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OFAC reaches multiple settlements to resolve Cuban sanctions violations

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

Financial Crimes

On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $141,442 settlement with a Colorado-based multinational mining firm for allegedly violating the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, between June 2016 to November 2017, a wholly-owned subsidiary of the firm purchased Cuban-origin explosives and explosive accessories from a third-party vendor to be used in a mine construction. The distributor, on the subsidiary’s behalf, imported Cuban-origin explosives and explosive accessories for the mine on at least four separate occasions, despite the subsidiary being “generally prohibited from dealing in Cuban-origin goods.” According to OFAC, shipping documents clearly identified that the goods were sourced from Cuba. In addition, purchase orders failed to contain express statements that items provided to the subsidiary may not originate from embargoed jurisdictions, nor did the subsidiary ask for country-of-origin information for the goods acquired from its suppliers. Additionally, OFAC contended that the subsidiary’s failure to provide appropriate export and trade sanctions training led to the apparent violations.

In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the parent firm and subsidiary failed to exercise reasonable due diligence to ensure it complied with U.S. Cuba sanctions requirements; and (ii) the firm and its subsidiaries and affiliates are “a large and sophisticated organization operating globally as a leading gold producer with experience and expertise in international transactions.” OFAC also considered various mitigating factors, including that (i) the apparent violations were self-disclosed and constituted a non-egregious case; (ii) the firm and subsidiary have not received a penalty notice from OFAC in the preceding five years; (iii) the amount of payments were not significant compared to the total volume of transactions undertaken on an annual basis; and (iv) the firm and its subsidiary cooperated with the investigation, signed a tolling agreement, and are currently implementing remedial measures to prevent future violations.

Separately, OFAC also announced a $45,908 settlement with a Florida-based company affiliated with a distributor of explosives and accessories for mining operations. According to the web notice issued in this action, on four occasions in 2016 and 2017, the company and certain affiliates procured Cuban-origin explosives and related accessories from a third-party vendor originating from Cuba on behalf of a U.S. company for the U.S. company’s mining project in Suriname in violation of the CACR. OFAC contended that the company was responsible for overseeing the processing of purchase orders and invoices for these transactions, and that in 2018, after the U.S. company customer learned of the goods’ Cuban origins, it was asked to no longer procure goods from Cuba. According to OFAC, the apparent violations occurred primarily because of the company’s failure “to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the United States,” adding that the company did not have a compliance program in place when the four transactions occurred, nor did it realize the transactions were prohibited until they were flagged by the customer. The company immediately ceased all activities involving Cuba after learning of the sanctions implications but did not voluntarily self-disclose the violations, which OFAC deemed non-egregious.

In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to “exercise a minimal degree of caution or care” when procuring Cuban-origin goods from its supplier; (ii) the company “had actual knowledge that it was financing the provision of Cuban-origin goods for export to Suriname”; and (iii) the company’s actions harmed the U.S. sanctions program. Mitigating factors included that the company is (i) small and largely overseen by one individual; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company provided timely information and entered into a tolling agreement. Providing context for the settlement, OFAC stated that “[t]his case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.”

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