Archive for the ‘Sanctions’ Category

Red Bull’s Cuban Documentary Violates the CACR

Thursday, August 28th, 2014 by Brooke Driver

By: Brooke Driver

Red Bull might give you wings, but that doesn’t mean you should fly (without a license). The energy drink company Red Bull North America, Inc. has agreed to settle with OFAC for $89,775 over its alleged seven violations of the Cuban Assets Control Regulations. Specifically, the company violated 31 C.F.R. part 515 of the CACR when it authorized seven Red Bull representatives to travel to Cuba in order to film a documentary between the dates of June 8 and June 18, 2009.

While the maximum penalty in this instance is $455,000, the base penalty is $105,000, and OFAC chose even to significantly reduce that fine despite the facts that:

  • Red Bull did not disclose its violations
  • Red Bull had prior knowledge of U.S. sanctions on Cuba and took steps to conceal the transactions
  • Red Bull is a U.S. subsidiary of a sophisticated multinational company with extensive experience in international trade (in other words, “you should have known better!”)

And considering the facts that:

  • The case was deemed non-egregious
  • Red Bull had not committed a violation in the five years prior to the incident
  • Red Bull immediately took remedial action in implementing an OFAC compliance program

Red Bull’s mishap acts as a forceful reminder that “export” applies to many more situations than a clear cut shipment of an item and that companywide training is essential for your protection. Marketing, in this case, and many other seemingly unrelated departments often perform or are involved in some form of exporting. Be sure to arm them with at least a high level awareness of the compliance risks they face.

BNPP Pays Nearly $9 Billion for Repeated Sanctions Violations

Thursday, August 28th, 2014 by Brooke Driver

By: Brooke Driver

The French bank BNP Paribas SA has agreed to pay $8.97 billion for its (get ready for this number) 3,897 apparent violations of the Sudanese Sanctions Regulations, Iranian Transactions and Sanctions Regulations, Cuban Assets Control Regulations and Burmese Sanction Regulations, a record breaking penalty for American sanctions violations. The enormity and global nature of the case prompted collaboration between OFAC, the U.S. Department of Justice, the New York County District Attorney’s Office, the Federal Reserve Board of Governors and the Department of Financial Services of the State of New York in the process of investigating BNPP’s violations and arriving at an appropriate consequence.

For a number of years prior to and including 2012, BNPP processed—and concealed—thousands of transactions to or through U.S. financial institutions involving parties subject to the aforementioned sanctions programs. In executing these illegal transactions, BNPP concealed, removed, omitted or obscured references to the sanctioned parties in related paperwork.

Specifically, between the dates of September 6, 2005 and July 24, 2009, BNPP processed 2,663 wire transfers totaling approximately $8,370,372,624 involving Sudanese entities, 318 wire transfers with a total value of $1,182,075,543 involving Iranian entities between July 15, 2005 and November 27, 2012, seven wire transfers for Burmese parties (totaling $1,478,371) between November 3, 2005 and sometime in May 2009 and 909 Cuba-related wire transfers between July 18, 2005 and September 10, 2012 with a total value of $689,237,183. The severity of the fine and year-long ban from conducting certain U.S. dollar transactions is a clear message to other financial institutions that might not take U.S. sanctions seriously.

OFAC claims that the settlement amount reflects the following factors:

  • BNPP had knowledge that its conduct might have violated U.S. law
  • At least one member of BNPP senior management and multiple supervisors  were aware of the company’s illegal conduct
  • The violations are numerous and span many years
  • The illegal transactions were large monetary transfers
  • BNPP had not received a violation notice in the five years leading up to the settlement
  • BNPP cooperated with OFAC’s investigation
  • BNPP has taken remedial action to prevent further U.S. sanctions violations

Commerzbank OFAC’s Next Target for Large Sanctions Violation Penalty

Thursday, August 28th, 2014 by Brooke Driver

By: Brooke Driver

Currently, the French bank BNP Paribas is receiving a lot of attention, due to its record breaking fine of nearly $9 billion for breaking U.S. sanctions laws. However, it seems that the German-based Commerzbank will serve as the U.S.’s next example of what can happen to a financial intuition that foolishly ignores U.S. law.

The bank, which has entered into settlement negotiations with the combined forces of OFAC, the Department of Justice, the Treasury Department, the Federal Reserve and the Manhattan District Attorney, is expected to pay between $600 million and $800 million to resolve its violations of sanctions regulations, including Iranian transactions, amongst others.

