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OFAC Announces Settlement Agreement with Insurance Company
On August 6, OFAC announced a $271,815 settlement with a New York-based insurance company with an overall focus on marine insurance and related lines of business, professional liability insurance, and commercial umbrella and primary and excess casualty businesses. According to OFAC, from May 8, 2008 to April 1, 2011, the company and its London branch office, “issued global protection and indemnity (“P&I”) insurance policies that provided coverage to North Korean-flagged vessels and covered incidents that occurred in or involved Iran, Sudan, or Cuba—some of which led to the payment of claims.” The company’s willingness to engage with OFAC-sanctioned countries resulted in 48 alleged violations of Foreign Assets Control Regulations, Executive Order 13466 of June 26, 2008, North Korea Sanctions Regulations, Iranian Transactions and Sanctions Regulations, Sudanese Sanctions Regulations, and Cuban Asset Control Regulations. OFAC stated that (i) the company did not maintain a formal compliance program at the time it issued the P&I insurance policies; and (ii) the company’s London office personnel “misinterpreted the applicability of OFAC sanctions regulations.” The final settlement amount reflects the fact that managers and supervisors knew or had reason to know that the majority of the insurance policies and claims payments at issue involved OFAC-sanctioned countries; the company is a commercially sophisticated financial institution; and it did not have a formal OFAC compliance program in place at the time the apparent violations occurred. Mitigating factors included the company’s cooperation with OFAC’s investigation; lack of prior enforcement action; and its remedial action plan to implement a sufficient OFAC compliance program.
OFAC Levies Penalty for Violations of the Iranian Transactions and Sanctions Regulations
On July 29, OFAC announced that it levied a $82,260 civil penalty against Blue Robin, Inc. for violating certain provisions of the Iranian Transactions and Sanctions Regulations. According to OFAC, from 2009 through 2010, Blue Robin conducted 33 transactions valued at over $200,000, where Blue Robin imported web development services from PersiaBMW, an Iranian company. The services rendered by PersiaBMW were used to develop web-based systems and applications to streamline online business processes and operations for Blue Robin’s customers. In its consideration of the penalty amount, OFAC determined that “Blue Robin acted recklessly because it knew it was importing services from an Iranian company over a period of more than five years, it sent payments through unlicensed money exchangers instead of through traditional commercial banking channels, and it appears that the company did not take any steps to research the legality of funds transfers to Iran or the importation of services from Iran until after it lost contact with its unlicensed money exchanger.” Nevertheless, due to Blue Robin’s self-disclosure and substantial cooperation with OFAC’s investigation, the penalty amount imposed against Blue Ribbon was below the base penalty amount for the violations.
OFAC Provides Overview of Agreement with Iran Regarding Sanctions Relief
On July 14, OFAC released a statement regarding the agreement reached with Iran over its nuclear program. Following months of diplomacy, OFAC stated that the P5 + 1 reached a Joint Comprehensive Plan of Action (JCPOA) with Iran regarding Iran’s nuclear program to ensure that it is exclusively peaceful going forward. Once the International Atomic Energy Agency (IAEA) verifies that Iran has implemented key nuclear-related measures described in the JCPOA (“Implementation Day”), “U.S. sanctions relief will be provided through the suspension and eventual termination of nuclear-related secondary sanctions.” The P5 + 1 and Iran also concluded on July 14 that the sanctions relief provided for in the JPOA of November 24, 2013 would be extended through Implementation Day; until further notice, the JPOA sanctions relief will be the only Iran-related sanctions relief in effect. The White House issued a description of the agreement to demonstrate how the long-term comprehensive nuclear deal with Iran “will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran’s nuclear program will be exclusively peaceful going forward.” Finally, as decided on July 14, licenses with the following credentials will remain in effect in accordance with their terms until Implementation Day: (i) Issued by OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry; and (ii) set to expire on or before July 14, 2015. OFAC stated that the U.S. government will publish detailed guidance related to the JCPOA prior to Implementation Day, and will issue revised guidance on the continued JPOA relief shortly.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 10, the P5 + 1, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 13, 2015. This updated guidance replaces guidance previously issued by OFAC on July 7, 2015.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 7, the P5 + 1, EU, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 10, 2015. This updated guidance replaces guidance previously issued by OFAC on June 30, 2015.
OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On June 30, the P5 + 1, European Union, and Iran agreed to extend the Joint Plan of Action for seven days, furthering negotiations to reach a solution to reduce Iran’s nuclear program. In conjunction with the announcement of the seven day extension, OFAC published Guidance on the Continuation of Certain Temporary Sanctions Relief Implementing the Joint Plan of Action, as Extended. The guidance continues the JPOA sanctions relief period, provided in November 2014 as implemented via Guidance, FAQs, and Statement of Licensing Policy, from June 30 through July 7, 2015.
OFAC Fines Commodity Trading Advisor for Apparent Sanctions Violations
On September 9, OFAC released an enforcement action against a CFTC-registered Introducing Broker and Commodity Trading Advisor that operates an electronic trading platform that allows customers to automatically place currency foreign exchange (FX) trades with broker-dealers. The company agreed to pay $200,000 to settle potential civil liability for apparent violations of Iran, Syria, and Sudan sanctions rules. According to OFAC, over “a number of years” the company maintained accounts for over 400 persons in Iran, Sudan, and Syria, and exported services to these customers by placing FX trades via its platform. The company also (i) originated eight funds transfers totaling $10,264.36 destined for two individuals located in Iran; and (ii) failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. OFAC determined that the company did not voluntarily self-disclose the apparent violations, and that the apparent violations constitute a non-egregious case. The base penalty for the apparent violations was $844,090,000. The lower settlement amount reflects OFAC’s consideration of the matter’s facts and circumstances, including the following mitigating factors: (i) the company is small with limited business operations; (ii) the company has taken remedial action in response to the apparent violations; (iii) the company has not received a penalty notice or Finding of Violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations; and (iv) the company substantially cooperated with OFAC’s investigation.
