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OFAC Declines to Issue Penalty for Iran Sanctions Violation

Friday, December 01, 2017
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control has issued a finding of violation, but no penalty, against a U.S. company for violating the Iranian Transactions and Sanctions Regulations, which prohibit U.S. persons from dealing in the property or interests in property of the government of Iran. OFAC determined that a binding memorandum of understanding the company executed with an entity identified as meeting the definition of the government of Iran was a contingent contract and therefore property in which the entity had an interest.

OFAC considered the following to be aggravating factors: the company failed to exercise a minimal degree of caution or care by executing a contingent contract with an entity it knew was listed on the specially designated nationals list at the time of the violation; company executives had actual knowledge of, and actively participated in, the conduct the led to the violation and were aware of the blocked entity’s status when the company executed the contingent contract; and the company undermined the policy objectives of the ITSR by dealing in the blocked property of a government of Iran entity identified on the SDN list. In addition, the company did not voluntarily disclose the violation.

However, OFAC considered the following to be mitigating factors: the company had not received a penalty notice or finding of violation in the five years preceding the date of the transaction giving rise to the violation; the company is small; and the company has taken remedial actions, including engaging trade counsel to assist it in understanding its obligations under U.S. sanctions laws, updating its OFAC compliance procedures, and undertaking a process to establish an OFAC compliance training program for all employees. In addition, OFAC determined that the violation at issue constitutes a non-egregious case.

Taking these and other factors into account, OFAC determined that the issuance of a finding of violation is the appropriate enforcement response. Not only is the company small and the scope of the underlying conduct limited, OFAC states, but there appears to have been no performance of the contingent contract or any further dealings by the U.S. company with the blocked entity or any other sanctioned party.

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