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OFAC reaches settlement with tool company for alleged Iranian sanctions violations

Financial Crimes Of Interest to Non-US Persons Iran Sanctions OFAC Department of Treasury Settlement

Financial Crimes

On March 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1,869,144 settlement with a U.S. tool manufacturer and its China-based subsidiary for 23 alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the company’s alleged transactions, valued at over $3.2 million, involving the subsidiary’s exporting and attempts to export 23 shipments of power tools and spare parts “with knowledge that such goods were intended specifically for supply, transshipment, or reexportation, directly or indirectly, to Iran.” Because the ITSR generally prohibit non-U.S. subsidiaries of U.S. persons from knowingly engaging in transactions with Iran, this settlement illustrates the importance of implementing OFAC compliance measures at such subsidiaries.

In arriving at the settlement amount, OFAC considered various aggravating factors and characterized the alleged violations as “an egregious case.” While the company voluntarily self-disclosed the alleged violations on behalf of its subsidiary, OFAC stated, among other things, that the company allegedly failed to implement procedures to monitor and audit the subsidiary’s compliance with applicable sanctions policies post-acquisition. Moreover, OFAC claimed that the subsidiary’s senior management continued to export goods to Iran, despite executing written agreements stating they would not engage in such conduct and attending compliance training sessions.

OFAC also considered numerous mitigating factors, including that (i) neither the company nor the subsidiary have received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the company immediately implemented “substantive remedial efforts,” including halting all of the subsidiary’s exports and hiring an independent investigator; and (iii) the company cooperated with OFAC’s investigation. OFAC noted that the company has committed to taking corrective actions to minimize the risk of recurring conduct.

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