Treasury Department Announces $21 Million Resolution Of Alleged Iran and Sudan Sanctions Violations
On June 5, the Treasury Department’s Office of Foreign Assets Controls (OFAC) announced a Dutch aerospace firm has agreed to pay $21 million to resolve allegations that the company violated U.S. sanctions on Iran and Sudan. OFAC alleged that from 2005 to 2010, the company indirectly exported or re-exported aircraft spare parts to Iranian or Sudanese customers, which the company either specifically procured from or had repaired in the United States, and required the issuance of a license by a federal agency at the time of shipment. The company self-reported 1,112 apparent violations of the Iranian Transactions and Sanctions Regulations, and 41 apparent violations of the Sudanese Sanctions Regulations. The settlement includes the payment of a $10.5 million civil penalty to OFAC and the Department of Commerce’s Bureau of Industry and Security, a forfeiture of an additional $10.5 million pursuant to a deferred prosecution agreement reached with the DOJ, and the acceptance of responsibility for its alleged criminal conduct. OFAC stated that the base penalty for the alleged violations was over $145 million, however it agreed to a lower settlement after considering that the company self-disclosed the violations and the company: (i) had no OFAC sanctions history in the five years preceding the date of the earliest of the alleged violations; (ii) adopted new and more effective internal controls and procedures, and (iii) provided substantial cooperation during the investigation.
OFAC Announces Sanctions Settlement With Securities Intermediary
On January 23, the Treasury Department’s OFAC announced that a Luxembourg bank agreed to pay $152 million to resolve potential civil claims that the bank concealed the interest of the Central Bank of Iran (CBI) in certain securities held in one of the Luxembourg bank’s custody accounts. OFAC claims that from December 2007 through June 2008, the bank held an account at a U.S. financial institution through which the CBI maintained a beneficial ownership in 26 securities valued at nearly $3 billion. After assuring OFAC of its intention to terminate all business with its Iranian clients, the bank allegedly transferred the securities to another European bank’s custody account at the Luxembourg bank. Though the transfer changed the record ownership of the securities, the custody account allowed CBI to retain beneficial ownership. OFAC alleged that in acting as the channel through which the CBI held interests in the securities, the Luxembourg bank exported custody and related securities services in violation of the Iranian Transactions and Sanctions Regulations. OFAC highlighted the bank’s “strong remedial response” after learning of the alleged lapse mitigated the penalty amount. Although OFAC did not identify the specific enhanced controls implemented by the bank, it encouraged other firms operating as securities intermediaries to implement certain specific measures: (i) make customers aware of the firm’s U.S. sanctions compliance obligations and have customers agree in writing not to use their account(s) with the firm in a manner that could cause a violation of OFAC sanctions; (ii) conduct due diligence, including through the use of questionnaires and certifications, to identify customers who do business in or with countries or persons subject to U.S. sanctions; (iii) impose restrictions and heightened due diligence requirements on the use of certain products or services by customers who are judged to present a higher risk; (iv) attempt to understand the nature and purpose of non-proprietary accounts, including requiring information regarding third parties whose assets may be held in the accounts; and (v) monitor accounts to detect unusual or suspicious activity.
Multinational Oil Services Company Resolves FCPA, Sanctions, And Export Control Matter
On November 26, the DOJ announced that Weatherford International—a multinational oil services company—and certain of its subsidiaries agreed to pay approximately $250 million in fines and penalties to resolve FCPA, sanctions, and export control violations. The DOJ alleged in a criminal information that the company knowingly failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations. The alleged compliance failures allowed employees of certain of the company’s subsidiaries in Africa and the Middle East to engage in prohibited conduct over the course of many years, including both bribery of foreign officials and fraudulent misuse of the United Nations’ Oil for Food Program. The company entered into a deferred prosecution agreement, pursuant to which it must pay an approximately $87 million penalty, retain an independent corporate compliance monitor for at least 18 months, and continue to implement an enhanced FCPA compliance program and internal controls. The subsidiaries pleaded guilty to related specific acts of corruption, including those alleged in a separate criminal information. The DOJ alleged, among other things, that employees of certain subsidiaries engaged in at least three schemes to pay bribes to foreign officials in exchange for government contracts. In addition the parent company agreed to pay over $65 million and submit to compliance and monitoring requirements to resolve parallel SEC civil allegations that the company violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
Separately, the parent company entered into an agreement with the Treasury Department’s Office of Foreign Assets Control (OFAC) and a deferred prosecution agreement with the DOJ, as well as an agreement with the Department of Commerce, to resolve alleged sanctions and export controls violations. Collectively, those agreements require the company to, among other things, pay $100 million in penalties and fines—inclusive of a $91 million settlement with OFAC—and undergo external audits of its efforts to comply with the relevant U.S. sanctions law for calendar years 2012, 2013, and 2014. Those payments resolve allegations, described in part in another DOJ criminal information, that the company and certain subsidiaries exported or re-exported oil and gas drilling equipment to, and conducted business operations in, sanctioned countries—including Cuba, Iran, Sudan, and Syria—without the required U.S. Government authorization.