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OFAC Settles Alleged Iran Sanction Violations with International Freight Forwarder
On August 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it had reached a $518,063 civil settlement with a California-based international freight forwarder for alleged violations of sanctions against Iran. OFAC claimed that the company shipped “used and junked cars and parts” from the U.S. to Afghanistan, via Iran, on 140 separate occasions from approximately April 2010 through June 2012. OFAC alleged that each instance of this conduct, which the company “did not voluntarily self-disclose,” violated OFAC’s Iranian Transactions and Sanctions Regulations (ITSR). See 31 C.F.R. § 560.204.
Had the company not settled, OFAC determined that civil monetary penalties ranged from approximately $1.5 million to $35 million. In establishing this range, OFAC alleged that the following were aggravating factors: (i) the company “demonstrated a reckless disregard for U.S. sanctions requirements by failing to exercise a minimal degree of caution or care in transshipping goods through Iran”; (ii) the company’s “President and co-owner knew and approved of the transshipments via Iran”; (iii) the company “provided an economic benefit to Iran through its pattern of conduct and the volume of transactions in which it engaged”; and (iv) the company is “sophisticated” and has “experience with U.S. export laws and OFAC regulations, particularly the ITSR.”
As for mitigating factors, OFAC alleged that: (i) the goods “did not appear to have an end use in Iran”; (ii) the company “has no prior OFAC sanctions history”; (iii) the company is a “small business,” and the alleged violations “constituted less than one percent of its total shipments” during the relevant time period; (iv) the company “had an OFAC compliance program in place” during the relevant time period; (v) the company “took remedial steps”; and (vi) the company “cooperated with OFAC’s investigation.”
Minnesota-Based Company Announces Closure of FCPA Investigations
On August 7, a Minnesota-based company announced in its Form 10-Q the closure of DOJ and SEC FCPA investigations related to gift, travel, entertainment, and other expenses incurred in connection with its Asia-Pacific operations. The company initially informed the DOJ and SEC about this matter in 2012 and thereafter provided the government periodic updates. According to the company’s 10-Q, the government’s investigations were closed “without further action taken by either [the SEC or DOJ].”
Ohio-Based Corporation Discloses FCPA Investigation in Quarterly Filing
On August 4, Ohio-based corporation disclosed in its 10-Q that the DOJ and SEC are conducting investigations concerning potential violations of the FCPA related to a subsidiary’s operations in Turkey. The company operates in more than 70 countries and develops and sells technology-enabled solutions, including data warehouse management and database technologies.
According to the 10-Q, the company “discovered certain questionable expenditures for travel, gifts and other expenses at one of its international subsidiaries” doing business in Turkey. The company stated that it promptly launched an internal investigation and, in February 2017, self-disclosed the investigation to the SEC and DOJ. According to its 10-Q, the company has periodically updated the government about its investigation and plans to “continue to cooperate fully.” The company also noted that it already has “taken remedial actions,” including terminations, and that the FCPA issues “involved specific individuals who are no longer with the Company.”
It appears that the company is making a case for full cooperation credit under the DOJ’s Pilot Program, which encourages companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.”
OFAC Fines Global Risk Mitigation Firm for Violating Iranian Sanctions
On August 10, the Treasury’s Office of Foreign Assets Control (OFAC) announced it had reached a settlement with a global company that provides services in regulatory risk mitigation for alleged violations of OFAC sanctions against Iran. OFAC claimed that, beginning in 2012, on 44 separate occasions, the firm imported Iranian-origin services into the U.S., and on 28 different occasions, engaged in “transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries’ payments to providers of Iranian-origin services.” In establishing the penalty, OFAC considered that the firm failed to exercise a minimal degree of caution—and senior management allegedly knew or had reason to know the transactions related to services of Iranian-origin—and that the transactions giving rise to the apparent violations were not eligible for OFAC authorization and yielded economic benefits to Iran. Furthermore, OFAC claimed the “frequency and duration of the apparent violations constitute a pattern or practice of conduct,” and that the firm’s ineffective compliance program failed to recognize the risks of engaging in the aforementioned transactions. OFAC maintained the firm violated the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560. OFAC also considered the company’s prior history of not being sanctioned; its significant remedial measures; and substantial cooperation with OFAC’s investigation.
The settlement requires the firm to pay more than $250,000 to settle the claims, which the firm did not voluntarily self-disclose to OFAC.
