Background

The Treasury Department’s Office of Foreign Assets Control reports that a U.S. company has agreed, on behalf of a former foreign subsidiary, to pay $473,157 to settle its potential civil liability for reexports of U.S. export-controlled test measurement equipment to Iran. OFAC states that this case highlights the potential benefits of implementing proactive and ongoing sanctions compliance controls in foreign companies that source U.S.-export controlled content from the U.S., including when U.S. persons, directly or indirectly, acquire foreign companies with preexisting relationships with sanctioned persons and jurisdictions.

After the parent company acquired the subsidiary and implemented a policy restricting sales to Iran, senior officials of the subsidiary continued such sales and hid them from the parent company. Upon discovering this misconduct, the parent company conducted an extensive internal investigation to determine the extent of the apparent violations, terminated the employees involved, and voluntarily self-disclosed the apparent violations to OFAC.

According to OFAC, the statutory maximum civil monetary penalty applicable in this matter is $2.1 million and the base penalty amount is $1.05 million given the voluntary self-disclosure. Aggravating factors included the subsidiary’s willful violations and the fact that senior subsidiary managers knew of and actively participated in the violative conduct. Mitigating factors included the parent company’s full cooperation with OFAC, remedial measures, and enhancement of its sanctions compliance program, including annual trade compliance training for sales representatives and their supervisors.

For more information on export compliance issues, please contact Kristine Pirnia. Click here to register for ST&R’s upcoming webinar on export controls.

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