The settlement covers violations all of which OFAC has determined were egregious under its Economic Sanctions Enforcement Guidelines. Specifically, on numerous occasions between 2004 and 2010, HSBC Group processed wire transfers totaling millions of dollars that involved Cuba, the Governments of Libya and Iran, and other sanctioned countries and entities.
HSBC Group did not voluntarily self-disclose the violations. The total base penalty amount for these violations, which was the statutory maximum in this case, totaled $1,159,872,734.
OFAC Agrees to $132 Million Settlement with Standard Chartered Bank for Violations of Sanctions Programs
OFAC alleged that from 2001 to 2007, SCB's London head office and its Dubai branch engaged in payment practices that interfered with the implementation of U.S. economic sanctions by financial institutions in the U.S., including SCB's New York branch. In London, those practices included omitting or removing material references to U.S.-sanctioned locations or entities from payment messages sent to U.S. financial institutions. In Dubai, the practices included sending payment messages to or through the U.S. without references to locations or entities implicating U.S. sanctions. As a result, millions of dollars of payments were routed through U.S. banks for or on behalf of sanctioned parties in apparent violation of U.S. sanctions.
These actions were in violations of the Iranian Transactions Regulations; the Burmese Sanctions Regulations; the Sudanese Sanctions Regulations; and the now-repealed version of the Libyan Sanctions Regulations.
On October 19, 2012, Brasseler USA, a Savannah, GA, medical supply company, has agreed to pay $18,900 to settle potential civil liability for alleged violations of the Iranian Transaction Regulations (ITR) from 2006 to 2009. Specifically, OFAC alleged that on three separate occasions, Brasseler exported goods or services to a person in a third country with knowledge that they were intended specifically for transshipment to Iran, without authorization from OFAC. The total of the transactions amounted to $5,241. Brasseler did not voluntarily self-disclose the matter to OFAC. According to OFAC, the alleged violations constituted a non-egregious case, and the base penalty amount for the violations totaled $21,000.
On November 15, 2012, Sogda Limited, Inc., a Kirkland, WA company, has agreed to pay $128,250 to settle potential civil liability for alleged violations of the Iranian Transactions Regulations (ITR). The alleged violations occurred between March 25, 2009 and August 26, 2010, when the company engaged in seven export transactions that involved the transshipment of goods through Iran.
The company did not voluntarily disclose the matter to OFAC. The alleged violations constituted a non-egregious case, and the base penalty amount for the alleged violations was $570,000.
On July 10, 2012, Great Western Malting Co. (Great Western), of Vancouver, Washington, has agreed to pay $1.35 million to settle apparent violations of the Cuban Assets Control Regulations (CACR). OFAC alleged that between August 2006 and March 2009, the Great Western performed various back-office functions for the sales by a foreign affiliate of non-U.S. origin barley malt to Cuba. The base penalty amount for the apparent violations was $5,990,000. The company did not disclose the matter to OFAC, and the apparent violations constituted a non-egregious case.
On August 12, 2012, Grand Resources USA, Inc. (GR-Duratech), a Houston, TX company, was assessed a penalty of $402,000 for violating the Iranian Transactions Regulations (ITR) and the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR).
In 2005, GR-Duratech negotiated a sale of graphitized petroleum coke to a company in the United Arab Emirates, with knowledge that the goods were for delivery to Bandar Abbas, Iran. After negotiating the terms of the sale and the related letter of credit, GR-Duratech referred the sale to its parent company, Grand Resources Co., Ltd. (Grand Resources), in Beijing, China, and later received a commission payment from Grand Resources for the sale. From July 2009 to August 2009, GR-Duratech dealt in property in which the Islamic Republic of Iran Shipping Lines (IRISL) had an interest, and engaged in transactions or dealings in or related to services of Iranian origin, when GR-Duratech was involved in the shipment of cargo aboard the blocked vessel “Sabalan,” a vessel in which IRISL had an interest, and presented trade documents related to the shipment to its bank for payment pursuant to a letter of credit referencing the blocked vessel.
GR-Duratech also engaged in transactions that resulted in the removal of references to Iran and an Iranian entity from the trade documents associated with the shipment. In September 2009, GR-Duratech dealt in property in which IRISL had an interest by transferring the trade documents related to the shipment to its customer in Turkey without OFAC’s authorization.
GR-Duratech did not voluntarily self-disclose the violations to OFAC. OFAC concluded that the 2005 ITR violation was a non-egregious case, but that the 2009 violations of the ITR and WMDPSR were an egregious case, in light of the company’s willful concealment and evasion involving GR-Duratech’s senior-level management. The base penalty amount for the violations totaled $670,000.
The E.O. targets foreign individuals and entities that have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions against Iran or Syria, or that have facilitated deceptive transactions for persons subject to U.S. sanctions concerning Syria or Iran. With this new authority, Treasury now has the capability to publicly identify foreign individuals and entities that have engaged in these evasive and deceptive activities, and generally bar access to the U.S. financial and commercial systems.
GL 4A permits the exportation or reexportation of items to Syria from the U.S. or by a U.S. person, including the Government of Syria, whose property and interests in property were blocked either by the Syrian Sanctions Regulations or one of the pertinent executive orders (the Blocked Person), provided that the exportation or reexportation of such items to Syria is licensed or otherwise authorized by the Department of Commerce.
GL 4A also permits from the U.S. to Syria the exportation and sales of services that are ordinarily incident to the exportation or reexportation of items to Syria, or of services to install, repair, or replace such items, is authorized, as long as the exportation or reexportation of such items to Syria is licensed or otherwise authorized by the Department of Commerce.
However, the note to GL 4A provides that the general notice does not authorize the exportation or reexportation of any item not subject to the Export Administration Regulations (EAR), or of related services.
On April 25, 2012, OFAC reported that Sandhill Scientific, Inc. (Sandhill) of Highlands Ranch, CO, a U.S. manufacturer of medical equipment, has agreed to remit $126,000 to settle allegations that it violated the Iranian Transactions Regulations (ITR) in May 2007 and OFAC’s Reporting, Procedures and Penalties Regulations on separate occasions in May and July 2008. Specifically, OFAC alleged that on May 4, 2007, Sandhill exported medical equipment valued at $6,700 to Dubai, UAE, with knowledge that the goods were intended for transshipment to a company in Iran with which Sandhill had an exclusive distributor agreement. OFAC also alleged that Sandhill failed to provide documents responsive to two administrative subpoenas issued by OFAC during its investigation.
Sandhill did not voluntarily disclose the matter to OFAC. OFAC determined that the alleged ITR violation constituted an egregious case because Sandhill’s unlicensed export appears to have resulted from willful and reckless conduct in which the company’s management was directly involved; Sandhill appears to have deliberately concealed the fact that the goods were destined for Iran; and Sandhill did not fully cooperate with the investigation. These determinations resulted in a base penalty amount of $250,000 for the alleged ITR violation.
The settlement amount reflected the fact that Sandhill did not appear to have any compliance program in place at the time of the alleged violations; Sandhill did not appear to have taken any remedial action after the alleged violations came to its attention; the export may have been eligible for an OFAC license under the ITR; and OFAC had no record of any prior sanctions enforcement actions against Sandhill.
On April 10, 2012, OFAC reported that Essie Cosmetics Ltd. (Essie) and its former individual corporate officer (Officer), of New York City, NY, have agreed to settle OFAC allegations involving Essie and the Officer’s unlicensed exports to Iran in violation of the Iranian Transactions Regulations (ITR). The apparent violations pertain to Essie and Officer’s knowing sale and export of nail care products on September 17, 2009, December 8, 2009 and February 23, 2010, to an Iranian distributor. Essie and the Officer did not voluntarily self-disclose the apparent violations and that the violations constituted an egregious case. The total transaction value for the three transactions settled with OFAC was $33,299, and the based penalty was $750,000. Essie, the Officer and OFAC agreed to settle in the amount of $450,000. The settlement amount reflected the fact that Essie and the Officer had no history of prior OFAC violations and have cooperated with the investigation.
