The Office of Foreign Assets Control reports that a company in the United Arab Emirates has agreed to pay $665,112 to settle its potential civil liability for apparent violations of the North Korea Sanctions Regulations. The company also entered into a deferred prosecution agreement with the Department of Justice in what the DOJ called its first-ever corporate enforcement action for violations of these regulations. This DPA will require the company to implement rigorous internal controls and cooperate fully with the DOJ, including by reporting any criminal conduct by an employee.
For more information on U.S. sanctions compliance, please contact ST&R’s export controls and sanctions practice leader Kristine Pirnia.
According to OFAC, the company exported cigarette filters to North Korea through a network of front companies in China and other countries using deceptive practices. The DOJ adds that the company deceived banks in the U.S. and UAE into processing transactions for a North Korean tobacco company by utilizing financial cutouts and front companies to conceal the North Korean nexus as well as falsified shipping records.
OFAC states that the statutory maximum civil monetary penalty applicable in this matter is $923,766. OFAC determined that the company did not voluntarily self-disclose the violations, which constitute an egregious case. There were also a number of aggravating factors, including (1) company employees willfully violated the regulations even though the company’s compliance policy warned that its banks would not handle transactions with sanctioned jurisdictions, (2) the senior manager had actual knowledge that the conduct at issue concerned the sale of cigarette filters to North Korea, and (3) the company is part of a sophisticated commercial group operating in international markets around the world.
On the other hand, OFAC determined the following to be mitigating factors: (1) the company has not received an OFAC penalty in the previous five years, and (2) the company cooperated substantially with OFAC’s investigation, including by promptly providing well-organized submissions in response to requests for information, and has agreed to provide ongoing cooperation as a term of settlement.
According to OFAC, this case is an example of how non-U.S. persons may violate OFAC’s regulations by processing financial transactions to, through, or involving U.S. financial institutions that pertain to commercial activity with an OFAC-sanctioned country, region, or person. Although no organizations subject to U.S. jurisdiction may be involved in the underlying commercial activity (e.g., the shipment of goods to or from a third country to an OFAC-sanctioned country), the inclusion of a U.S. financial institution in any payments associated with these commercial activities can result in or cause prohibited activity (e.g., the exportation or reexportation of services from the U.S., or by U.S. persons, to a comprehensively sanctioned country).
Copyright © 2024 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.