OFAC Imposes Sanctions on Eight Additional Venezuelans Connected to Venezuelan President Maduro
On August 9, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was imposing sanctions on eight Venezuelan individuals for their role in supporting the “Constituent Assembly,” which was instituted under President Nicolas Maduro in order to allegedly undermine the democratic process by “rewrit[ing] the Venezuelan constitution and dissolv[ing] Venezuelan state institutions.” Seven of the individuals sanctioned are current or former officials of the Venezuelan government, and one was an active participant in identified “anti-democratic” actions. All assets belonging to the identified individuals subject to U.S. jurisdiction are frozen, and U.S. persons are prohibited from having any dealings with them. As previously reported in InfoBytes, sanctions were imposed on President Maduro on July 31.
Three Companies Announce the Close of FCPA Investigations
During the week of July 24, 2017, three different companies announced the closure of DOJ and/or SEC FCPA investigations.
In a Form 10-Q filed with the SEC on July 25, 2017, an American multinational technology company disclosed that the DOJ and SEC had each informed the company in June 2017 of the closure of their respective investigations into “alleged illegal activity by a former Poland employee in connection with sales to the Polish government.” The company initially informed the SEC in 2012 that the Polish Central Anti-Corruption Bureau was looking into the matter, and the DOJ followed up with its own investigation in April of 2013. The DOJ expanded the investigation from Poland to Argentina, Bangladesh, and Ukraine. The 2012 issues came on the heels of a 2011 settlement in which the company paid the SEC $10 million to settle separate FCPA allegations for alleged cash payments to Chinese and Korean officials.
A South African alternative payment systems provider made a similar announcement on July 27, stating that the DOJ had written a letter to the company closing its investigation of alleged FCPA and disclosure violations. According to the announcement, the DOJ, along with the SEC and South African authorities, began looking into a 2012 contract award process involving a subsidiary of the company after an unsuccessful bidder for the same contract “refer[ed] unsubstantiated South African press articles to the DOJ.” The SEC was the first to bow out of the investigation, closing its inquiry through a letter in 2015, followed six months later by the South African government. The company is traded on NASDAQ’s Global Select Market, providing a jurisdictional hook into a case otherwise about payments made by a South African company in South Africa to South African citizens who were South African government employees. Our additional coverage of this matter can be viewed here.
In a Form 10-Q filed on July 25, 2017, a mining company also announced the end of a DOJ investigation into alleged violations of the FCPA “relating to certain business activities of [the company] and its affiliates and contractors in countries outside the U.S.” According to the announcement, the Colorado company had already received a similar declination from the SEC earlier this year. Our additional coverage of this matter can be viewed here.
The DOJ simultaneously reportedly confirmed to the Wall Street Journal that the agency was still actively enforcing the FCPA. The Journal cited an anonymous source at the DOJ for assurances that “though there haven’t been any new corporate FCPA cases since mid-January, there is no letup in U.S. enforcement efforts.”
Macau Real Estate Developer Convicted of Violating FCPA
On July 27, 2017, a federal jury in the Southern District of New York convicted a Macau real estate developer of bribery, money laundering, and conspiracy, for his role in a widespread plan to bribe United Nations officials in order to establish a new conference facility in Macau. Five other defendants have also been charged; four have pleaded guilty, and one passed away. A sentencing date has not yet been set.
As pointed out on the FCPA Professor, this is a significant win for the DOJ because it marks the first time since 2011 that the DOJ has successfully taken an FCPA case to verdict. Our additional coverage of this matter can be viewed here.
President Trump Signs Into Law New Sanctions Against North Korea, Iran, and Russia
On August 2, President Trump signed into law a bipartisan bill placing new sanctions on Iran, Russia, and North Korea. The House passed the sanctions by a vote of 419-3, while the Senate cleared it 98-2. The Countering America's Adversaries Through Sanctions Act (H.R. 3364) is comprised of three bills:
- Korean Interdiction and Modernization of Sanctions Act. The sanctions modify and increase President Trump’s authority to impose sanctions on persons in violation of certain United Nations Security Council resolutions regarding North Korea. Specifically, U.S. financial institutions shall not “knowingly, directly or indirectly,” facilitate or maintain correspondent accounts with North Korean or other foreign financial institutions that provide services to North Korea, or execute a transfer of funds or property “that materially contributes to any violation of an applicable United National Security Council resolution.” A foreign government that provides to or receives from North Korea a defense article or service is prohibited from receiving certain types of U.S. foreign assistance. The sanctions concern: (i) shipping and cargo restrictions; (ii) cooperation between North Korea and Iran pertaining to the countries’ weapon programs; (iii) forced labor and trafficking victims, including goods produced by forced labor; and (iv) foreign persons that employ North Korean forced laborers. Furthermore, the Secretary of State is directed to submit a determination regarding whether North Korea meets the criteria for designation as a state sponsor of terrorism no later than 90 days after the Act has been enacted.