OFAC states that, for the time being, the old licensing case numbering system will not disappear completely. An amended version of a license that was originally issued prior to March 26, 2012, will continue to follow the original license case number system, i.e., alphabetical characters for the sanctions program followed by the existing license number and an alphabetical character, as in the past.
- Teledyne Technologies Incorporated and its subsidiary, Teledyne RD Instruments, Inc. (Teledyne), have agreed to pay $30,385 to settle allegations of violating the Sudanese Sanctions Regulations. OFAC alleged that on two occasions in 2007 Teledyne indirectly exported Acoustic Doppler Current Profilers (ADCP) to Sudan valued at $122,766. The base penalty amount for the alleged violations was $61,383. Teledyne voluntarily self-disclosed this matter to OFAC. The settlement amount reflected the facts that Teledyne had no history of prior OFAC violations; the exports of the ADCPs caused minimal harm to sanctions programs objectives; and Teledyne took appropriate remedial action upon learning of the potential OFAC violations.
- Richland Trace Homeowners Association, Inc. (Richland Trace), of Dallas, TX, has been assessed a penalty of $9,000 for violating the Former Liberian Regime of Charles Taylor Sanctions Regulations (Liberian Regulations). Richland Trace used $9,500 of the proceeds from the February 3, 2009, sale of property in which a person designated pursuant to Executive Order 13348, Blocking Property of Certain Persons and Prohibiting the Importation of Certain Goods from Liberia, had an interest, to reimburse itself for past assessments and late fees that had accrued against the property since December 2005. As a result, OFAC determined that Richland Trace violated the prohibition against dealing in blocked property set forth in the Liberian Regulations. Richland Trace did not voluntarily self-disclose the violation to OFAC. The base penalty amount for the violation was $10,000. The assessed penalty amount reflected the fact that Richland Trace displayed reckless disregard for U.S. sanctions by failing to comply with the conditions of its OFAC license but had no history of prior OFAC violations.
- Online Micro, LLC (Online), of Costa Mesa, CA, and one of its principal owners (the Owner) have agreed to settle administrative charges made by the OFAC arising from apparent violations of the Iranian Transactions Regulations (ITR). The apparent violations relate to unlicensed exports by Online and the Owner, between 2009 and 2010, of computer-related goods indirectly from the United States through Dubai, United Arab Emirates, to Iran in apparent violation of the ITR. Online, the Owner, and OFAC agreed to a settlement in the amount of $1,054,388 with respect to apparent violations of the ITR by Online and the Owner. This settlement with OFAC was related to criminal plea agreements reached by Online, the Owner, and the Office of the United States Attorney for the District of Columbia, as well as settlement agreements between Online, the Owner, and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). OFAC’s settlement with Online and the Owner has been deemed satisfied by their acceptance of criminal responsibility, the criminal forfeiture of assets, and the restrictions imposed by BIS against Online and the Owner.
Online and the Owner each pleaded guilty in the U.S. District Court for the District of Columbia to one count of criminal conspiracy to violate IEEPA and the ITR after an indictment arising from the same conduct was filed by the U.S. Department of Justice. In addition to the forfeiture of a money judgment in the amount of $1,899,964 by Online and the Owner, Online and the Owner also accepted BIS Export Denial Orders which prohibit them from exporting any goods from the United States for a ten-year period. The BIS Export Denial Orders were suspended in their entirety provided Online and the Owner remain in compliance with the terms of their Settlement Agreements with BIS and with the Export Administration Regulations. Online and the Owner did not voluntary disclose these matters to OFAC. OFAC considers the apparent violations to be egregious.
OFAC is also amending an existing general license to broaden its authorization with respect to the importation of certain Sudanese-origin services and to add an authorization for activities related to Sudanese persons’ travel to the United States.
Finally, OFAC is making certain technical changes to the SSR, including changes to reflect the establishment of the independent state of the Republic of South Sudan and the separation of the Government of the Republic of South Sudan from the Government of Sudan.
- Wilson Tool International, Inc. (Wilson Tool) of White Bear Lake, MN, has agreed to remit $15,000 to settle an alleged violation of the Iranian Transactions Regulations (ITR) occurring on September 12, 2005. OFAC alleged that Wilson Tool sold and exported punch press tooling equipment to an entity in Iran without an OFAC license. The transaction value was $10,304.33. OFAC determined that Wilson Tool did not voluntarily self- disclose this matter to OFAC and that the alleged violation constituted a non-egregious case. The base penalty amount for the alleged violation was $25,000, but was reduced considering mitigating factors.
- ASF, Inc. (ASF), a Mobile, AL company, has agreed to remit $5,400 to settle allegations of a violation of the Iranian Transactions Regulations (ITR) that occurred on May 2, 2006. OFAC alleged that ASF engaged in a transaction related to goods destined for Iran and facilitated the exportation of goods from a third country to Iran by a foreign person, without an OFAC license. OFAC determined that ASF did not voluntarily disclose this matter to OFAC and that the apparent violation constituted a non-egregious case. The base penalty amount for the alleged violation was $10,000.
- Commerzbank AG, New York Branch (Commerzbank), of New York, NY, has agreed to remit $175,500 to settle apparent violations of the Cuban Assets Control Regulations that occurred from September 7, 2005, through September 30, 2005. The agreement covers allegations that Commerzbank, acting as an advising and confirming bank in connection with a letter of credit, presented four sets of trade documents, in which a Cuban Specially Designated National (SDN) had an interest, to the Miami branch of the foreign bank that issued the letter of credit, for payment in favor of a Canadian company. The aggregate value of the trade documents was $884,157. Commerzbank did not voluntarily self-disclose the matter, and the alleged violations constituted a non-egregious case. The base penalty amount for the alleged violations totaled $260,000. The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines: Commerzbank should have been aware of the prohibited Cuban interest, given that the trade documents contained repeated references to the SDN and its vessels; Commerzbank has undertaken remedial measures to strengthen its OFAC compliance program to ensure that such apparent violations do not recur in the future; and Commerzbank cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations.
On October 14, 2011, Sunrise Technologies and Trading Corporation of Flushing, NY, and its principal owner (Sunrise) have agreed to settle administrative charges made by the OFAC arising from violations of the Iranian Transactions Regulations (ITR), which are administered by OFAC. OFAC alleged that between 2007 and 2011, Sunrise exported computer-related goods indirectly from the United States through Dubai, United Arab Emirates, to Iran without the required export licenses. OFAC initiated the inquiry into these matters and referred the case to criminal law enforcement authorities for further investigation. Sunrise and OFAC agreed to a settlement in the amount of $1,661,672 with respect to apparent violations of the ITR by Sunrise.
This settlement with OFAC is related to criminal plea agreements reached by Sunrise and the Office of the United States Attorney for the District of Columbia, as well as settlement agreements between Sunrise and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). OFAC’s settlement with Sunrise has been deemed satisfied by their acceptance of criminal responsibility, the criminal forfeiture of assets, and the restrictions imposed by BIS against Sunrise and its principal owner.
Sunrise and its principal owner each pleaded guilty in the U.S. District Court for the District of Columbia to one count of criminal conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and the ITR after an indictment arising from the same conduct was filed by the U.S. Department of Justice. In addition to the forfeiture of a money judgment in the amount of $1,250,000, Sunrise also accepted BIS Export Denial Orders which prohibit them from exporting any goods from the United States for a ten-year period. The BIS Export Denial Orders were suspended in their entirety provided Sunrise remains in compliance with the terms of their Settlement Agreements with BIS.
