On 24 September 2020, the U.S. Department of Treasury's Office of Foreign Asset Control (OFAC) announced a settlement with Keysight Technologies, Inc. (Keysight) for sanctions violations committed by its former subsidiary, Anite Finland OY (Anite). Anite reexported goods to Iran that incorporated 10 percent or more controlled U.S.-origin content. This appears to be the first public settlement announced by OFAC that is based on violations involving the reexport of goods that incorporated greater than a de minimis amount of U.S.-origin controlled content in contravention of section 560.205 of the Iranian Transactions and Sanctions Regulations (ITSR).

The settlement

OFAC settled with Keysight, a company based in Santa Rosa, CA, for potential U.S. export control violations committed by its former Finnish subsidiary, Anite. Keysight has agreed to pay US$473,157 for its potential civil liabilities. In addition, as part of the settlement agreement, Keysight made a five year commitment to numerous compliance measures.

The facts*

Keysight acquired Anite in August 2015. After the acquisition, Anite sold goods containing 10 percent or more U.S.-origin controlled content to Iran. Anite designed and sold test and measurement instruments, and related software, to the wireless industry. Anite fulfilled six orders to Iran between January 2016 and June 2016 that totalled US$331,089 in value. The export of those goods required a license pursuant to the ITSR.

The ITSR requires a license for the reexport to Iran of goods containing 10 percent or more U.S.-origin controlled content. At the time the violations occurred, a general license (General License H) had been in place between 16 January 2016 and 27 June 2018 that permitted certain transactions between foreign entities owned or controlled by U.S. persons, but General License H did not authorize the reexport from third countries of any goods that were prohibited by section 560.205 of the ITSR.

After Keysight's acquisition of Anite and Anite's integration into Keysight, Keysight directed Anite to cease all business with sanctioned countries. Despite that direction from management, employees at Anite continued to do business with entities in Iran. Those employees also took steps to conceal their activities from others at Keysight.

Upon discovery of the violations, Keysight conducted an internal investigation and submitted a voluntary self-disclosure to OFAC and in its Securities and Exchange Commission filings. Mitigating factors – particularly actions taken by Keysight during the course of its internal investigation and after the voluntary self-disclosure – brought the penalty amount down from the statutory maximum of US$2,102,920 to US$473,157.

Next steps

Companies that have acquired, or are looking to acquire, foreign entities should assess their potential sanctions exposure associated with the proposed transaction. This case highlights the need to assess exposure through the supply chain, as violations of U.S. sanctions can be triggered by the export, reexport, or transfer of goods with incorporated U.S.-origin content. Once a company acquires a new entity, the purchaser should ensure that its newly acquired entity adopts a robust sanctions compliance program.

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