Global communications solutions provider, CSE TransTel, a subsidiary of CSE Global Limited (both based in Singapore), recently agreed to settle Iran sanctions charges leveled by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) for $12 million. The charges involve 104 violations of the Iran sanctions between June 2012 and March 2013. The case involved an independent U.S. government investigation, not a voluntary self-disclosure.
The charges related to TransTel causing six different financial institutions to provide unauthorized financial services relating to transactions with Iran. The funds transfers were processed in part in the U.S. and they involved the supply of goods or services handled by a variety of vendors and service providers with connections to Iran. None of the transactions referred to Iran, Iranian parties, or Iranian projects, yet they were still sufficient to trigger a U.S. government investigation and charges. Note that the U.S. financial institutions were not involved in this enforcement matter at this time, but rather a non-U.S. company was accused of “causing” U.S. companies subject to OFAC jurisdiction to violate the Iran sanctions. This “causation” approach creates a broader scope of OFAC jurisdiction and enforcement than many non-U.S. companies expect, and its use is expanding. Moreover, many non-U.S. companies believe they are beyond the reach of U.S. sanctions penalties, but charges and forced settlements involving non-U.S. companies are relatively common for the agency. Companies that are charged with violations, including causation violations, face difficult choices. If they don’t settle the accusations with OFAC, they may well find themselves listed as specially designated nationals (SDN), which would render them virtually unable to conduct business in the U.S., or with most U.S. companies and subsidiaries. In addition to heightened restrictions on dealing with SDN’s many non-U.S. companies use denied party screening programs that include OFAC SDN designations, and those companies will very often refuse to deal with a listed SDN.
Best practices to reduce the risk of an OFAC investigation and associated penalties include very basic steps, such as issuing or updating a company-wide export control and sanctions policy statement and having well-versed specialists provide baseline training. Given very recent bi-partisan legislation to tighten U.S. sanctions on Iran, Russia and North Korean, now is a good time to renew a policy statement with counsel.
Protective compliance measures range from conducting a review and enhancement of the company’s broader export/sanctions compliance program, to a review of company transactions and sales channels to identify potentially risky transactions. Construction of a more robust compliance program based on the results of such a data review is a path selected by many companies, and should be seriously considered by international telecom companies, which will be under a heightened level of review.