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Penalty Case Highlights Risks of Shipping Directly to Foreign Customers, OFAC Says

Monday, October 02, 2017
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control reports that a U.S. company has agreed to pay $334,800 to settle its potential civil liability for four apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations. Specifically, this company exported jewelry to a Hong Kong entity listed on OFAC’s List of Specially Designated Nationals and Blocked Persons and failed to identify any sanctions-related issues with these transactions prior to shipment.

OFAC states that this case highlights the risks for companies with retail operations that engage in international transactions, particularly those that ship their products directly to customers outside the U.S. OFAC encourages companies to develop, implement, and maintain a risk-based approach to sanctions compliance and to implement processes and procedures to identify and mitigate areas of risks. The many factors a company could consider with respect to its compliance program include an assessment of its products and services, frequency and volume of international transactions and shipments, client base, and size and geographic location(s).

In this case the base penalty amount totaled $620,000. OFAC determined that the company did not voluntarily self-disclose the apparent violations and considered the following to be aggravating factors: (1) the company failed to exercise a minimal degree of caution or care with respect to the conduct that led to the apparent violations, (2) the company caused significant harm to the objectives of U.S. sanctions regulations by dealing in the property of an SDN and allowing an SDN access to the commercial marketplace, and (3) the company is a commercially sophisticated entity with global operations in an industry at high risk for money laundering.

On the other hand, OFAC concluded that the apparent violations constitute a non-egregious case and considered the following to be mitigating factors: (1) the company did not receive a penalty notice or finding of violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations; (2) the company cooperated with OFAC during its investigation, including by agreeing to execute multiple agreements to toll the statute of limitations; and (3) the company took remedial action to correct the deficiencies at issue.

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