For the violations that OFAC considered to be an egregious case, Sunrise did not voluntary disclose these matters to OFAC.
On October 27, 2011, Zurigo Trading, Inc. (Zurigo) of Weston, FL, was assessed a penalty of $7,000 for violating the Iranian Transactions Regulations (ITR). Specifically, in September 2006, Zurigo attempted to export goods valued at $7,168 to Iran on behalf of its foreign customer. OFAC determined that Zurigo did not voluntarily self-disclose the violation to OFAC and that the violation constituted a non-egregious case. The base penalty amount for the violation was $10,000. The assessed penalty amount reflects OFAC’s consideration of the fact that Zurigo had knowledge or reason to know that the goods were destined for Iran; Zurigo did not have an OFAC compliance program in place at the time of the violation; Zurigo has not been the subject of an OFAC enforcement action in the five years preceding the transaction at issue; and, some of the goods Zurigo attempted to ship appear to have been eligible for an OFAC license had an application been submitted to OFAC.
OFAC Authorizes Exports of Food, Use of Diplomatic Funds, and the Transportation of Human Remains to Sudan and Iran
Exports of agricultural commodities that do not fall within the definition of food in SSR and ITR, food intended for military or law enforcement purchasers or importers, medicine, and medical devices destined for Sudan and Iran still require specific licenses.
The rule is effective October 12, 2011.
New Executive Order Blocks Property of the Government of Syria and Prohibits Certain Transactions With Respect to Syria
The E.O. blocks all Government of Syria’s assets that are within the U.S. or within the control of any U.S. person, including any overseas branches. In addition, the E.O. prohibits:
(1) new investment in Syria by a U.S. person;
(2) exports, reexports, sales, or provisions of direct or indirect services to Syria from the U.S., or by a U.S. person, wherever located;
(3) imports into the U.S. of petroleum or petroleum products of Syrian origin;
(4) any dealing by a U.S. person related to petroleum or petroleum products of Syrian origin; and (5) any approval, financial facilitation, or guarantee by a U.S. person of transactions by a foreign person where the transaction would be prohibited to a U.S. person.
These sanctions are in addition to the national emergency declared in E.O. 13338 of May 11, 2004 (as amended), which blocks property of certain persons and prohibits the export of certain goods to Syria.
Norton Lilly International (Norton), Mobile, AL, has been assessed a penalty of $18,750 for its violation of the Iranian Transactions Regulations that occurred in November 2006. Norton engaged in a transaction or dealing related to services of Iranian origin, and facilitated a transaction by a foreign person involving Iranian-origin services. In the transaction, Norton acted as a paying agent for a foreign entity, to pay port charges incurred at an Iranian port in the amount of $14,936. OFAC determined that Norton did not voluntarily self-disclose the violation to OFAC and that the violation constituted a non- egregious case.
The base penalty amount for the violation was $25,000. The assessed penalty reflects OFAC’s consideration that Norton had knowledge or reason to know that the conduct, activity, or transaction giving rise to the violation involved port charges with respect to a ship calling in Iran; Norton did not have a compliance program in place at the time of the violation; Norton has instituted remedial measures by adopting procedures to comply with OFAC’s regulations in the future; Norton cooperated with OFAC by promptly responding to OFAC’s administrative subpoena and providing OFAC all relevant information regarding the violation; and Norton has not been subject to an OFAC enforcement action in the five years preceding the date of the violation.
CMA CGM (America) LLC (CCA), of Norfolk, VA, has remitted $374,400 to settle allegations of violations of the Cuban Assets Control Regulations, the Iranian Transactions Regulations, and the Sudanese Sanctions Regulations, occurring between December 2004 and April 2008. OFAC alleged that CCA, a global container shipping company, facilitated the exportation of goods from foreign ports to Sudan on at least two occasions and, in 28 separate transactions, accepted payments for shipping services provided by its foreign parent company, CMA CGM, or its foreign affiliates, in connection with shipments between third countries and Cuba, Iran, or Sudan. The transactions involving the alleged violations were valued at approximately $402,265.
OFAC determined that CCA did not voluntarily self-disclose the matter to OFAC and that the alleged violations constituted a non-egregious case. The base penalty amount for the alleged violations totaled $640,000. The settlement amount reflects OFAC’s consideration of the following: the alleged violations appear to have resulted from a pattern of conduct over a period of approximately three years; given the size and scope of CCA’s operations and the nature of its international business, it appears to have lacked an adequate compliance program to avoid U.S. sanctions violations; some of the goods exported from third countries to Cuba and Iran may have qualified as agricultural/medical products under the Trade Sanctions Reform and Export Enhancement Act of 2000 and, thus, may have been eligible for a license; CCA and CMA CGM have undertaken remediation to ensure that such alleged violations do not recur; CCA had not been the subject of OFAC penalties within the past five years; and CCA cooperated with OFAC throughout the investigation, including by requesting the cooperation of CMA CGM and its foreign affiliates in gathering relevant transaction data, and by agreeing to toll the statute of limitations.
Société Générale New York Branch, New York, NY (SGNY) has remitted $111,359 to settle allegations of violations of the Iranian Transactions Regulations (Regulations) occurring December 27, 2006, and May 9, 2007. OFAC alleged that SGNY dealt in Iranian-origin services and/or facilitated transactions by a foreign person where the transactions by the foreign person would have been prohibited by the Regulations if performed by a U.S. person. Specifically, OFAC alleged that SGNY, as the issuing bank of two letters of credit between two non-sanctioned parties, processed two payments under those letters of credit involving the shipment of cargo transported aboard vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines of Tehran, Iran, an Iranian entity. The value of the payments was $329,954.
SGNY voluntarily self-disclosed the alleged violations and OFAC has determined that the alleged violations constituted a non-egregious case. The base penalty amount for the alleged violations was $164,977. The settlement amount reflects OFAC’s consideration of the following: SGNY improved its compliance program in response to the apparent violations by enhancing its internal controls related to screening trade finance transactions, and provided additional training to staff involved in processing such transactions; SGNY cooperated with OFAC’s investigation and resolution of this matter; and OFAC has not issued a penalty notice or Finding of Violation against SGNY in the five years preceding the transactions at issue.
Heritage Turbines, Inc., Hyannis, MA (Heritage) has remitted $4,500 to settle an alleged violation of the Sudanese Sanctions Regulations occurring on or about November 21, 2007. OFAC alleged that Heritage attempted to ship two fuel nozzle kits to Sudan without an OFAC license. The fuel nozzle kits were valued at a total of $2,000. OFAC determined that Heritage did not voluntarily self-disclose this matter to OFAC and the alleged violation constituted a non-egregious case. The base penalty amount for the alleged violation totaled $10,000. The settlement amount reflects the fact that Heritage had no history of sanctions violations and cooperated with OFAC’s investigation of this matter.
Effective July 1, 2011, sections 570.506 and 570.508 replace and supersede General License Nos. 3 and 2, respectively, which have been removed from OFAC’s web site. General License Nos. 1B, 4, and 5, as well as certain statements of licensing policy, are not being incorporated into the Regulations at this time and remain available on OFAC’s web site.
- Aegis Electronic Group, Inc. (Aegis) has agreed to pay $20,000 to settle allegations of violations of the Iranian Transactions Regulations (ITR). OFAC alleged that Aegis, a U.S. distributor of industrial imaging products, including cameras, monitors, and related control units, violated the ITR by its unlicensed sale and export of camera control units to Austria with knowledge that the items were intended for re-export to Iran.
