Criminal Defense Lawyers

Recent OFAC Sanctions Enforcement Actions

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. OFAC has been quite active recently in investigating violations of its sanctions programs and bringing enforcement actions against companies for non-compliance.

OFAC derives its authority from federal laws and Presidential Executive Orders that direct it to impose controls on transactions and freeze assets under U.S. jurisdiction. It can impose civil penalties for sanctions violations and has the power to prosecute criminal violations as well. Let’s take a look at some of OFAC’s recent enforcement actions and what they mean for companies trying to comply with U.S. sanctions requirements.

JP Morgan Chase Bank Pays $5.26 Million for Apparent Violations of Multiple Sanctions Programs

In early 2023, JP Morgan Chase Bank, N.A. agreed to pay over $5 million to settle potential civil liability for apparent violations of multiple OFAC sanctions programs[1]. The apparent violations related to the bank processing transactions that involved persons or countries subject to U.S. sanctions.

Specifically, the settlement addressed potential violations of sanctions against Sudan, Cuba, Iran and Syria. The transactions occurred between 2013 and 2015, with most relating to Sudan. JP Morgan Chase voluntarily self-disclosed the apparent violations.

This enforcement action shows that even large, sophisticated banks can run afoul of OFAC rules. It also demonstrates that OFAC will pursue penalties even for unintentional violations. The takeaway is that financial institutions must have strong compliance procedures in place to screen transactions and customers against OFAC sanctions lists.

MoneyGram International Pays $860,000 for Apparent Violations of OFAC’s Narcotics Trafficking Sanctions Regulations

In another 2023 settlement, MoneyGram International, Inc. agreed to pay over $860,000 for 2,689 apparent violations of OFAC sanctions involving blocked persons and countries[2]. The apparent violations related to MoneyGram’s money transfer services being used by individuals appearing on OFAC’s List of Specially Designated Nationals (SDN List).

The SDN List identifies individuals and entities that are prohibited from accessing the U.S. financial system, such as terrorists, drug kingpins and weapons proliferators. MoneyGram’s automated interdiction software failed to screen customer names against the SDN List in certain instances. This allowed transactions from blocked persons to go through.

This action demonstrates that OFAC will pursue enforcement even for unintentional or technical violations of its sanctions programs. Companies that offer money transfer or payment services must have adequate compliance systems and internal controls in place to effectively screen transactions.

Amazon Settles Potential Civil Liability for Apparent Violations of Syria and Crimea Sanctions

In July 2022, e-commerce giant Amazon.com, Inc. agreed to pay close to $23,000 to settle its potential civil liability for apparent violations of OFAC’s Syria and Crimea sanctions programs[3]. Specifically, Amazon appeared to have violated the sanctions by exporting goods and services without the required OFAC authorization from the U.S. to persons located in Crimea.

The settlement amount was relatively small but the enforcement action is significant because it targeted a non-financial company. It signals that OFAC is monitoring compliance across all industries. The takeaway is that companies of all types need to be aware of OFAC sanctions that may impact their business activities and customers.

Kollmorgen Corporation Pays $600,000 for Apparent Violations of Russia/Ukraine Sanctions

OFAC also recently took action against an industrial equipment manufacturer for apparent violations of Russia/Ukraine sanctions. In August 2022, Massachusetts-based Kollmorgen Corporation agreed to pay over $600,000 to settle its potential civil liability[4].

The apparent violations involved Kollmorgen exporting industrial equipment, parts and components from the U.S. to several Russian entities on OFAC’s Sectoral Sanctions Identifications List. This list imposes restrictions on certain dealings with Russian entities in the energy, defense and financial sectors.

This case demonstrates that companies must pay attention to OFAC’s sectoral sanctions, in addition to restrictions on dealings with SDNs. It also shows that OFAC is actively enforcing the Russia/Ukraine sanctions that were imposed beginning in 2014.

Halliburton Pay $275,000 for Apparent Violations of Multiple Sanctions Programs

In May 2022, oilfield services giant Halliburton agreed to pay $275,000 to settle potential civil liability for apparent violations of several OFAC sanctions programs, including those targeting Cuba, Iran, Syria, and the Crimea region of Ukraine[5]. Halliburton voluntarily self-disclosed the apparent violations.

The apparent violations involved Halliburton affiliates exporting and re-exporting oilfield services equipment from the U.S. to sanctioned countries and regions. Some of the transactions occurred as far back as 2005.

This enforcement action demonstrates that OFAC has a long memory when it comes to sanctions violations. It also shows that OFAC takes a broad view of what constitutes an export violation and that it will pursue penalties even for voluntary self-disclosures.

Key Takeaways

What can we learn from these recent OFAC settlements and enforcement actions? Here are some key takeaways for companies trying to manage sanctions compliance risk:

• OFAC is actively enforcing sanctions programs and will pursue penalties even for inadvertent or technical violations.
• Compliance systems and internal controls need to be robust enough to identify any touchpoints with OFAC sanctioned countries, entities, individuals or sectors.
• Screening software must be kept updated as OFAC frequently adds new parties to its sanctions lists.
• OFAC has a long memory – enforcement actions can happen years after the transactions at issue.
• All types of companies are at risk, not just financial institutions that process transactions.
• OFAC considers a wide range of business activities to be potential sanctions violations, including exporting, re-exporting, processing transactions, providing services, or otherwise dealing with sanctioned parties or countries, even indirectly[1][2][3].
• Companies outside the U.S. can still face OFAC enforcement if they conduct transactions in U.S. dollars or otherwise touch the U.S. financial system[4][5].
• OFAC expects foreign companies to conduct due diligence on customers and transactions to avoid assisting sanctioned parties or activities[5][6].
• Potential penalties for non-U.S. companies include civil monetary fines, being cut off from the U.S. financial system, and harm to reputation[5][6].
• Foreign companies should implement risk-based compliance programs to screen customers/transactions and ensure no dealings with OFAC prohibited parties or activities.
• Seek legal counsel to understand sanctions obligations based on specific business activities and risks.

In summary, OFAC has demonstrated its willingness to enforce U.S. sanctions laws against both U.S. and foreign companies across industries. The risks are significant for non-U.S. companies that touch the American financial system or deal with U.S. parties. Investing in sanctions compliance programs tailored to unique risk profiles is essential.