The Treasury Department’s Office of Foreign Assets Control announced recently that a multinational company has agreed to pay $4.38 million to settle its potential civil liability for 225 apparent violations of multiple OFAC sanctions programs.

OFAC states that this case highlights that commercial activity that might not otherwise violate its regulations (e.g., the sale of non-U.S. goods by a non-U.S. person to an entity in a sanctioned country) can cause a violation when related financial transactions are processed through or involve U.S. financial institutions. It also emphasizes the importance of maintaining an effective, risk-based sanctions compliance program and training key staff to identify and escalate potential violations to the appropriate compliance personnel.

According to OFAC, the apparent violations occurred when the company’s wholly-owned subsidiary directed customers in Iran, Syria, and Sudan to make payments to its bank account at the United Arab Emirates branch of a U.S. financial institution and made payments from that same account to entities in Iran and Syria. OFAC notes that the subsidiary continued this activity over several years despite having received communications from its parent company and various financial institutions regarding its banking activity giving rise to sanctions concerns.

OFAC attributes the apparent violations primarily to deficiencies in the parent company’s global sanctions compliance program. Specifically, the company did not have in place procedures to regularly monitor the subsidiary’s activities to identify potential sanctions issues. In addition, subsidiary personnel did not have substantive training on U.S. sanctions and did not consult with the parent company’s compliance program manager on the transactions at issue.

The statutory maximum civil monetary penalty applicable in this matter is $71.4 million and the base penalty amount is $21.9 million. Aggravating factors included the subsidiary’s sustained failure to exercise a due degree of caution or care in complying with U.S. sanctions requirements and the parent’s company’s status as a commercially sophisticated entity serving customers in more than 100 countries. Mitigating factors included the parent company’s penalty history, quick action to determine the root causes of the conduct at issue, and adoption of new and more effective internal controls and procedures, including updating its export control standards and improving its employees’ understanding of U.S. export controls and sanctions.

For more information on export penalties and how to avoid them, please contact attorney Kristine Pirnia via email.

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