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Remedial Measures Yield Lower Penalty for Sanctions Violations

Thursday, January 30, 2020
Sandler, Travis & Rosenberg Trade Report

A ship management company has agreed to pay a $1.125 million penalty to settle 36 apparent violations of the Burmese Sanctions Regulations (which have since been terminated). According to the Office of Foreign Assets Control, this case shows that it is essential for companies engaging in international transactions to consider and respond to sanctions-related warning signs, such as information that goods originated from or were supplied by a person or entity subject to U.S. economic and trade sanctions. It also highlights the benefits of self-disclosing violations and taking remedial measures.

For more information on avoiding and mitigating export sanctions violations, please contact export attorney Kristine Pirnia.

The apparent violations involve the ship company’s dealings in the property interests of a Burmese company that, at the time, was identified on OFAC’s List of Specially Designated Nationals and Blocked Persons and its provision of transportation services from Burma to Singapore for a land reclamation project for the benefit of the Burmese company. OFAC notes that the ship company refused to sign export documents that listed the Burmese company as the shipper and again when they were changed to list an alternate shipper. The ship company even applied for an OFAC license authorizing the export given the apparent involvement of an SDN, but while that application was pending the ship company signed the export documents to ensure the safety of its crew, which had had its passports taken by local officials in Burma.

The ship company subsequently filed a new license application with OFAC for additional shipments. That application was denied but the ship company’s president allegedly failed to forward that denial to others within the company. As a result, shipments involving the Burmese SDN continued both before and after the OFAC denial.

The statutory maximum civil monetary penalty amount in this matter was $9 million. Aggravating factors included that the ship company ignored OFAC’s license denial and other warning signs, the involvement of the ship company’s president, and the fact that the ship company is a commercially sophisticated company operating globally with experience and expertise in international trade and shipping transactions.

Mitigating factors included that the ship company had no OFAC penalty or violation in the previous five years and that it undertook significant remedial measures, including appointing a dedicated compliance officer; developing and implementing a formal sanctions compliance program with specific policies and procedures for compliance screening, transaction checklists, and red flag identification tools; instituting a practice of requiring continuing education and training on sanctions-related matters for its personnel; enhancing its screening procedures and updating and strengthening the sanctions compliance provisions included in its standard contracts; and preparing for and developing contingency plans in the event it identifies the interest of an OFAC-blocked or -prohibited party after cargo is loaded on one of its vessels.

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