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$434,700 Penalty for Apparent Economic Sanctions Violations

Monday, October 28, 2013
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced Oct. 24 that a California company has agreed to pay $434,700 to settle potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations and the Cuban Assets Control Regulations. According to OFAC, this company (1) approved capital expenditure requests by its subsidiaries in the Netherlands and Singapore to purchase toolings and other equipment needed to fulfill orders for a project located in Iran, (2) referred to its foreign subsidiaries three business opportunities involving the sale of goods to Iran that the company itself could not have directly performed as a result of U.S. prohibitions, and (3) provided testing services from its Texas facility to its Dutch subsidiary with reason to know that they would be provided to an entity located in Iran. Furthermore, the Colombian branch office of the company’s U.S. subsidiary sold concrete pipe to a consortium in which a Cuban company was a partner.

The base penalty amount for the apparent violations was $690,000. Aggravating factors include the company’s reckless disregard of U.S. sanctions requirements, including by its management and supervisory staff; the company knew, or should reasonably have known with reasonable due diligence, that the transactions underlying the apparent violations involved Iran or Cuba; given the nature and size of its operations, the company’s compliance program was inadequate to address the sanctions risks the company faced as a business and to prevent the apparent violations; and the company did not voluntarily self-disclose this matter to OFAC. Mitigating factors include the fact that the apparent violations constitute a non-egregious case, many of the apparent violations involved transactions that were ultimately not consummated, the company has not received a penalty notice or finding of violation from OFAC in the previous five years, the company undertook significant remedial steps in response to the apparent violations, and the company provided substantial cooperation during OFAC’s investigation, including by providing records in a clear and organized fashion and by agreeing to toll the statute of limitations.

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