Specifically, OFAC alleged that, during the period August 2008 - January 2009, Aegis violated the ITR when it exported two camera control units from the United States to Austria for re-export to Iran. Aegis did not voluntarily disclose this matter to OFAC. The total transaction value of the camera control units exported to Austria for re-export to Iran was $2,685. The base penalty amount for Aegis’ apparent violation was $10,000, but the settlement amount reflects OFAC’s consideration of multiple factors including: the criminal charges set forth in the Deferred Prosecution Agreement reflect knowing and willful conduct by an employee that is attributable to the company; there is no indication that Aegis’ senior management participated in the apparent violations; and Aegis lacked a sanctions compliance program at the time of the apparent violations, but it has since implemented a compliance program that requires sanctions and export compliance training of all employees.
- McGriff, Seibels & Williams of Texas, Inc., Houston, TX (McGriff), has paid $122,408 to settle allegations of violations of the Iranian Transactions Regulations (ITR). OFAC alleged that McGriff, a U.S. insurance brokerage firm specializing in insurance coverage for the energy sector, violated the ITR by its unlicensed design, revision, and placement, with foreign insurers, of six commercial multiple peril (CMP) insurance policies that insured the risks of a submersible oil rig in Iranian waters. The policy periods were between May 1, 2004, and April 31, 2005.
The combined premiums received by the foreign insurers for the six CMP insurance placements totaled $453,364. McGriff voluntarily disclosed this matter to OFAC and the alleged violations constituted a non-egregious case. The settlement amount reflects OFAC’s consideration of the following: the insurance services provided by McGriff, which were highly specialized and involved the Iranian petroleum industry, were particularly harmful to the objectives of the sanctions program; the apparent violations resulted from the actions of a senior employee outside the knowledge of McGriff’s senior management; McGriff strengthened its OFAC compliance program in response to the apparent violations; McGriff has not been the subject of prior OFAC penalties or other OFAC administrative actions; and McGriff cooperated with OFAC in the investigation, including entering into two tolling agreements.
- Metropolitan Life Insurance Company (MetLife) has remitted $22,500 to settle allegations of a violation of the Cuban Assets Control Regulations. OFAC alleged that, in June 2006, MetLife mailed a check representing a $30,162 lump sum death benefit payment directly to the beneficiary in Cuba. This matter was not voluntarily disclosed by MetLife. The alleged violation was reported to OFAC and to MetLife by the attorney who administered the estate of the U.S. decedent. Upon the receipt of the notice, MetLife stopped payment and deposited the death benefit payment into a blocked account. The funds were subsequently transferred to a bank for distribution to the beneficiary. The alleged violations constituted a non-egregious case.
The base penalty amount for MetLife’s apparent violation was $50,000. The settlement amount reflects OFAC’s consideration of the following: MetLife provides specialized insurance services; MetLife has not been the subject of prior OFAC penalties; MetLife cooperated with OFAC by making an authorized transfer of the blocked payment to a blocked account opened in the name of the beneficiary for the purpose of making authorized distributions to the beneficiary; and MetLife has taken several steps to strengthen its OFAC compliance program, including requiring sanctions compliance training of all employees.
• Trans Pacific National Bank of San Francisco, CA (Trans Pacific) paid $12,500 to settle allegations of violating the Iranian Transactions Regulations (ITR) from September 18, 2007 to March 19, 2008. OFAC alleged that Trans Pacific engaged in transactions related to goods of Iranian origin and services for exportation to Iran, and facilitated transactions by a foreign person by initiating two separate wire transfers on behalf of an account holder for an underlying commercial transaction prohibited by the ITR, which is prohibited by the ITR if performed by a U.S. person. In one instance, the wire transfer instructions referenced “Iranian material” and in the other instance the instructions referenced “Iran material.” The value of the transactions totaled $35,600. Trans Pacific did not voluntarily disclose this matter to OFAC. The settlement amount reflected the fact that at the time of the transactions, Trans Pacific’s filtering system was not designed to detect references to sanctions targets in the “Originator to Beneficiary Information” field leading to both of these apparent violations; and Trans Pacific has enhanced its compliance program in response to the violations by requiring that the memorandum information of each wire transfer also be reviewed for OFAC sanctions references.
• Aon International Energy, Inc. of Houston, TX (Aon Energy), a subsidiary of Aon Corporation, paid $36,000 to settle allegations of violations of the Iranian Transactions Regulations (ITR) that occurred in October 2005. OFAC alleged that Aon Energy had facilitated the placement of coverage and the payment of premiums for facultative retrocession reinsurance that reinsured construction risks associated with a petroleum project on Kharg Island in Iran. Specifically, Aon Energy brokered and placed facultative retrocession reinsurance on behalf of a European reinsurer with two European retrocessionaires. The combined premium for the two retrocession reinsurance placements was $62,883. Aon Energy did not voluntarily disclose this matter to OFAC. The settlement amount reflected OFAC’s consideration of the fact that AON Energy provides specialized insurance services resulting in transactions that were particularly harmful to the sanctions program; OFAC viewed the apparent violations as part of a pattern of reckless, but not egregious, conduct by Aon Energy in connection with these policies; Aon Energy, under the direction of its parent, Aon, took several steps to strengthen its OFAC compliance program and its existing OFAC procedures after the apparent violations; Aon Energy has not been the subject of prior OFAC penalties or other OFAC administrative actions; and Aon Energy cooperated with OFAC and also entered into a tolling agreement with OFAC which was undertaken by Aon on behalf of Aon Energy.
- Discover Financial Services of Riverwoods, IL (Discover) has remitted $8,720 to settle allegations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR) violations occurring from December 2005 to November 2007. OFAC alleged that Discover dealt in property in the United States in which a Specially Designated Narcotics Trafficker had an interest by maintaining a personal credit card account on his behalf. Discover processed twenty-eight transactions through this personal credit card account. The value of the transactions processed over three years totaled $23,252. The base penalty amount was adjustment to account for several General Factors: Discover voluntarily disclosed this matter to OFAC, took steps to strengthen its OFAC compliance program and its existing OFAC procedures, assigned a new employee to review the credit card portfolio against SDN list updates, and provided extra training to its employees. In addition, Discover had no other known violations on record with OFAC prior to these allegations.
- Wells Fargo Bank, N.A. (Wells Fargo) has remitted $67,500 to settle allegations of violations of the Iranian Transactions Regulations (ITR) from March 2005 to July 2006. OFAC alleged that Wells Fargo exported financial services to Iran by performing financial services in the United States on behalf of an account holder while the account holder was located in Iran. The value of the transactions totaled $55,959.62. Wells Fargo did not voluntarily disclose this matter to OFAC. The base penalty amount for the apparent violations was $90,000. The settlement amount reflects OFAC’s consideration of the following General Factors: OFAC expressed to Wells Fargo an interest in this account holder as early as April 2002 but Wells Fargo failed to conduct an investigation until September 2006. There were three prior penalty cases against Wells Fargo for violations of the ITR. In addition, Wells Fargo created and implemented a risk-based OFAC compliance program, which includes the use of Internet Protocol addresses to identify registered users located in Iran. Finally, Wells Fargo established open and timely communications with OFAC, and entered into two tolling agreements with OFAC.
- One unnamed individual was assessed a penalty totaling $30,000 for violating the Iranian Transactions Regulations (ITR). Specifically, the individual engaged in prohibited transactions in 2006 when he sent and/or attempted to send funds to Iran for investment in a catering business located in Iran. The individual did not voluntarily disclose the violations to OFAC, however the violations were considered nonegregious in nature. The assessment amount reflected OFAC’s consideration pursuant to its Enforcement Guidelines this being the first individual’s violation of an OFAC sanctions program.
