Despite Pandemic, OFAC Settles with Animal Nutrition Company for $257k for Violations of Cuban Sanctions Program
OFAC recently issued guidance suggesting that organizations may re-allocate or reduce sanctions compliance operations based on the impact of the pandemic on an organization’s business activities. Notwithstanding this guidance, OFAC announced this enforcement action, the first in several months, which indicates its continued commitment to sanctions enforcement.
If organizations are able to continue business operations, in whole or in part, OFAC’s settlement announcement is a further warning that such operations must adhere to sanctions compliance requirements.
Biomin designed a transaction structure that violated the Cuba Sanctions Program. Interestingly, however, OFAC implied in its announcement, that OFAC could have complied by (1) proceeding under a General License that required Department of Commerce approval; or (2) applying to OFAC for a Special License to authorize the transactions in advance.
Starting in July 2012, and continuing until September 29, 2017, Biomin and its foreign-ciontrolled entities in 30 sales of agricultural commodities produced outside the united States to Alframa S.A., a Cuban company, in violation of the Sanctions Compliance Program. The total value of the transactions was $17 million.
Biomin structured the transactions knowing that it could not directly sell its agricultural products to Alfarma. Under the proposed structure, Biomin limited its role to processing purchasing orders while Biomin’s foreign affiliates fulfilled the orders. Biomin’s U.S. company coordinated the sales and earned commissions. Biomin’s foreign affiliates handled all other aspects of the transactions and interacted directly with Alfarma in Cuba.
As explained in the announcement, Biomin America owned a majority interest in several of the foreign affiliates and directly managed another foreign affiliate, which made them a “U.S. Person” as defined under Section 515.329 and subject to the Cuban Sanctions Program.
OFAC also noted that Biomin had no sanctions compliance program in place during the time that these violations occurred.
In resolving the enforcement matter, OFAC cited the fact that Biomin voluntarily self-disclosed the conduct and the violations constitute a non-egregious case. OFAC cited that Biomin was reckless in its decision to structure the transaction believing that the structure complied with the Cuban Sanctions Program.
OFAC stated that Biomin’s management was involved in the transactions and agreed with the design of the improper transaction structure. Biomin and the foreign affiliates involved in this matter, are all part of ERBER Group, a commercially sophisticated, international company.
OFAC noted that the base penalty amount is $973k. OFAC discounted the penalty amount to $257k.
As part of its remediation, Biomin conducted comprehensive training sessions for logistics, compliance and senior management on country-specific embargoes, denied persons screening and export license requirements. Further, Biomin developed written policies and procedures to prevent sales to unauthorized destinations, parties and activities.