The Commerce Department determined ZTE, which was previously fined for shipping telecommunication equipment to Iran and North Korea, subsequently paid full bonuses to employees who engaged in the illegal conduct, failed to issue letters of reprimand and lied about the practices to USA authorities, the department said.
But instead of punishing those involved, "ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand", the Commerce Department said in a statement.
A new report this morning reveals that a move by the United States to ban American firms selling components to the Chinese telecom equipment maker ZTE Corp will also hit a target closer to home: Qualcomm, a major supplier of chips for ZTE's phones.
The ban follows on from a settlement agreed previous year between ZTE and the US Department of Commerce's Bureau of Industry and Security - which included the threat of the ban were it found to be non-compliant.
The West warned telecoms operators not to use ZTE equipment because its state ownership raised security fears.
Trading in ZTE shares was suspended in Hong Kong.
Last year, the US government forced the Chinese company to dismiss four senior employees but the US Department of Commerce says ZTE should also have disciplined 35 employees. -China Tension over trade between the world's two biggest economics.
"ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation", Commerce Secretary Wilbur Ross said in a statement provided to TechCrunch.More news: Seahawks reportedly postpone a Colin Kaepernick workout over protest uncertainty
"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company", ZTE's Chairman and Chief Executive Officer Zhao Xianming said at the time.
The UK's National Cyber Security Centre (NCSC) warned the use of ZTE equipment would "have a long term negative effect on the security of the UK". President, Donald Trump, accused China along with Russian Federation on the issue of devaluation of the currency.
"The UK telecommunications network already contains a significant amount of equipment supplied by Huawei, also a Chinese equipment manufacturer".
For ZTE itself, the latest US action means one of the world's top makers of smartphones and communications gear will no longer be able to buy technology from American suppliers, including components central to its products.
ZTE's smartphones use microchips from Qualcomm and glass from Corning.
Shares in optical networking equipment maker Acacia Communications Inc, which gained just under a third of its total 2017 revenue from ZTE, tumbled 35 percent.
ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.