Pinnacle Aircraft Parts, Inc. (Pinnacle) of Miami, FL, has paid $225,000 to settle allegations of violating OFAC’s Reporting, Procedures and Penalties Regulations (the “RPPR&rdquo, occurring in November 2007. OFAC alleged that Pinnacle failed to provide documents in response to an administrative subpoena issued by OFAC as part of its investigation of Pinnacle’s 2004 sale and delivery of a jet engine, valued in excess of $1 million, that was destined to Iran.
The subpoena directed Pinnacle to provide a written report regarding the jet engine transaction and “copies of all transactional documents such as invoices, shipping documents, airway bills, correspondence, and all other documents pertaining to the payment or transportation of this shipment.”
According to OFAC, in its November 9, 2007, response to the subpoena, Pinnacle, through its outside counsel, submitted more than 260 pages of responsive documents but failed to submit a copy of a post-sale e-mail – which Pinnacle had provided to its counsel – indicating that the aircraft engine was likely destined for Iran as well as other responsive documents concerning the terms of sale.
Pinnacle did not voluntary disclose the violation to OFAC. OFAC determined that Pinnacle’s failure to produce responsive documents constituted an egregious case, resulting in a base penalty amount of $250,000. One of the deciding factors in determining the final penalty amount was that Pinnacle apparently relied in good faith on the advice on legal counsel in deciding not to produce the e-mail with Iran reference and other documents in response to the subpoena. However, OFAC noted that even though Pinnacle relied on the advice of its counsel in deciding not to produce the e-mail and other documents, Pinnacle was the party legally responsible for compliance with OFAC’s subpoena and the actions of its counsel were attributable to Pinnacle for purposes of calculating a base penalty and settlement amount.
- Garlock Sealing Tech, LLC (Garlock), a subsidiary of Enpro Industries (Enpro) of Charlotte, NC, has remitted $16,875 to settle allegations of violations of Executive Order 13405, “Blocking Property of Certain Persons Undermining Democratic Processes or Institutions in Belarus” occurring on June 23, 2008. OFAC alleged that Garlock attempted to send, without authorization from OFAC, a funds transfer in the amount of $14,308 to the account of an entity blocked pursuant to Executive Order 13405. Garlock did not voluntarily disclose this matter to OFAC. The base penalty for the apparent violation was $25,000. The settlement amount reflects OFAC’s consideration of the following General Factors: Garlock was a sophisticated entity with global operations; Garlock has not been subject to an OFAC enforcement action in the five years preceding the date of the apparent violation; and Garlock has taken remedial steps to prevent the recurrence of such a payment.
- OFAC issued a Finding of Violation Letter to Christ for all Nations (CfaN) of Orlando, FL, for violations of the Sudanese Sanctions Regulations. CfaN exported goods and services to Sudan in support of a non-commercial event in Sudan during 2006. CfaN has implemented steps to ensure that it does not perform any activities in violation of OFAC regulations and has not been subject to other OFAC enforcement action. The transactions in question appear to have been licensable had CfaN timely submitted a license application. A Finding of Violation was deemed appropriate given the clear violation of OFAC regulations on the one hand, and the licensable, non-commercial nature of the conduct and the non-profit nature of the violator on the other hand.
- Yokozuna Pearls & Gems, Inc. (Yokozuna) of Monrovia, CA, has been assessed a penalty of $25,000 for its violation of the Burmese Sanctions Regulations (BSR) that occurred in March 2006. Yokozuna initiated a $220,465 funds transfer to Myanmar Foreign Trade Bank, an entity blocked pursuant to the BSR, in furtherance of a contract to purchase and import pearls from Myanmar Pearl Enterprise, Yangoon, Burma. The funds transfer was blocked by a U.S. financial institution and the contract was not completed. The exportation of financial services (defined to include direct and indirect transfers of funds from the U.S. or by a U.S. person, wherever located, to Burma) is prohibited by the BSR. Yokozuna did not voluntarily disclose this matter to OFAC. The base penalty for the violation was $250,000. The final penalty amount reflects OFAC's consideration of the following General Factors: this was Yokozuna's first OFAC violation; Yokozuna received inaccurate legal guidance before engaging in the prohibited transaction; Yokozuna cooperated with OFAC and terminated its business transactions with Burma; and the documented financial condition of Yokozuna's owner.
- Hydra-Tech Pumps, Inc. (Hydra-Tech), Nesquehoning, PA, has been assessed a penalty of $1,961 for its violation of the Sudanese Sanctions Regulations that occurred in September 2007. Hydra-Tech exported a hydraulic hose to Khartoum State Water Corporation, Khartoum, Sudan. Hydra-Tech did not voluntarily disclose this matter to OFAC but has implemented enhanced export compliance procedures. This matter was resolved according to the prior enforcement guidelines published by OFAC at 68 Fed. Reg. 4422.
- Sumitomo Mitsui Banking Corporation (SMBC), a Japanese corporation, has agreed to pay $229,380 to settle allegations that SMBC’s New York Branch Office (SMBCNY) violated the Sudanese Sanctions Regulations (the SSR). OFAC alleged that, from December 9, 2005, until about December 1, 2006, SMBCNY appears to have violated the SSR when it exported services to Sudan through its processing of the payments for SMBC’s purchase of six export bills, in an aggregate amount of $1,037,988, relating to letters of credit (LC) issued by Sudanese banks and by its receipt of two USD payments, in the aggregate amount of $15,357,720, related to approximately forty LCs issued by a Sudanese bank.
- OFAC determined that SMBC voluntarily self disclosed the matter to OFAC and that the alleged violations constituted a non-egregious case. The base penalty amount for the apparent violations was $655,373. The settlement amount reflects OFAC’s consideration of the following General Factors: SMBCNY was part of a commercially sophisticated international bank and had reason to know its conduct may have violated the SSR; SMBC had no violations of this nature on record with OFAC; SMBC substantially cooperated with OFAC’s investigation of the alleged violations; and SMBC promptly responded to all requests for additional information and agreed to a statute of limitations tolling agreement when requested by OFAC.
Barclays agreed to settle with OFAC the alleged violations for $176 million. The obligation was deemed satisfied by Barclay’s payment of $298 million to the Department of Justice (DOJ) and the New York County District Attorney’s Office.
OFAC stated that, “Barclay’s violations arose out of practices designed to circumvent filters at U.S. banks installed to detect transactions in violation of OFAC regulations. This was done using cover payments to avoid referencing parties targeted by U.S. sanctions and omitting or removing information in payment messages in order to conceal the identities of U.S. sanctions targets – most notably Sudan – in electronic funds transfer instructions executed through the United States. In addition, Barclays sometimes processed payments involving sanctioned persons through a Barclays sundry account, making it appear as though Barclays was the remitting bank.”
Based on OFAC’s analysis of information provided by Barclays, from August 2002 through September 2006 Barclays routed at least 1,285 electronic funds transfers, with an aggregate value of approximately $112.7 million, through Barclays New York and third-party banks located in the United States.
Barclays has terminated the practices leading to violations of OFAC regulations and has put in place policies and procedures that are designed to minimize the risk of the recurrence of similar conduct in the future. The bank voluntarily self-disclosed the apparent violations and has cooperated fully with OFAC.
- Compass Bank of Birmingham, AL, has remitted $607,500 to settle allegations of violating the Sudanese Sanctions Regulations in September 2006. OFAC alleged that Compass Bank acted without an OFAC license or outside the scope of its license by initiating three funds transfers on behalf of one of its clients related to the petroleum or petrochemical industries in Sudan. Compass Bank did not voluntarily disclose this matter to OFAC and the alleged violation constituted a non-egregious case.
