The Office of Foreign Assets Control reports that a U.S. company has agreed to pay $3.3 million over its participation in an eight-year conspiracy that resulted in the unauthorized export of services and more than $11 million in goods to Iran on at least 62 occasions. In addition, a former senior company executive has agreed to pay $175,000 for related conduct.
For more information on ensuring that your company complies with U.S. sanctions, please contact attorney Kristine Pirnia via email.
Conduct
According to an OFAC press release, the company exported its products to Iran through a distributor despite having applied for but never received a specific license or other applicable guidance from OFAC. In addition, none of the exported goods for which the company requested a license was either generally authorized or exempt from prohibition. The products were exported through departments generally overseen by the named executive.
The company subsequently agreed to be acquired by another company but never disclosed its exports to or involvement with Iran, nor did the acquiring company otherwise discover this conduct during its preacquisition due diligence. Once the acquiring company did become aware of the Iran-related business and directed it to stop, the named executive took steps to cover up his and other executives’ involvement and continued to oversee the export of goods to Iran.
Penalties
OFAC states that the statutory maximum civil monetary penalty applicable to the company is $22.2 million and the base penalty is $11.1 million. Aggravating factors included that the company knew or had reason to know its conduct was prohibited, that senior company executives knew of that conduct, and that the conduct spanned about eight years. Mitigating factors included the benign nature of the products and the company’s clean penalty history, cooperation with OFAC, and remedial response, which included developing sanctions and export control policies and procedures, conducting sanctions and export control training for senior management and key personnel, and implementing screening for all parties involved in its international transactions.
The statutory maximum penalty for the executive, and the base penalty, is $2.8 million. Aggravating factors included the executive’s knowledge of the prohibited exports, oversight of several departments responsible for such exports, and failure to ensure that the exports were halted when directed by the acquiring company. Mitigating factors included the executive’s clean penalty history, cooperation with OFAC, and separation from the company.
Compliance Considerations
According to OFAC, this case highlights that U.S. sanctions on Iran encompass a wide range of potentially violative conduct and that firms with potential sanctions exposure should therefore implement measures to ensure that senior management both commit to and maintain a culture of compliance throughout the company.
Further, because businesses that lack a robust sanctions compliance function face significant risks, clear and efficient reporting streams that can rapidly identify red flags for further evaluation and action are important. In some circumstances, placement of a U.S. entity under the compliance structure of a non-U.S. entity that may lack sufficient familiarity with U.S. sanctions laws could prevent the prompt identification of and response to potentially prohibited conduct.
Finally, OFAC states, this action emphasizes the importance of conducting sufficient pre- and post-acquisition due diligence to identify and promptly remediate compliance deficiencies. In particular, after merger and acquisition transactions are complete, companies should closely oversee their new business elements, in addition to their pre-existing units, to identify any sanctions-related risks or issues and take appropriate preventative and remedial measures.
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