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Penalty for Dealing with Iran Sharply Reduced for Struggling, Cooperative Company

Friday, July 31, 2015
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced July 29 its issuance of an $82,260 penalty against a company for violations of the Iranian Transactions and Sanctions Regulations. OFAC states that this company conducted 33 transactions in which it imported Web development services from an Iranian company that worked collaboratively with its computer engineers via a private Internet portal to develop Web-based systems and applications that were used to automate online business processes and operations for the company’s customers.

The statutory maximum civil monetary penalty for the alleged violations was $8.25 million but the base penalty amount was $102,825. There were a number of aggravating factors: (1) the company acted recklessly by conducting transactions over a period of more than five years with a company that it knew was located in Iran without inquiring about the permissibility of those transactions, (2) at least one co-owner and manager knew that the company was conducting transactions with an Iranian company, (3) the company continued to receive technical assistance from the Iranian company after it became aware that it had violated the ITSR and that this technical assistance was not covered by the informational material exemption in the ITSR, (4) the company had no OFAC compliance program in place at the time of the transactions and has not implemented one since, and (5) the company engaged in a limited remedial response to the apparent violations. However, OFAC considered the following to be mitigating factors: (1) the company has no prior OFAC sanctions history, including no penalty notice or finding of violation in the five years preceding the date of the earliest transaction giving rise to the apparent violations; (2) the company is a small business that claims to be suffering financial difficulties; and (3) the company substantially cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for 541 days.

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