Background

Two recent penalty cases from the Treasury Department’s Office of Foreign Assets Control illustrate the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.

According to OFAC, a multinational company headquartered in the U.S. has agreed to pay $141,442 to settle potential civil liability under the Cuban Assets Control Regulations relating to its offshore subsidiary’s purchase of Cuban-origin explosives and explosive accessories from a third-party vendor. OFAC states that the shipments from Cuba occurred because an employee of the subsidiary failed to understand the implications of engaging in transactions related to Cuban-origin goods.

Similarly, OFAC has announced a $45,908 settlement with a U.S. company affiliated with a distributor of explosives and accessories for mining operations to settle potential civil liability under the CACR relating to its procurement of Cuban-origin explosives and related accessories. OFAC states that these apparent violations occurred primarily because the company, which is largely overseen by a single individual, failed to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the U.S.

In each of these cases, the statutory maximum civil monetary penalty is $367,264. In the first case, aggravating factors included that the company and its subsidiary (1) failed to exercise a minimal degree of caution or care and should have known that their conduct would lead to an apparent violation and (2) constitute a large and sophisticated organization operating globally with experience and expertise in international transactions. In the second case, aggravating factors included that (1) the company had actual knowledge that it was financing the provision of Cuban-origin goods for export and (2) the goods were procured from an entity under the control or acting on behalf of the Cuban military, intelligence, or security services.

In both cases mitigating factors included the company’s compliance history and cooperation with OFAC’s investigation. OFAC also highlighted the first company’s remedial measures, which include comprehensive training for export compliance and country-specific embargoes, denied persons screening, and export license requirements.

For more information on sanctions against Cuba or other countries and ways to ensure compliance, please contact attorney Kristine Pirnia via email.

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