- Custom Polymers, Inc., a Charlotte, NC company, has agreed to remit $57,800 to settle an allegation of violating the Sudanese Sanctions Regulations on or about August 17, 2007. OFAC alleged that Custom Polymers attempted to make a payment involving Sudan, on behalf of its affiliate, without the required OFAC license. The $116,250 payment was allegedly for the purchase and export of bottle regrind from Sudan. OFAC determined that Customs Polymers did not voluntarily disclose this matter to OFAC and the alleged violation constituted a non-egregious case.
Maersk Line, Ltd., a Delaware corporation, and its wholly owned U.S. subsidiaries, Farrell Lines Incorporated, and E-Ships, Inc. (collectively, MLL), have remitted $3,088,400 to settle allegations of violations of the Sudanese Sanctions Regulations (SSR) and of the Iranian Transactions Regulations (ITR).
OFAC alleged that MLL violated the SSR and the ITR by providing unlicensed shipping services for 4,714 shipments of cargo originating in or bound for Sudan and Iran, including the transportation of such cargo on vessels owned, operated and/or chartered by MLL, but also chartered by MLL's parent, A.P. Moller-Maersk A/S, on at least one leg of the cargo's journey to or from Sudan and Iran.
MLL did not voluntarily self-disclose the matter to OFAC. OFAC concluded that the alleged violations constituted a non-egregious case. The base penalty amount for the apparent violations - which was calculated based on gross freight charges from origination to destination - was $61,768,000. OFAC stated that the settlement amount reflected OFAC's consideration of the General Factors, such as that MLL is part of a commercially sophisticated world-wide shipping conglomerate with significant experience operating under licenses issued by OFAC and other U.S. Government agencies; the activities conducted by MLL resulted in actual harm to sanctions program objectives by conferring an economic benefit on Sudan and Iran; MLL has not been found to have violated OFAC sanctions in the past five years; MLL substantially and fully cooperated with OFAC's investigation of the alleged violations; and MLL and its parent have undertaken substantial remediation to ensure that such alleged violations do not recur.
3M Imtec Corporation of Ardmore, OK (3M Imtec), successor in interest to Imtec Corporation (Imtec), has remitted $125,000 to settle allegations of violations of the Iranian Transactions Regulations (ITR), and the Export Administration Regulations (EAR). This settlement agreement was reached between 3M Imtec, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Imtec voluntary disclosed information to OFAC detailing that it had engaged in unlicensed transactions that appeared to have violated the ITR and the EAR. Imtec was acquired by another company in July 2008 and its name was changed to 3M Imtec Corporation. In connection with the acquisition, a due diligence review was conducted which disclosed that, prior to its acquisition, Imtec engaged in unlicensed transactions with Iran. A full investigation of the apparent Iran violations was conducted and a disclosure of those findings was made to OFAC and BIS.
During the period of June 2004 to April 2007, Imtec appears to have violated the ITR by selling and shipping implants and related dental equipment to purchasers in a third country for delivery to Iran. ITR authorizes OFAC to issue licenses for the sale of agricultural commodities, medicines, and medical devices for use in Iran, provided that those agricultural commodities, medicines, and medical devices are not listed on the Commerce Control List (CCL). A proposed charging letter issued by BIS to 3M Imtec states that the items sold were classified as EAR99.
Although Imtec had previously requested and obtained separate licenses from OFAC authorizing the sale of dental equipment to Iran, the sales that are the subject of the settlement agreement were made outside of the effective dates of those licenses. Imtec did not have a trade compliance program in place at the time that the apparent violations occurred. Although Imtec management was aware of the need to obtain OFAC licenses authorizing sales to Iran as evidenced by its prior OFAC licenses, Imtec’s apparent lack of a comprehensive trade compliance program resulted in the lapse of those licenses.
LD Telecommunications, Inc. of Coral Gables, FL, has agreed to remit $21,671 to settle allegations of violations of the Cuban Assets Control Regulations (CACR) occurring between December 2005 and March 2006. OFAC alleged that LD Telecommunications, Inc. initiated unlicensed funds transfers for the provision of telecommunications services to Cuba. LD Telecommunications, Inc. did not voluntarily disclose this matter to OFAC.
Hilton International Co. of McLean, VA (HI), a subsidiary of Hilton Worldwide, has remitted $735,407 to settle allegations of violations of the Sudanese Sanctions Regulations (SSR). OFAC alleged that between June 2002 and February 2006 HI engaged in 142 violations of the SSR in connection with its unlicensed operation of two Hilton brand hotels in Sudan. HI voluntarily disclosed this matter to OFAC. The alleged violations were discovered and self-reported as a result of pre-acquisition due diligence directed by Hilton Hotels Corporation, which acquired HI from the UK-based Hilton Group plc. in February 2006.
Pursuant to OFAC’s Civil Penalties - Interim Policy (Nov. 27, 2007), because HI signed a statute of limitation tolling agreement covering alleged violations for which the statute of limitations would have otherwise expired prior to October 16, 2007 (the effective date of the IEEPA Enhancement Act), the settlement agreement is based on the maximum statutory penalties in place at the time the tolling agreement was signed, which in this case equaled $11,000 per alleged violation.
According to the prosecution, Amirnazmi, who owned TranTech Consultants, an Exton, PA company that specialized in databases for chemical companies, conspired and from 1996 to July 2008 transferred a chemical-procurement software system he developed, ChemPlan, to Iran to train Iranians to close technological gaps between Iran and its adversaries.
Amirnazmi also “worked with and at the express direction of” Iranian President Mahmoud Ahmadinejad to support Iran’s petrochemical industry. Amirnazmi entered into contracts with Iranian officials creating partnerships that would obtain large quantities of chemicals to be used in large chemical manufacturing plants in Iran. Some of the chemicals had serious dual-use potential, including use in the manufacture of solid-phase rocket propellants.
At his sentencing hearing, Amirnazmi was defiant and maintained that he never intended to break any U.S. laws and stated he had no reason to lie.
In addition to four-year sentence, the U.S. District Judge ordered Amirnazmi to serve five years of supervised release once he leaves prison, make restitution of $17,227 to a bank he defrauded and forfeit $81,277.
Credit Suisse, Lloyds TSB Bank PLC (Lloyds) and several other banks have been investigated for deleting and manipulating wire transfer information to conceal illegal money transfers involving Iran, Burma, Cuba, and Libya from the mid-1990s through 2006. Credit Suisse also instructed Iranian customers on how to format dollar-denominated transactions to avoid detection by the U.S. authorities.
Credit Suisse was fined $536 million after disclosing various apparent violations in a voluntary self-disclosure. According to the Assistant Attorney General, the fine would have been much higher had Credit Suisse not cooperated fully.
Lloyds used a similar technique to manipulate information that disguised clients in Iran and Sudan who were barred from doing business in the U.S. Based on OFAC’s analysis of Lloyds’ transactions, the bank routed over 4,200 wire transfers in apparent violation of IEEPA and the OFAC regulations related to Iran, Sudan, and Libya from June 2003 through August 2006.
Lloyds indicated that it terminated these illegal activities, including ceasing U.S. dollar clearing activities for Iranian bank customers in 2003, and has cooperated fully with OFAC investigation. Lloyds has settled with OFAC for $217 million, a sum which has been deemed satisfied by its prior payment of a larger amount in satisfaction of penalties assessed by the U.S. Department of Justice.
While Lloyds did not voluntarily self-disclose the apparent violations, OFAC mitigated the total potential penalty based on Lloyds’ substantial cooperation and its prompt and thorough remedial response.
