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OFAC reaches $3.3 million settlement with cosmetics company for Iranian sanctions violations

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

Financial Crimes

The U.S Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced settlements with a California-based cosmetics company and a former senior company executive to resolve potential civil liability stemming from allegations that the company participated in a conspiracy to export goods and services from the United States to Iran over roughly an eight-year period. According to OFAC’s web notice, the company entered into an exclusive agreement with an Iranian distributor to sell products in the Middle East, specifically in Iran, without ever receiving a specific license or other applicable OFAC guidance to do so. OFAC maintained that these exported products (for which the company requested a license), were neither generally authorized nor exempt from prohibition. During a later acquisition, the company again applied for, but did not receive, a specific license to export products to Iran. The company knew that an OFAC license was required to lawfully export the products to Iran but continued to do so through departments generally overseen by the former senior company executive, OFAC said, adding that prior to the acquisition, the company did not disclosure the exports or its involvement with Iran, nor was this conduct discovered during pre-acquisition due diligence.  By conspiring to export approximately $11.1 million worth of goods to Iran over approximately eight years, the company allegedly violated the Iranian Transactions and Sanctions Regulations.

In arriving at the settlement amount, OFAC considered, among other things, that the company willfully violated U.S. sanctions by exporting its products and services to Iran, despite having knowledge that such conduct was prohibited, and that senior company officials had actual knowledge of the alleged misconduct. The $3.3 million settlement (of which the former senior company executive is responsible for $175,000) reflects that while the company voluntarily self-disclosed the apparent violations, the violations constitute an egregious case. OFAC also considered several mitigating factors, including that: (i) the company has undertaking remedial measures to prevent future misconduct; (ii) the overall percentage represented by its sales to Iran is small; (iii) the company has not received a penalty notice from OFAC in the preceding five years; (iv) the company cooperated with OFAC during the investigation and agreed to toll the statute of limitations; and (v) the former senior company executive’s violations involved the export of benign consumer goods.

Providing context for the settlement, OFAC said, among other things, that the “case highlights that U.S. sanctions on Iran encompass a wide range of potentially violative conduct, including the formation and execution of conspiracies to engage in prohibited activities such as exporting goods to Iran and causing such exports to occur.” OFAC reminded businesses that “placement of a U.S. entity under the compliance structure of a non-U.S. entity that may lack sufficient familiarity with U.S. sanctions laws could prevent the prompt identification of and response to potentially prohibited conduct.”