Blog
OFAC Penalties for Sanctions Evasion
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions against foreign countries, entities, and individuals. These sanctions play a key role in U.S. national security and foreign policy efforts. However, violations of OFAC sanctions can result in severe civil and criminal penalties.
Contents
OFAC’s Role in Sanctions Enforcement
OFAC publishes various sanctions lists, like the Specially Designated Nationals (SDN) list. U.S. persons and companies are generally prohibited from dealing with individuals and entities on these lists. OFAC has imposed sanctions programs on countries like Russia, Iran, North Korea, Syria, and others.
OFAC treats sanctions violations very seriously, regarding them as threats to national security and foreign relations. As a result, criminal offenders face heavy fines ranging from thousands to millions of dollars, and even prison time up to 30 years[1].
In recent years, OFAC has coordinated with other agencies like the Department of Justice (DOJ) and Bureau of Industry and Security (BIS) to crack down hard on sanctions evasion and export controls violations. This interagency cooperation has produced record penalties, like the $1.1 billion fine on Swedish telecom giant Ericsson in 2022[2].
Civil vs. Criminal Penalties
OFAC can impose civil penalties through administrative proceedings. Criminal penalties require federal prosecutors to file charges and obtain convictions in court.
For criminal violations, individual offenders face up to $1 million in fines and up to 20 years in prison. Corporations can be fined up to $100 million or twice the value of the transaction. These criminal fines are per violation, so multiple violations can lead to astronomical penalties[3].
On the civil side, OFAC can impose penalties up to $311,562 per violation. For egregious cases, OFAC can impose penalties equal to twice the transaction value, even if that exceeds the statutory maximum. Civil penalties against corporations are often in the tens or hundreds of millions[4].
Aggravating and Mitigating Factors
OFAC considers many factors when determining penalties for sanctions violations. Aggravating factors that increase penalties include:
- Willful or reckless violation of sanctions
- Awareness of conduct at issue
- Harm to sanctions program objectives
- Individual characteristics (e.g., commercial sophistication)
- Prior OFAC warning letters
Mitigating factors that may reduce penalties include:
- Voluntary self-disclosure
- Cooperation with OFAC investigation
- Remedial response
- Lack of awareness of conduct at issue
- Unrelated past OFAC compliance problems
OFAC published detailed penalty guidelines so companies can better understand the agency’s approach. However, each case is unique, and OFAC has wide discretion in assessing sanctions penalties.
Recent Major OFAC Settlements
Here are some of the largest OFAC civil settlements in recent years:
- JPMorgan Chase (2022) – $162 million[5]: related to deficient compliance controls that led to thousands of sanctions violations.
- Amazon (2022) – $134,523[5]: for shipping consumer products to individuals located in Crimea region of Ukraine.
- Ericsson (2022) – $1.1 billion[5]: for conspiring to violate Iranian sanctions through front companies and re-selling U.S. goods.
- JPMorgan Chase (2021) – $162 million[6]: related to deficient compliance controls that led to thousands of sanctions violations.
- BitPay (2021) – $507,375[6]: for processing cryptocurrency payments involving sanctioned jurisdictions.
These massive fines show that even large sophisticated companies struggle to maintain full compliance with complex U.S. sanctions rules. Smaller companies with less resources are even more at risk.
Self-Disclosure and Cooperation
While penalties for OFAC sanctions violations can be severe, companies may mitigate fines by self-disclosing detected issues and cooperating with investigations. According to OFAC guidelines[1], voluntary self-disclosure can result in substantially reduced penalties, sometimes by more than 50%.
The key considerations in self-disclosure are:
- Timeliness – disclose issues promptly upon discovery
- Completeness – provide all relevant information to OFAC
- Availability – make company records and personnel available
OFAC also values cooperation with agency requests during investigations. Companies that fully cooperate could see further mitigation beyond self-disclosure alone. Elements of cooperation include[2]:
- Providing all requested documents and information
- Making current and former employees available for interviews
- Disclosing relevant facts not directly requested
- Proactively volunteering assistance
In July 2022, OFAC, the Department of Commerce, and Department of Justice jointly released new guidelines emphasizing the benefits of voluntary self-disclosure[3]. The agencies explained self-disclosure does not guarantee no enforcement, but it can yield reduced penalties and business disruptions.
However, false or misleading disclosures could be considered aggravating factors resulting in even higher penalties. Companies should take care to thoroughly investigate issues before self-disclosing to ensure complete and accurate information is provided.
While self-disclosure does not eliminate liability, it demonstrates a company’s good faith commitment to compliance. Combined with full cooperation, self-disclosure offers the best possibility of minimizing sanctions penalties.