The Office of Foreign Assets Control reports that a U.S. company has agreed to pay $1.4 million to settle its potential civil liability for apparent violations arising from the approval by U.S. senior managers of five contracts for a foreign subsidiary to supply goods to a Russian energy firm for an Arctic offshore oil project. OFAC states that this enforcement action highlights the importance of large U.S. firms with international operations evaluating the totality of their business processes for risk exposure, noting that even large, sophisticated companies with OFAC compliance programs face sanctions risks if they do not develop internal controls that account for their day-to-day operations and procedures and consider how a variety of different types of conduct can implicate applicable prohibitions.
According to OFAC, the company had procedures in place to review prospective transactions with Russian firms to prevent violations of U.S. sanctions. Under these procedures company personnel were to complete a form for all transactions involving Russia at the quotation, purchase order, sales order, and delivery stages to collect information for its compliance office to determine the company’s legal obligations. However, the form did not indicate that U.S.-person involvement in the activities of the company’s foreign subsidiaries could have fallen within the applicable prohibitions.
The statutory maximum civil monetary penalty applicable in this matter is $22.4 million and the base penalty amount is $1.4 million. Aggravating factors included that U.S. senior managers were aware that their approvals were for contracts to supply goods to a restricted entity and that the company is a large and commercially sophisticated firm with an extensive global presence, operates in an industry and in locations with significant sanctions risk exposure, and was aware of these risks. Mitigating factors included the corrective actions the company took upon discovering the apparent violations, including assigning a senior compliance manager to manage the integration of operations into the company’s new owner’s compliance program; implementing an automatic block on all orders with a Russia “bill to,” “ship to,” or end-user reference; and implementing a software enhancement that requires end-users to be identified for all transactions.
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