- Countering Iran's Destabilizing Activities Act of 2017. The sanctions—intended to deter Iranian activities and threats affecting the U.S. and key allies—include: (i) assessments of Iran’s conventional force capabilities such as its ballistic missile or weapons of mass destruction programs; (ii) prohibitions on the sale or transfer of military equipment and sanctions against Iran’s Islamic Revolutionary Guard Corps and any affiliated foreign persons; (iii) programs to be undertaken by the U.S. and other foreign governments to counter destabilizing activities; and (iv) prohibitions on any activity that provides “financial, material, technological, or other support for goods or services in support” of the identified programs or persons. The sanctions also block any property or interests in property of any designated person “if such property and interests in property are in the [U.S.], come within the [U.S.], or are or come within the possession or control of a [U.S.] person.” The law allows President Trump to impose sanctions against persons committing human rights violations against Iranian citizens, and also grants him the ability to “temporarily waive the imposition or continuation of sanctions under specified circumstances.”
- Countering Russian Influence in Europe and Eurasia Act of 2017. Under the new sanctions, notwithstanding sanctions passed under President Obama’s administration, Congress will review President Trump’s proposed actions to terminate or waive sanctions with respect to Russia and determine whether the actions will or will not “significantly alter [U.S.] foreign policy with regard to the Russian federation.” Additionally, the President may, at his discretion, waive specified cyber- and Ukraine-related sanctions if submitted to the appropriate congressional committees and “is in the vital national security interests of the [U.S.].” The sanctions concern the following: (i) cybersecurity; (ii) crude oil projects; (iii) Russian and foreign financial institutions; (iv) corruption; (v) human rights abuses; (vi) evasion of sanctions; (vii) transactions with Russian intelligence or defense sectors; (viii) pipeline developments; (ix) privatization of state-owned assets by the Russian federation; and (v) arms and related material transfers to Syria. The sanctions further detail financial transaction loan and credit restrictions between U.S. and international financial institutions and sanctioned persons—including directives related to financing new debt—and place prohibitions on sanctioned financial institutions. Among other things, the sanctions direct the development of a national strategy for combating the financing of terrorism and other types of illicit financing.
SEC Reaches Settlement with Broker-Dealer Over Alleged Sale of Unregistered Stocks and Failure to File SARs
On July 28, the SEC announced it had reached a settlement in an administrative proceeding against a broker-dealer firm for allegedly selling hundreds of millions of unregistered penny stock shares and failing to file Suspicious Activity Reports (SARs) for over $24.8 million in suspicious transactions with the Financial Crime Enforcement Network. Bank Secrecy Act regulations require a broker-dealer to file SARs if it “knows, suspects, or has reason to suspect that the transaction . . . involves funds derived from illegal activity or is intended . . . to hide or disguise funds” to evade anti-money laundering (AML) rules. A broker-deal must also file SARs if there is no apparent lawful purpose for the transaction or if the transaction is to facilitate criminal activity. According to the settlement, the firm’s actions violated the Securities Act and Exchange Act. In addition to being censured and agreeing pay a $200,000 penalty, the firm will no longer accept the deposit of stocks valued under $5.00 and will retain an independent consultant to assist with mandatory enhancements to the firm’s AML policies and procedures.
OFAC Imposes Sanctions on Venezuelan President Maduro
On July 31, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was imposing sanctions on Venezuelan President Nicolás Maduro, pursuant to Executive Order 13692, for undermining the country’s democracy and rule of law after recent elections and committing widespread human rights abuses. The sanctions prohibit any U.S. individual from dealing with President Maduro and freezes all assets belonging to him subject to U.S. jurisdiction. Treasury Secretary Steven T. Mnuchin explained that the July 30 “illegitimate elections confirm that Maduro is a dictator who disregards the will of the Venezuelan people. By sanctioning Maduro, the United States makes clear our opposition to the policies of his regime and our support for the people of Venezuela who seek to return their country to a full and prosperous democracy.”
The July 31 sanctions follow an announcement on July 26 in which OFAC announced it was imposing sanctions against 13 current or former Venezuelan government officials associated with election corruption and human rights violations. As a result, all assets subject to U.S. jurisdiction are frozen and U.S. persons are prohibited from dealing with any of the individuals on the list.