Last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a Finding of Violation against Johnson & Johnson (Middle East) Inc. for violations of the Sudanese Sanctions Regulations. Although such a finding does not result in a monetary penalty, Johnson & Johnson will not be eligible for a 25 percent “first violation” reduction for any violations that may occur over the next five years. See OFAC Economic Sanctions Enforcement Guidelines, available here.
Johnson & Johnson (Middle East) is a New Jersey corporation and wholly owned subsidiary of Johnson & Johnson. Following a corporate restructuring in 2009, Johnson & Johnson (Middle East) managed Johnson & Johnson (Egypt) S.A.E., including its trade with Sudan. This management led to the prohibited facilitation of five shipments of goods to Sudan from Johnson & Johnson (Egypt) S.A.E. over a seven month span in 2010.
The United States maintains a comprehensive embargo on Sudan, which prohibits the exportation of goods and services to that country. The Sudanese Sanctions Regulations explicitly prohibit facilitation of such exportation. 31 C.F.R. 538.206 and 407.
Facilitation is a very broad sanctions compliance concept. As a general rule, United States persons cannot facilitate a transaction by foreign persons that would be prohibited if performed by a United States person. In most cases, prohibited facilitation involves an indirect export of services by a United States person. Although facilitation is generally considered comparable across sanctions programs, the regulations for each comprehensive program contain specific definitions of the term. Facilitation may also be defined in Executive Orders, which prohibit approving, guaranteeing, and evading or avoiding any of the prohibitions set forth in those orders.
Sanctions Compliance Training
In contradistinction with the Federal functional regulators, OFAC does not prescribe the exact specifications required for sanctions compliance programs. OFAC does, however, specifically refer to the existence and quality of compliance training in its Enforcement Guidelines Risk Matrix.
The Finding of Violation announcement explains that the “compliance program did not include any training on OFAC regulations for it General Manager, who was responsible for sales to Sudan.” This aggravating factor could only be mitigated with appropriate and effective training based on the company’s risk profile, covering applicable personnel, and the provision of necessary up-to-date information and resources to ensure compliance.