The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) enforces the nation’s sanction laws—such as those that prohibit exports to sanctioned countries or transactions involving individuals, companies, and shipping vessels on sanctions lists. The OFAC enforcement stories that make the news are often those with record-setting fines against major international companies.
However, in recent months OFAC has increasingly made a point of levying fines and penalties against small businesses.
What has been the crime? Regulatory violations stemming from ignorance of OFAC’s sanctions regime and a failure to institute export control and sanctions compliance programs. While the sizes of the fines pale in comparison to those larger companies have been subjected to, they can still cripple and even bankrupt small businesses. Recent examples include:
Aug. 5, 2015—Production Products, Inc., a small Maryland-based, family-run manufacturer with only 10 employees, was fined $78,500 in connection with charges that the company exported three HVAC duct fabrication machines to China National Precision Machinery Import/Export Corporation, a Chinese company on the Specially Designated Nationals and Blocked Persons List. OFAC considered the company’s failure to implement a sanctions compliance program to be an aggravating factor in determining the amount of the fine. Given the value of the machines, OFAC could have fined the company $1 million—but the agency reduced the penalty in part because the company took remedial steps to implement a sanctions compliance program.
July 24, 2015—Great Plains Stainless Co., a small Oklahoma-based distributor of stainless steel pipe, tube, fittings, and flanges, was fined $214,000 for selling goods to a legitimate and non-sanctioned customer in Dubai. The company fell afoul of Executive Order 13382 and OFAC regulations because its Chinese vendor shipped the goods from Shanghai aboard a sanctioned vessel, the M/N Sahand. Again, OFAC found an aggravating factor leading to an increased penalty was the company’s failure to have a sanctions compliance program in place.
July 29, 2015—Blue Robin, Inc., a Massachusetts-based information technology firm was fined $82,260 for the 2009-2010 importation of web development services from an Iranian company called PersiaBME—a violation of the Iranian Transactions and Sanctions Regulations. Despite the company’s pleas that it was unaware it was violating U.S. law and was struggling financially, OFAC determined the penalty amount was appropriate because the business had no OFAC compliance program in place at the time of the transactions and had not implemented one since.
These enforcement actions illustrate that OFAC will not provide a free pass if you are a small company or have a lack of experience in international trade. Given the ongoing crackdown, investing in compliance today could save your business thousands in fines and penalties down the road.
For more information, please contact one of the attorneys listed below.