Late last month, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced settlements with two Cayman Island subsidiaries of Halliburton Energy Services, Inc. and CGG Services S.A., a French geoscience exploration and production company. The settlements resolved apparent violations of the Cuban embargo. These penalties highlight the increased compliance expectations imposed on sophisticated international businesses operating in highly-regulated industries.
The violations involving the Halliburton foreign subsidiaries arise from the provision of goods and services to a consortium in which a Cuban state-owned company held a 5 percent interest in the oil and gas produced within an identified concession in Angola. This was not the first OFAC settlement involving Cuban participation in a consortium. In October 2013, OFAC entered into a settlement with Ameron International Corporation to resolve apparent violations of the Cuban Assets Control Regulations arising from the sale of concrete pipe to a consortium in which a Cuban company was a partner.
In the Halliburton settlement announcement, OFAC states that one of the subsidiaries had actual knowledge of the Cuban interest in the consortium. The Angolan-based consortium operator provided the subsidiary with documents reflecting the Cuban interest. Irrespective of the actual knowledge from these documents, OFAC implies that Halliburton should have known of the Cuban interest from “a news article and a notice in an Angolan government registry.” OFAC probably would have imposed a civil penalty on Halliburton based upon this publicly available information and its failure to screen all of the consortium members that directly benefited from its provision of goods and services.
OFAC determined that Halliburton voluntarily self-disclosed the apparent violations, which were non-egregious. While these violations were arguably non-egregious under the Economic Sanctions Enforcement Guidelines, the non-egregious determination in the CGG Services S.A. settlement is questionable. The settlement announcement clearly describes willful or reckless violations of the law, awareness of the conduct at issue, and significant harm to the sanctions program. CGG Services S.A. and its affiliated companies knowingly exported U.S. origin items to vessels that it knew were located in Cuban waters and knowingly provided services to a Cuban company. This is another example of OFAC considering factors outside those in the Economic Sanctions Enforcement Guidelines to facilitate settlement by offering lower civil penalties.