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$305,000 Penalty for Alleged Violations of Cuban Sanctions

Tuesday, March 01, 2016
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced Feb. 25 that a company located in the Cayman Islands has agreed, on behalf of itself and its affiliate, to pay $304,706 to settle potential civil liability for alleged violations of the Cuban Assets Control Regulations. OFAC states that these companies exported goods and services in support of oil and gas exploration and drilling activities within the Cabinda Onshore South Block oil concession in Angola even though they knew or should have known that a state-owned Cuban company held a five percent interest in an oil and gas production consortium and corresponding interests in this concession and any oil or gas procured there.

The statutory maximum civil monetary penalty for the alleged violations was $1.24 million and the base penalty amount was $423,202. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (1) the companies acted with reckless disregard for U.S. sanctions by conducting transactions for the benefit of a consortium without conducting reasonable due diligence to determine who belonged to the consortium and had a corresponding interest in the concession; (2) the companies should have known that a Cuban entity belonged to the consortium because the consortium operator provided documents that showed a Cuban company as a member and there were other documents stating that this company held an interest in the consortium, including a news article and a notice in an Angolan government registry; (3) the companies are sophisticated entities that regularly deal in oilfield goods and services around the world; and (4) these companies’ sanctions compliance program was inadequate because it did not include a procedure to screen all of the consortium members. OFAC also considered the following mitigating factors: (1) the companies are eligible for up to 25 percent “first violation” mitigation because they have not been the subject of a penalty notice or finding of violation from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations; and (2) the Cuban company’s interest in the concession was only five percent, thus reducing the extent of the economic benefit provided to a sanctioned country.

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