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Compliance Measures and Culture Important in High-Risk Industries, OFAC Says

Friday, May 03, 2019
Sandler, Travis & Rosenberg Trade Report

The Office of Foreign Assets Control states that a recent enforcement case illustrates the benefits companies operating in high-risk industries (e.g., international shipping and logistics) can realize by implementing risk-based compliance measures, especially when engaging in transactions involving high-risk exposure to jurisdictions or persons implicated by U.S. sanctions. OFAC states that this case also highlights the benefits of developing and maintaining a culture of compliance where senior management sets a positive example and encourages staff to comply with the law.

In this case a U.S. company processed five electronic funds transfers that pertained to payments associated with vessels owned or controlled by the Islamic Republic of Iran Shipping Lines, which was identified on OFAC’s list of specially designated nationals and blocked persons. OFAC states that the company had multiple documents identifying these vessels by their respective International Maritime Organization numbers and connecting them to Iran and that both vessels were publicly identified by name and IMO number on the SDN list by the time the company processed the transfers.

Both the statutory maximum and base civil monetary penalty amounts for the apparent violations were $1.49 million. The company ultimately agreed to pay $871,837 to settle the charges.

OFAC states that the aggravating factors included the company’s reckless disregard for its obligations to comply with U.S. economic and trade sanctions, the fact that company managers knew of and participated in the conduct at issue, and the company’s status as a global, commercially sophisticated shipping and logistics company that operates in a high-risk industry.

On the other hand, OFAC noted that the company took extensive remedial measures, including appointing an OFAC compliance officer, regularly publishing OFAC compliance statements to all company offices, instructing its shipbrokers to include an OFAC compliance clause in each charter party agreement, and screening every vessel and party to a wire transfer against the SDN list. Other mitigating factors include that the company had no OFAC penalty in the previous five years and that the apparent violations accounted for a miniscule amount of the company’s total transactional history during the relevant time period.

For more information, or assistance developing and implementing sanctions compliance programs, please contact export compliance attorney Kristine Pirnia at (202) 730-4964.

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