Even while the Treasury Department’s Office of Foreign Asset Control (“OFAC”) has been properly focused on implementing and enforcing the Russia sanctions scheme in response to Russia’s unprovoked invasion of Ukraine, OFAC had time to issue two enforcement actions involving violations of the Cuba Sanctions Program. 

The two separate cases stem from four transactions involving Newmont Corporation, a global mining company, and Chisu International Corporation (Chisu), a Florida based corporation affiliated with a distributor in Suriname, which was involved in the underlying conduct.

Newmont agreed to pay $141,442 and Chisu agreed to pay $45,908 to resolve violations of Cuban Sanctions Program.  Specifically, Newmont’s Suriname subsidiary purchased Cuban-origin explosives and accessories from a third-party vendor affiliated with Chisu.  In 2016 and 2017, Chisu purchased Cuban-origin explosives and accessories from a third-party vendor, which were in turn supplied to Newmont’s mining operations in Suriname.  Newmont voluntarily disclosed the violations.  Chisu did not voluntarily disclose the conduct to OFAC.

In 2013, Newmont secured the right to mine gold in Suriname.  One year later, Suriname provided an exploitation license for a mine known as Merian.  After a competitive bidding process, Newmont selected Chisu International to provide explosive materials needed to construct the mine. 

In 2013, Newmont and the Government of Suriname entered into a “Mineral Agreement” that granted Newmont the right to mine gold in Suriname. On August 11, 2014, the government of Suriname granted Newmont an exploitation license for a mine known as Merian. Through a bidding process, Newmont Suriname selected a Suriname-based distributor affiliated with Chisu to supply explosive materials for the construction of the mine. The distributor imported the explosives and accessories for the mine from a Cuban entity on four occasions.

Between June 2016 and November 2017, Chisu and its affiliates in Suriname and Panama on four occasions procured Cuban-origin explosives and related accessories for Newmont. Chisu processed the purchase orders and invoices, and its affiliate in Suriname handled customs clearance, storage and delivery of the products to Newmont. 

Under the Cuban Sanctions Program, the prohibition on dealings with Cuban business extends to all companies owned or controlled by a U.S. company.  In this case, the prohibition extended to Newmont’s Suriname subsidiary.

In reviewing the transactions, OFAC noted that a Newmont assistant manager exchanged shipping documents with an operations manager for Chisu.  These documents clearly identified that the goods were provided by a Cuban company and sourced from Cuba.  In January 2018, Newmont learned that the explosives and accessories Chisu had previously provided had been sourced from Cuba; Newmont thereafter sought and received assurances from Chisu that it would no longer procure goods from Cuba.

Notwithstanding these assurances, Chisu supplied two additional shipments with Cuban-origin goods.  The bills of lading with all four transactions clearly identified the Cuban company as the source of the explosives and explosive accessories. 

The Newmont Suriname employee failed to understand the significance of receiving Cuban-origin explosives and accessories. OFAC noted that the Newmont Suriname employee who was involved in the first transaction had not attended in U.S. export and trade sanctions training.  Newmont Suriname’s purchase orders did not contain any express statements attesting to the fact that goods may not originate from embargoed jurisdictions, nor did Newmont request country-of-origin information for the goods.

OFAC stated that Chisu was a small company, run by a single individual who failed to understand the implications  of dealings with Cuban property or merchandise.  Chisu had no compliance program when the four transactions occurred. 

As noted by OFAC, Newmont and its subsidiary failed to exercise a minimal degree of caution or care with respect to U.S. sanctions requirements.  Newmont reasonably should have known, based on all readily available information and with the exercise of reasonable due diligence, that the transaction would have violated the Cuban Sanctions Program.

With respect to Chisu, OFAC concluded that Chisu failed to exercise a minimal degree or caution or care in procuring Cuban-origin goods.

Newmont and Chisu were credited with cooperation.  Newmont voluntarily disclosed its conduct.  Chisu did not.  Newmont also is implementing remedial measures by conducting training, screening and implementing for written policies and procedures.

According to OFAC, the Newmont case underscores the importance of global companies implementing and maintaining sanctions compliance program throughout its world-wide operations, including foreign subsidiaries and affiliates.  As part of this effort, companies have to train overseas employees to ensure they can identify red flags and monitor country of origin of products purchased.

Additionally, OFAC reiterated the importance of implementing strong controls with suppliers and to conduct due diligence to examine risks from geographic location, type o industry and the status and compliance controls of key partners involved in specific transactions.