Among the actions in question are Commerzbank’s business transactions with the Islamic Republic of Iran Shipping Lines, which was designated for economic sanctions in 2008 for allegedly supporting Iran’s proliferation of weapons of mass destruction. Apparently, Commerzbank continued to work with the company, despite the fact that it had prior knowledge of the sanction. ECTI will keep you updated as the case unfolds.

Epsilon Pays Over $4 Million for ITSR Violations

Thursday, August 28th, 2014 by Brooke Driver

By: Brooke Driver

Epsilon Electronics Inc. of Montebello, California (A.K.A. Power Acoustik Electronics, Sound Stream, Kole Audio and Precision Audio) recently agreed to settle for $4,073,000 over its violations of the Iranian Transactions and Sanctions Regulations. Between the dates of August 26, 2008 and May 22, 2012, Epsilon issued 39 invoices for car and audio equipment (valued at $3,407,491 to a company that reexports nearly all of its products to Iran and has offices in Tehran, Iran and Dubai.

Epsilon was aware of the company’s relationship with Iran and was also issued a cautionary letter from OFAC in January of 2012 explaining the role of the ITSR in protecting U.S. interests. OFAC chose to demand the high fine based on Epsilon’s awareness that its actions were in violation of U.S. law and its apparent conscious efforts to obscure those actions.

Argentinian Travel Website to Pay $2,809,800 for Violations of the Cuban Assets Control Regulations

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

A Delaware company with its headquarters in Buenos Aires, Argentina, Decolar.com, recently agreed to pay OFAC $2,809,800 to settle for the charges against it. Apparently, between March 2, 2009 and March 31, 2012, Decolar allowed its foreign subsidiaries to aid 17,836 individuals with flight and hotel reservations for travel to and from Cuba. Of course, Decolar neglected to attain the proper licensure to do so. But, while the cost is high, Decolar must be relieved that OFAC did not enforce the full penalty charge of $4,460,000. In determining the settlement cost, OFAC claims to have considered the follow facts:

• Decolar disclosed the violations and cooperated with OFAC’s investigation
• Decolar has taken measures to develop a working OFAC compliance program
• Upon discovering the violations, Decolar immediately stopped offering Cuba-related travel services
• Decolar demonstrated reckless disregard for U.S. sanctions by failing to ascertain that its activities were not in violation of U.S. law (OFAC states here that Decolar naively took the word of an unidentified third party who assured Decolar management that it was in the clear. OFAC adds that Decolar should have been aware of the CACR restrictions on its activities).
• Decolar’s senior management was aware of its subsidiaries’ Cuba-related travel services

The two main take aways here, folks, are that:

1. When relying on a third party legal/export compliance advisor, do your homework. Before you stake your business’ reputation on his word, be sure that he knows what he’s talking about.
2. Recognize that you will be punished for violating laws you should know about, not just the ones you do know. OFAC made it very clear in this case that Decolar management reasonably should have known that it was in violation of U.S. law—and now the company is facing a fine with an uncomfortable amount of digits.
In other words, an untrained company is an unprotected company. Put in the hours, not the dough.

Washington State Resident Targeted by OFAC for Exporting Unlicensed Medical Goods to Iran

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

OFAC recently announced that Concord, CA company Sea Tel, Inc. has agreed to pay a settlement of $85,113 for its apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, between the dates of November 20, 2007 and February 26, 2009, Sea Tel invoiced a South Korean distributor for 16 orders of marine antenna systems totaling $378,281 in value. The California-based company then exported these products to South Korea with knowledge or reason to believe that they were intended for use on vessels owned by the National Iranian Tanker Company. Although OFAC emphasized that the illegal shipments caused significant harm to the American sanctions program and that Sea Tel’s actions revealed a pattern of reckless disregard for said sanctions, luckily for Sea Tel, OFAC chose to significantly lower its fine from the base penalty of $189,141, due to the facts that:

  • This was Sea Tel’s first offense
  • Sea Tel disclosed the violations to OFAC and cooperated throughout the investigation
  • Sea Tel had an OFAC compliance program in place when the violations occurred (although, obviously not a very good one)

Netherlands Company CWT Pays Whopping $5,990,490 to Settle CACR Violations

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

One can only hope that Netherlands-based CWT B.V. learned its lesson when it was slapped with a nearly six million dollar penalty for violating the Cuban Assets Control Regulations. The supposed violations occurred between the dates of August 8, 2006 and November 28, 2012. During this period, the travel service provider CWT reportedly assisted no less than 44,430 people in travel to or from Cuba. As the company became majority-owned by U.S. persons in 2006, its actions became subject to U.S. law, and therefore, the Trading with the Enemy Act.

