After an uncharacteristic lull in the release of enforcement notices, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced on June 23 a settlement with HyperBranch Medical Technology, Inc., based in Durham, North Carolina, for violations of U.S. sanctions on Iran. HyperBranch agreed to pay $107,691.30 to settle its potential civil liability.
HyperBranch is a specialty medical device company that develops and markets products primarily for the traumatic or surgically induced wound market. According to the settlement notice, on April 15 and May 27, 2011, HyperBranch exported goods — dural sealant and spinal sealant, both samples and actual product — to its United Arab Emirates distributor with knowledge, or reason to know, that the goods were ultimately destined for Iran.
In its notice, OFAC indicated that the base civil monetary penalty was $159,542, while the statutory maximum civil monetary penalty for the apparent violations was $1,129,912. OFAC highlighted the following aggravating factors:
- HyperBranch acted willfully with knowledge of the ultimate destination of its products since it had edited the destination control statement at the request of its distributor and had continued to conduct business after receiving confirmation that its distributor was re-exporting the products to Iran.
- The firm’s former CEO and former international sales manager knew of the ultimate destination of the goods.
- The firm did not have a sanctions compliance program in place at the time of the apparent violation.
OFAC considered the case to be non-egregious, which meant that OFAC applied a lower penalty base. Moreover, HyperBranch qualified for a lower base penalty because it voluntarily self-disclosed the apparent violation. OFAC noted other mitigating factors:
- The harm to U.S. sanctions program objectives was limited because medical end-use products destined for Iran were likely eligible for a specific license, had HyperBranch sought one from OFAC. (Although OFAC’s notice did not mention it, certain medicine and medical devices are eligible for shipment to Iran under general license.)
- The firm had no OFAC violations in the five years preceding the apparent violation, which made it eligible for up to a 25 percent “first violation” mitigation.
- The firm took remedial steps, including the implementation of an OFAC compliance program.
- The firm cooperated with the investigation and agreed to suspend the statute of limitation for nearly two years.
Although the sales at issue in this case occurred in 2011, well before the implementation in January 2016 of the Iran nuclear-related deal (the Joint Comprehensive Plan of Action), the case serves as a reminder that OFAC remains an active enforcer of these sanctions.