I will admit it – I changed this posting from its original draft.  I intended to write about the absence of any OFAC enforcement actions for 2018.  I went to double-check the OFAC enforcement website (here), and lo and behold, OFAC snuck its first enforcement action of 2018 – dated June 6, 2018 against Ericsson, Inc. for $145,983.

Before the Ericsson enforcement action, OFAC had been surprisingly silent in 2018.  If you look back at prior years, OFAC has not been as inactive as 2018.

Maybe there is a logical explanation for OFAC’s enforcement silence.  OFAC has been issuing a flurry of new sanctions rules and changes to existing programs.

Let’s look at OFAC’s To-Do List:

1. Iran Sanctions: On May 8, 2018, the President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA), and to begin re-imposing the U.S. nuclear-related sanctions that were lifted to effectuate the JCPOA sanctions relief, following a wind-down period.
2. Ukraine-Russia Sanctions: On April 6, 2018, OFAC added seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank, to the SDN list.
3. Countering America’s Adversaries Through Sanctions Act (“CAATSA”): On August 2, 2017, the President signed CAATSA requiring OFAC to implement changes to its Iran, Russia and North Korea Sanctions Programs.

In light of these activities, OFAC’s delay in enforcement actions appears to be more than justified.

In its first enforcement action announced on June 6, 2018, Ericsson agreed to pay $145,893 for violations of the Sudan Sanctions Program.  The Sudan Sanctions Program was relaxed significantly in 2017.  Nonetheless, Ericsson’s conduct occurred in 2011 and 2012 when the Sudan Sanctions Program was restrictive.

On September 22, 2011, Ericsson signed a letter of intent with a subsidiary of a Sudanese telecommunications company to provide equipment and services to upgrade and expand telecommunications coverage in Sudan.  Ericsson enlisted the assistance of a third-party contractor to assist in the installation of a satellite hub.  Two Ericsson employees and the contractor agreed among themselves to avoid writing in any emails that the contract involved Sudan.  To remedy an overheating problem with the equipment, the Ericsson employees consulted with another Ericsson official, who requested that they avoid using any emails disclosing the connection of the project to Sudan for fear of violating the law and Ericsson’s sanctions compliance policy.

The two Ericsson employees and the subcontractor agreed to purchase a new satellite facility from a US supplier.  The Ericsson employees discussed the proposed transaction with Ericsson’s compliance department and were informed that such a purchase and delivery would violate Ericsson’s sanctions compliance policy and was prohibited.  Despite being told not to conduct the transaction, the employees moved forward with the transaction and listed the delivery point as Botswana.  The employees arranged for transshipment of the satellite to Sudan through Switzerland and Lebanon.

Interestingly, OFAC added a significant paragraph at the end of the enforcement action.

This enforcement action highlights the importance of empowering compliance personnel to prevent transactions prohibited by U.S. economic and trade sanctions. Entities should ensure their sanctions compliance teams are adequately staffed, receive sufficient technology and other resources, and are delegated appropriate authority to ensure compliance efforts meet an entity’s risk profile. Sanctions compliance personnel should be equipped with the tools necessary to review, assess, and proactively address sanctions-related issues that arise with ongoing or prospective transactions, customers, or counter-parties.

These words are an important reminder to everyone about the obligation to design and implement an effective sanctions compliance program with an independent and empowered CCO and supported with adequate resources.