Background

The Treasury Department’s Office of Foreign Assets Control reports that a U.S. company has agreed to pay $189,483 in connection with its exports to third-country distributors of goods, technology, and services that it knew or had reason to know were intended for a reseller in Iran.

OFAC states that during the relevant time period the company did not have export control or sanctions compliance policies or procedures in place and did not provide its personnel with relevant training. According to OFAC, the company incorrectly believed its sales were in accordance with applicable sanctions regulations in part because it did not deal directly with Iran but rather through a third-country intermediary.

The statutory maximum civil monetary penalty applicable in this matter is $15.0 million and the base penalty applicable is $291,512. Aggravating factors included that the company knew sanctions generally barred dealings with Iran and that company employees at all levels knew the exported products were intended for Iran. Mitigating factors included the company’s voluntary self-disclosure, the insignificant value of the exports in comparison with the company’s overall revenue, and the remedial measures the company took, including establishing export controls and sanctions compliance policies and procedures; hiring a director of compliance; providing compliance training to employees in sales, marketing, shipping, service, and compliance; and obtaining formal export classifications confirming that its products are properly designated EAR99 for export control purposes.

Among other things, OFAC states, this enforcement action serves as a reminder that reliance on the understanding of an individual in a managerial or supervisory role, or on informal sanctions compliance measures, may not be sufficient to mitigate sanctions compliance risks. Companies should make certain to have an accurate understanding of relevant U.S. sanctions regulations, especially when selling to global markets using sales models where potentially violative conduct may be more likely. Companies may consider sanctions compliance measures such as written policies and processes that address applicable sanctions concerns and clear guidance for employees.

For more information on effective sanctions compliance programs, please contact attorney Kristine Pirnia via email.

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