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$4.3 Million Penalty to Settle Charges of Willful and Reckless Illegal Exports to Iran

Wednesday, September 14, 2016
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced Sept. 13 that a U.S. company has agreed to pay $4.32 million to settle charges that it violated the Iranian Transactions and Sanctions Regulations by indirectly exporting seeds to two Iranian distributors on 48 occasions over a number of years. OFAC states that the company shipped the seeds to consignees based in two third countries in Europe or the Middle East and that its customers arranged for the re-exportation of the seeds to Iran. OFAC alleges that although personnel (including several mid-level managers) from various business units within the company and/or its parent were aware of U.S. economic sanctions programs involving Iran and the need to apply for and obtain a specific license from OFAC to export the seeds in question, the company engaged in a pattern or practice designed to conceal the involvement of Iran and/or obfuscated the fact that the seeds were ultimately destined for distributors in Iran.

An OFAC notice states that both the statutory maximum and base civil monetary penalty amounts for the alleged violations were $12 million. OFAC determined that the company did not voluntarily self-disclose the alleged violations, which constitute an egregious case. Further, OFAC considered the following to be aggravating factors: (1) the company willfully violated U.S. sanctions on Iran by engaging in, and systematically obfuscating, conduct it knew to be prohibited; (2) the company demonstrated recklessness with respect to U.S. sanctions requirements by ignoring its OFAC compliance responsibilities despite substantial international sales and warnings that OFAC sanctions could be implicated; (3) multiple employees had contemporaneous knowledge of the transactions giving rise to the alleged violations and that the seeds were intended for reexportation to Iran, and the company continued sales to its Iranian distributors for nearly eight months after its director of finance learned of OFAC’s investigation; (4) the company engaged in this pattern of conduct over a period of years, providing over $770,000 in economic benefit to Iran; (5) the company did not initially cooperate with OFAC’s investigation, providing some information that was inaccurate, misleading, or incomplete; and (6) the company is a division of a commercially sophisticated international corporation.

On the other hand, OFAC considered the following to be mitigating factors: (1) the company has not received a penalty notice or finding of violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the alleged violations, making it eligible for “first offense” mitigation of up to 25 percent; (2) the exports at issue were likely eligible for an OFAC license; (3) the company took remedial steps to ensure future compliance with OFAC sanctions, including stopping all exports to Iran, implementing a compliance program, and training at least some of its employees on OFAC sanctions; and (4) the company cooperated with OFAC by agreeing to toll the statute of limitations for a total of 882 days.

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