A multinational company has agreed to pay more than $8 million as part of a settlement with U.S. government agencies concerning thousands of illegal exports to Iran.
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According to the Bureau of Industry and Security, for about six years the company and its foreign partners sold software licenses and maintenance agreements to foreign-registered pass-through entities that the foreign partners knew were shell corporations that conducted business in Iran and were directly affiliated with Iranian companies. BIS notes that the company conducted several internal audits of its export controls processes that warned of potential violations but that the recommended improvements were not implemented until much later. The company also failed for years to adequately investigate a number of whistleblower allegations of violative activity.
The Department of Justice adds that during this time period the company acquired cloud-based services companies and became aware through pre-acquisition due diligence and post-acquisition export control-specific audits that they lacked adequate export control and sanctions compliance. However, the company allowed these companies to continue to operate as standalone entities after acquiring them and failed to fully integrate them into its more robust export controls and sanctions compliance program. Instead, according to the Office of Foreign Assets Control, the company relied on its small U.S.-based export compliance team to coordinate and enforce compliance processes for these companies even though it was “not resourced or empowered to manage these processes appropriately.”
The company will pay $3.29 million to BIS and agreed with that agency to complete three audits of its export compliance program over a three-year period. The company also agreed to pay $2.13 million to OFAC but that obligation will be satisfied by the payment to BIS. Further, the company will disgorge $5.14 million of its profits from the illegal exports as part of a non-prosecution agreement with the DOJ.
BIS noted that the company voluntarily self-disclosed the potential violations and said such disclosures “will be a significant mitigating factor in any penalties imposed” for all exporters. The DOJ said the self-disclosure was a major consideration in its decision as well, adding that its voluntary self-disclosure policy (absent aggravating factors) creates a presumption in favor of a non-prosecution agreement and limits monetary penalties to the gains from the illegal conduct.
The DOJ also cited the company’s remedial efforts, noting that it spent more than $27 million over four years on significant changes to its export compliance and sanctions program. These include (1) transitioning to automated sanctioned party screening of its cloud-based service providers, (2) implementing a risk-based export control framework for its partners that requires a stringent review of proposed sales by a third-party auditor, (3) developing and implementing an improved compliance program, and (4) hiring experienced U.S.-based export controls and sanctions compliance staff.
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