Although CWT did disclose the majority of these violations to OFAC, a small portion did take place after the voluntary disclosure. OFAC did not demand the base penalty of $11,093,500, but arrived at the still painful total of $5,990,490 based on the following factors:

  • CWT failed to exercise a minimal degree of caution or care regarding its obligations to comply with OFAC sanctions against Cuba by processing unauthorized travel-related transactions for more than four years before recognizing that it was subject to U.S. jurisdiction
  • CWT is a commercially sophisticated international corporation and travel services provider
  • CWT processed a high volume of transactions and assisted a large number of travelers, which caused significant harm to the objectives of the CACR
  • CWT had no compliance program at the time (or an inadequate one)
  • This instance was CWT’s first violation
  • CWT cooperated substantially with OFAC’s cooperation
  • CWT has taken significant remedial actions in order to improve its OFAC compliance procedures

Lesson learned: company ownership is just as important in determining U.S. jurisdiction as location. You may run your operation across the world, but if it is owned by United States citizens, it is subject to United States law, and you will suffer the consequences if you don’t comply accordingly.

OFAC Publishes Final Rule Amending the ITSR

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

On March 31, 2014, OFAC published a final rule that came into effect April 7 amending the Iranian Transactions and Sanctions Regulations. The new rule expands an existing general license allowing the exportation or reexportation of food to Iran by including the broader category of agricultural commodities. It also adds a new general license enabling shipments of certain replacement parts for particular medical devices. Finally, the rule addresses a few definitions in OFAC regulations, clarifying some and adding others. Click here for more information.

Sea Tel, Inc. Pays $85,113 for Violating Iranian Sanctions

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

OFAC recently announced that Concord, CA company Sea Tel, Inc. has agreed to pay a settlement of $85,113 for its apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, between the dates of November 20, 2007 and February 26, 2009, Sea Tel invoiced a South Korean distributor for 16 orders of marine antenna systems totaling $378,281 in value. The California-based company then exported these products to South Korea with knowledge or reason to believe that they were intended for use on vessels owned by the National Iranian Tanker Company. Although OFAC emphasized that the illegal shipments caused significant harm to the American sanctions program and that Sea Tel’s actions revealed a pattern of reckless disregard for said sanctions, luckily for Sea Tel, OFAC chose to significantly lower its fine from the base penalty of $189,141, due to the facts that:

  • This was Sea Tel’s first offense
  • Sea Tel disclosed the violations to OFAC and cooperated throughout the investigation
  • Sea Tel had an OFAC compliance program in place when the violations occurred (although, obviously not a very good one)

US Stops Approving Export Licenses for Russia and Adds Russians and Ukrainians to US Prohibited Parties Lists

Tuesday, May 6th, 2014 by Brooke Driver

By: Brooke Driver

Executive Summary:

1)     Both the State Department and the Commerce Department have stopped approving export and reexport license applications for products and technologies destined to Russia.  This is in response to Russian actions related to the Ukraine and Crimea.

2)    The Treasury Department has implemented US smart sanctions that prohibit involvement in transactions with listed Russian and Ukrainian persons/entities.  The prohibition applies to entities that are more than 50% owned by a listed person.

3)    There are no other changes in the export/reexport licensing requirements for sending things to Russia or Ukraine.

Expanding the scope of the executive order he signed March 6, President Obama has signed two new executive orders in response to the political situation in Ukraine. The first order, signed March 17, allows the US the right to block the property of certain Russian individuals if it is in the US, comes into the US or comes into the possession of a person in the US. The order is meant to block officials of the Government of the Russian Federation or those who choose to assist the Russian Federation. So far, the list includes high ranking Russian government officials, financial institutions, and Crimea-based separatist leaders, including former Ukrainian president Viktor Yanukovich, presidential aide Vladislav Surkov and advisor Sergei Glazyev, to name a few.

For the latest updates to the list, go to http://www.treasury.gov/ofac/downloads/t11sdnew.pdf

Three days after signing this order, President Obama released another, this one enabling the US to impose economic sanctions against Russia for its use of force and annexation of the Ukranian region of Crimea. Specifically, this executive order allows the Treasury Department the ability to designate any or all of these sectors of the Russian economy for additional sanctions: metals and mining, energy, financial services, engineering and defense and related material. Essentially, by signing this order, Obama has threatened to significantly damage the Russian economy by cutting off trade with the US. However, Treasury officials claim that the president must handle the execution of the new order “with care, given the fact that that could also impact the global economy.”  Importantly, so far the Treasury Department has not yet imposed these available sanctions against any of the sectors.