This rule has been initially published as an interim final rule with request for comments on September 8, 2008. In response to comments received, OFAC made several changes to the final version of the rule:
- The definition of “voluntary self-disclosure” was amended to clarify that when a third party required to report an apparent violation fails to do so, but a person that has committed an apparent violation and is subject to any of the OFAC sanctions ("Subject Person") reports the violation to OFAC, the notification will still be considered a voluntary self-disclosure. However, in those cases where the third party does notify OFAC before a final enforcement response to the violation, a Subject Person’s notification will not be considered a voluntary self-disclosure even if it precedes the third party’s notification.
- The definition of “voluntary self-disclosure” was also amended to clarify that a self-initiated notification to OFAC made at the same time as another government agency learns of the apparent violation (either through disclosure or otherwise) does qualify as voluntary self-disclosure if the other aspects of the definitions are met. This change is intended to cover self-disclosures made to OFAC and another government agency simultaneously.
- Similarly, if a Subject Person notifies another government agency of an apparent violation as required by that agency, the notification may be considered a voluntary self-disclosure by OFAC, based on a case-by-case determination.
- On the requested clarification on Suspicious Activity Report (SAR) filing, OFAC responded that the filing of a SAR does not itself preclude a determination of voluntary self-disclosure for a subsequent self-disclosure to OFAC of the same transaction, unless OFAC learns of the apparent violation prior to the self-disclosure filing.
- Regarding party cooperation and tolling agreements, the final rule eliminates any reference to statute of limitations waivers. Furthermore, with respect to whether a Subject Person’s refusal to enter into a tolling agreement should be considered an aggravating factor in assessing the person’s cooperation, the final rules states that a Subject Person’s unwillingness to enter into a tolling agreement will not be considered against the Subject Person. On the other hand, if a Subject Person is willing to enter into a tolling agreement, it may be considered a mitigating factor.
- For the purposes of calculating a penalty in cases involving a set of “substantially similar violations,” OFAC clarified that the penalty reduction of up to 25% for a Subject Person’s first violation will generally apply to the entire set of “substantially similar violations” and not solely to the first of those violations.
- OFAC also amended the final rule to make clear that determination of appropriate enforcement response is not limited to prior formal determinations of sanctions violations. Thus, prior cautionary letters, warning letters, and evaluative letters will be considered in determining OFAC sanctions, if any. This particular amendment specifies that consideration of a Subject Person’s sanction history will be limited to the five years preceding the transaction giving rise to the apparent violation.
- On the issue of attorney-client privilege or the attorney work product doctrine, the final rule was amended by eliminating the reference to “failure to furnish the requested information” and instead referring to a “failure to comply” with a request for information. The language is intended to specify that OFAC will not seek penalties in cases where responsive information is withheld on the basis of apparently applicable and properly invoked privilege.
- The Enforcement Guidelines also clarify the base penalty amounts for transactions within the scope of the Trading With the Enemy Act (TWEA), which are capped at the $65,000. In non-egregious cases involving apparent violations of TWEA, when the apparent violation is disclosed through a voluntary self-disclosure, the civil penalty is capped at the $32,500. Non-egregious violations of TWEA not voluntarily disclosed are capped at the $65,000.
- The penalty for failure to maintain records in conformance with the requirements of OFAC regulations is set at a maximum of $50,000.
More detailed discussion of the amendments and public comments can be found in the final rule, published as Appendix A to Part 501 – Economic Sanctions Enforcement.
Monarch has been engaged in imports and exports of military and commercial aircraft components for over 20 years.
Wang-Woodford was arrested at San Francisco International Airport in December 2007 after arriving on a flight from Hong Kong and has remained incarcerated ever since. Originally, Wang-Woodford was charged along with her husband Brian D. Woodford in a 20-count indictment returned in the Eastern District of New York on January 15, 2003. A superceding indictment charging Wang-Woodford with operating Jungda International Pte. Ltd (Jungda), a Singapore-based successor to Monarch, was returned on May 22, 2008. Brian Woodford, a U.K. citizen who served as chairman and managing director of Monarch, remains a fugitive.
The 2008 indictment alleged that between January 1998 and December 2007, the defendants exported controlled U.S. aircraft parts from the U.S. to Monarch and Jungda in Singapore and Malaysia and then re-exported those items to buyers in Iran without the required U.S. government licenses. The parts exported included aircraft shields, shears, “o” rings, and switch assemblies. On the export documents filed with the U.S. government, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts.
At the time of her arrest, Wang-Woodford had in her possession catalogues from China National Precision Machinery Import and Export Corporation (CPMIEC) containing advertisements for military technology and weaponry, including surface-to-air missile systems and rocket launchers. CPMIEC, a Chinese company, has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) based on the company’s history of selling military hardware to Iran. Under those sanctions, all U.S. persons and entities are prohibited from engaging in business with CPMIEC.
The Bureau of Industry and Security publish on its website Lists to Check that include sanctions by various government agencies and that should be consulted by persons involved in export or re-export transactions.
The report sets forth the number of license applications, licenses issued, license amendments issues, and applications denied by agricultural commodities, medicine, or medical devices categories, as well as by country (i.e., Iran or Sudan). The average processing time was as follows:
- Denial Letters - 116 days
- Licenses - 60 days
- Return Without Action (RWA) Letters - 16 days
- Overall - 49 days
OFAC alleged that from 2004 to 2006, ANZ processed international trade financing and foreign currency exchange transactions through U.S. correspondent accounts. In the process, ANZ concealed the identities of persons targeted by the U.S. sanctions by removing their names as well as references to Sudan, thus impeding the U.S. banks’ ability to detect these violations.
The settlement agreement covers 16 transactions totaling $28 million that allegedly violated the Sudanese Sanctions Regulations, and 15 sanctions totaling $78 million that allegedly violated the Cuban Assets Control Regulations.
ANZ voluntarily disclosed violating the Cuban Assets Control Regulations but not the apparent Sudanese Sanctions Regulations violations. However, while conducting a review of the transactions, the company discovered additional violations of the Sudanese Sanctions of which OFAC was not aware.
OFAC stated that ANZ’s prompt and substantial cooperation involving extensive review of transactions, as well as the fact the company had not been subject to an OFAC enforcement action in the five years preceding the transactions served as mitigating factors in determining the penalty amount. As part of the settlement agreement, ANZ also agreed to re-design its current operations and policies to implement procedures that establish more effective controls on potential OFAC violations.
- Oxbow Carbon and Minerals LLC of West Palm Beach, FL agreed to remit $276,250 to settle allegations that the company violated the Iranian Transactions Regulations occurring from November 2006 through October 2007. OFAC alleged that Oxbow engaged in transactions involving services originating in Iran and facilitated trade-related transactions by non-U.S. persons which involved the use of vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines in Tehran, Iran, without an OFAC license. Oxbow did not voluntarily disclose the alleged violations to OFAC, but OFAC noted that the company “demonstrated cooperation” during OFAC’s review of the alleged violations and has made revisions to its compliance program as a remedial measure.
- National Marine Consultants, Inc. has remitted $42,075 to settle allegations of violations of the Iranian Transactions Regulations. OFAC alleged that between March 2005 and May 2007 NMCI outsourced to an Iranian entity inspection services it was contractually bound to perform for a third-party, without an OFAC license. NMCI did not voluntarily disclose the matter to OFAC, but later cooperated with OFAC’s investigation.
- Philips Electronics of North America Corporation, a New York, NY company, has remitted $128,750 to settle allegations of violations of the Cuban Assets Control Regulations occurring between June 2004 and March 2006. OFAC alleged that PENAC acted without an OFAC license through an employee’s travel to Cuba in connection with the sale of medical equipment by a foreign affiliate of PENAC. PENAC voluntarily disclosed this matter to OFAC.
