The Treasury Department’s Office of Foreign Assets Control has announced that a Vietnam-based company has agreed to pay $860,000 on behalf of two of its subsidiaries to settle spotential civil liability for apparent violations of OFAC sanctions against North Korea.
OFAC states that between April 2016 and October 2018 these subsidiaries sought and received 43 wire transfers totaling about $1.1 million from 15 different third-party companies in Hong Kong, China, and Turkey as payment for the sale of alcoholic beverages to North Korea. All of these transfers were processed by U.S. correspondent banks, which thus exported financial services to North Korea.
According to OFAC, the statutory maximum civil monetary penalty applicable in this matter is $15.8 million and the base penalty amount is $1.7 million. Aggravating factors included the subsidiaries’ failure to exercise due caution or care and the fact that the subsidiaries’ senior management knew or had reason to know they were doing business with, and receiving payments made on behalf of, North Korean entities. OFAC further notes that the apparent violations were not voluntarily self-disclosed and that neither the parent company nor its subsidiaries had sanctions compliance programs or policies in place at the time the conduct at issue occurred.
Mitigating factors included the company’s clean penalty history, substantial cooperation with OFAC’s investigation, and implementation of significant remedial measures, including establishing sanctions compliance teams and programs at its subsidiaries, providing sanctions compliance training to its subsidiaries, and engaging an independent third party to perform compliance screening functions. In addition, the subsidiaries’ senior management issued a compliance directive that prohibited doing business with comprehensively sanctioned jurisdictions and required due diligence on all prospective and renewing customers, including screening customers against sanctions lists.
OFAC states that this enforcement action illustrates (1) how non-U.S. persons in foreign jurisdictions may face sanctions liability, particularly when utilizing the U.S. financial system, (2) how the absence of a risk-based sanctions compliance program can increase the likelihood of committing potential sanctions violations, and (3) the importance of conducting a sanctions risk assessment to identify potential areas in which a company may, directly or indirectly, engage with OFAC-prohibited persons, parties, countries, or regions, including an assessment of the geographic location of customers, supply chains, intermediaries, and counter-parties.
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