The Treasury Department’s Office of Foreign Asset Control (OFAC) continues to pile up sanctions enforcement actions. As the Biden Administration slowly takes over the reins of the Department of Treasury, OFAC enforcement is likely to increase. Companies should expect more and complex sanctions, including anticipated strict sanctions against Russia for election interference. OFAC’s mission and enforcement profile will increase. At the same time, individual liability is a primary objective for expansion of civil and criminal sanctions enforcement.
The latest company to fall – Nordgas S.r.l, an Italian company that manufactures components for gas boiler systems and applications. Over a four-year period, Nordgas reexported 27 shipments of air pressure switches from UniControls, a U.S. company, that was intended for ten customers in Iran, thereby causing a U.S. company to indirectly export goods to Iran. AS OFAC stated, “Nordgas obfuscated the reexportation and Iranian customers from the U.S. company.”
UniControls settled its OFAC enforcement action earlier this month and agreed to pay $216,464 to settle its liabilities for violations of the Iran Sanctions program.
Starting in May 2010, Nordgas sought to purchase air pressure switches for gas boiler systems from a U.S. company with the plan to reexport the switches to customers in Iran. The U.S. company notified Nordgas it could not export its switches to Nordgas if Nordgas intended to ship to end users in Iran. Nordgas stated its intent was to sell to customers in Italy. Based on this understanding, the U.S. company sold the air pressure switches to Nordgas.
In late 2012, Nordgas again sought to purchase air pressure switches from the U.S. company – this time Norgas misrepresented its intent and claimed that it was selling to a Nordgas affiliate; in fact, Nordgas planned to sell to customers in Iran. Nordgas’s employees used replacement terms in correspondence and trade documentation to disguise the customer’s location in Iran. For several years, Nordgas used false terms to disguise the Iran customer.
Nordgas took further steps to conceal the Iran customer. In one instance, Nordgas offered to ship directloy to Nordgas’s affiliate, the supposed customer, and Nordgas declined the offer. In another instance, Nordgas employees requested that the U.S. company remove the term “Made in USA” from the switches to disguise their origin.
OFAC determined that Nordgas’s violations were egregious and not voluntarily self-disclosed. In view of the individual facts of this case, as well as Nordgas’s financial circumstances, its cooperation with OFAC, and its agreement to implement enhanced compliance commitments, OFAC reduced the penalty by $650,000 to a final amount of $350,000, conditioned on Nordgas’s enhancement of its sanctions compliance program. Specifically, Nordgas agreed to implement a sanctions compliance program and enhanced compliance commitments, including submission of an annual report to OFAC each year for the next five years, describing how Nordgas is meeting its compliance program commitments.
This enforcement action is an interesting example of the reach of OFAC’s jurisdiction, extending to foreign companies to non-U.S. persons for foreign trading activities involving U.S. origin goods. Foreign companies cannot disguise or conceal the involvement of a sanctioned country or person in a transaction by falsifying the names of end-users or other parties.
In foreign transactions involving U.S. origin goods, foreign companies have to ensure compliance with OFAC regulations. Foreign companies have to understand the risks of conducting business with U.S. companies and institute a risk- based sanctions compliance program.