman and CEO of ZTE in April previous year, said the company acknowledges its mistakes and is committed to making changes.

"The company has taken an overhaul of its organisation and structure, business procedures and internal control", Zhao said, adding the company had "taken necessary measures to ensure the company's compliance with United States export laws and performance of its obligations under the agreements". The Chinese cellphone equipment-maker receives nearly one-third of its components from American companies such as Qualcomm, Microsoft and Intel, according to Reuters.

The $1.2 billion fine is made up of an immediate fine of $892 million and future penalties of $300 million, which will depend on whether the company complies with the terms of the deal.

In addition, ZTE removed compliance from the responsibility of the legal department and created a separate compliance department with increased headcount to build the compliance program with full independence.

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