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$6 Million Penalty for Violation of Sanctions on Iran, Cuba, and Sudan

Tuesday, November 15, 2016
Sandler, Travis & Rosenberg Trade Report

The Office of Foreign Assets Control reports that a U.S. company and two subsidiaries have agreed to pay $5.98 million to settle their potential civil liability for apparent violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations. Also in connection with these activities the company has concluded a settlement agreement with the Bureau of Industry and Security and a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of Texas. OFAC states that its settlement will be deemed satisfied by the company’s payment of $25 million under the NPA.

The conduct at issue included approving commission payments that related to the sale and exportation of goods to Iran, selling and exporting goods to Iran and/or facilitating those transactions, exporting goods for the specific purpose of filling orders from Iranian customers, engaging in dozens of transactions involving the sale of goods to Cuba, and exporting goods to Sudan.

According to OFAC, the statutory maximum civil monetary penalty amount for these apparent violations was $37.8 million and the base penalty amount was $8.5 million. The settlement amount reflects OFAC’s consideration of the following facts and circumstances.

Aggravating factors – the company’s conduct demonstrated at least reckless disregard for U.S. sanctions requirements; senior managers knew or had reason to know that their respective business transactions giving rise to the ITSR-related apparent violations involved Iran; the company’s conduct provided a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan; the company is a large and sophisticated company engaged in the business of providing oilfield services around the world, including regions with high sanctions risk; and the company’s compliance program at the time of the apparent violations was wholly inadequate

Mitigating factors – the company had not received a penalty notice or finding of violation in the previous five years; cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and has made efforts to remediate its compliance program and agreed to further compliance enhancements

OFAC also determined that the four apparent violations involving the commission payments were egregious because senior-level finance executives approved the payments and the company appears to have willfully blinded itself to the consequences of its approval, had reason to know that the payments involved Iran, and ignored several warning signs over three years that approving the payments was prohibited conduct. OFAC determined that the remaining apparent violations were non-egregious.

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