- Willbros USA, Inc. of Houston, Texas, paid $6,600 to settle an allegation of violation of the Sudanese Sanctions Regulations occurring between June 18, 2003 and December 29, 2004. OFAC alleged that Willbros willfully violated the Regulations when it entered into a contract to bid on an oil development project in Sudan, despite its knowledge that such activities violated the Regulations, by facilitating the export of goods, technology or services to Sudan and evading the prohibitions set forth in the Regulations. Willbros voluntarily disclosed this matter to OFAC. OFAC applied its 2003 Economic Sanctions Enforcement Guidelines to this violation because Willbros and OFAC agreed to settle the allegation of violation, and memorialized the tentative agreement, prior to the issuance of OFAC’s Civil Penalties Interim Policy of November 27, 2007.
The amendment removes Iraq, Libya, and North Korea from the list of countries designed as state sponsors of terrorism. Remaining on this list are Cuba, Iran, Sudan, and Syria. Except as authorized, U.S. companies may not engage in any financial transactions with the governments of those countries.
Khoshnevisrad and his company Ariasa are each charged with two counts of unlawful export of U.S. goods to Iran and two counts of conspiracy to unlawfully export U.S. goods to Iran, in violation of the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions Regulations (ITR).
According to the affidavit in support of the criminal complaint filed in August 2008, Khoshnevisrad and Ariasa instructed a trading company in Ireland to purchase several model 250 turbo-shaft helicopter engines from Rolls-Royce Corp in Indiana. This type of engine was originally designed for a U.S. Army light observation helicopter and is now installed in civil and military helicopters. The Irish trading company purchased 17 of the engines for a total of $4.27 million, falsely stating that the helicopters would be used by the Irish company or by fake companies. The affidavit alleges that these helicopter engines were exported from the U.S. to a company in Malaysia pretending to be a book publisher, at a freight forwarding company address. From there, the engines were shipped to Iran. Among the recipients was the Iran Aircraft Manufacturing Industrial Company, known by its Iranian acronym as HESA. In September 2008, HESA was designated by the Treasury Department as an Iranian proliferator of weapons of mass destruction.
The affidavit further alleges that Khoshnevisrad and Ariasa instructed in 2006 a Dutch aviation parts company to place an order for several aerial panorama cameras from the U.S. The specific cameras were designed for the U.S. Air Force, for use on bombers, fighters and surveillance aircraft. The Dutch company was supposed to place the order with a Pennsylvania company and to ship them to an address in Iran. Khoshnevisrad, knowing that Iranian end user would be prohibited in this case, instructed the Dutch company to “give them an end user by yourself.” In August 2006, a representative of the Dutch company notified Khoshnevisrad that the cameras were received and would soon be shipped to Tehran.
The affidavit alleges that neither Khoshnevisrad nor Ariasa ever sought an authorization or a license from the U.S. Department of Treasure to export any goods or technology to Iran. If convicted, Khoshnevisrad faces a prison sentence of up to 20 years for each of the first three counts of the complaint, and a prison sentence of up to five years on the fourth count.
The Guidelines establish several significant changes from the 2003 proposed rule.
First, rather than identifying “aggravating” and “mitigating” factors, the Guidelines set forth General Factors for Taking Administrative Action (General Factors) that OFAC will consider in determining an appropriate enforcement response to an apparent violation and, if a civil monetary penalty is warranted, in establishing the amount of the penalty. The Guidelines reflect a realization that in many cases, a particular factor may be considered either “aggravating” or “mitigating” (e.g. remedial action was considered a mitigating factor under 2003 rules; but, absence of remedial action considered as aggravating factor).
Some or all of the following General Factors will be considered in determining the appropriate administrative action in response to an apparent violation of U.S. sanctions by a person, and, where a civil monetary penalty is imposed, the amount of such penalty:
A. Willful or reckless violation of law,
B. Awareness of conduct at issue,
C. Harm to sanctions program objectives,
D. Individual characteristics of the subject person,
E. Compliance program,
F. Remedial response,
G. Cooperation with OFAC,
H. Timing of apparent violation in relation to imposition of sanctions,
I. Other enforcement actions taken by federal, state or local agencies against the subject person,
J. Future compliance / Deterrence effect, and
K. Other relevant facts on a case-by-case basis.
Second significant development is that the Guidelines provide for the issuance of either cautionary letters or findings of violation under certain circumstances, rather than the cautionary letters and warning letters provided for under the 2003 proposed rule and the evaluative letters provided for in the 2006 interim final rule.
Third, in recognition of OFAC’s position that enhanced maximum civil penalties authorized by the Enhancement Act should be reserved for the most serious cases, the Guidelines distinguish between egregious and non-egregious civil monetary penalty cases. Egregious cases are defined as those representing the most serious sanctions violations, based on an analysis of all applicable General Factors.
Fourth, in those cases in which the imposition of a civil monetary penalty is deemed appropriate, the Guidelines provide a new process for determining the penalty amount. This process involves first determining a base penalty amount, which is based on two considerations: (i) whether the conduct, activity, or transaction giving rise to a violation is egregious or non-egregious, and (ii) whether the case involves a voluntary self-disclosure by the subject person. The existence or lack of a voluntary self-disclosure is a major factor in establishing the penalty amount. The base penalty amount for a case involving self-disclosure reflects a 50 percent or more reduction from the base penalty amount that would otherwise be applicable.
Thus, under the Guidelines, the base penalty amount in a case determined to be non-egregious and involving voluntary self disclosure will not exceed one-half of the transaction value (capped at $125,000 per violation), while in an egregious case without voluntary self-disclosure, the penalty may reach the applicable statutory maximum.
Once a base penalty amount is determined based on the transaction value and egregiousness / voluntary self-disclosure factors, the amount may be adjusted upward or downward based on the other General Factors.
With respect to responses to apparent violations, depending on the facts and circumstances of a particular case, an OFAC investigation may lead to one or more of the following actions:
A. No action,
B. Request for additional information,
C. Cautionary letter,
D. Finding of violation,
E. Civil monetary penalty,
F. Criminal referral, or
G. Other administrative actions, including (1) License denial, suspension, modification, or revocation, and (2) Cease and desist order.
In establishing the amount of civil penalties, including for failure to furnish information or to keep records, OFAC will review the facts and circumstances surrounding an apparent violation and apply the General Factors.
Although this interim final rule is effective immediately, OFAC is soliciting comments for a 60-day period with a view of improving the Guidelines.
OFAC states that these new penalties are applicable to all enforcement actions that are pending or commenced on or after October 16, 2007 and interprets this provision to mean that the new civil penalty provisions apply to all violations with respect to which a Final Penalty Notice had not been issued as of October 16, 2007.
OFAC intends to publish revised enforcement guidelines and procedures to account for the new maximum penalty amounts set forth in the IEEPA Enforcement Act. Until that time, OFAC will continue to apply its current enforcement guidelines which are set out in the notice. As a practical matter, OFAC states that this means that prepenalty notices will generally be issued at the transaction amount. Aggravating and mitigating factors and percentages set forth in the current guidelines will continue to be applied.
However, OFAC lists the following exceptions to those rules:
- PPN Mailed - Where a prepenalty notice ("PPN") has been mailed to the cited party prior to October, 16, 2007, OFAC will not impose a penalty in excess of the PPN and will continue to apply the current enforcement guidelines to calculate the penalty amount.
- Tentative Settlement Amount Communicated and Memorialized - Where OFAC has communicated to a party that an settlement amount would be recommended internally, and the party has made a written settlement offer to OFAC, OFAC will continue to process the settlement under the terms of the communication from OFAC.
- SOL Waivers - In those cases where a party has agreed to a statute of limitations ("SOL") waiver and the SOL would have expired prior to October 16, 2007, OFAC will calculate the penalty amounts in accordance with the maximum penalty applicable at the time the waiver was signed.