On September 13, 2016, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) reached a settlement with the PanAmerican Seed Company (“PanAm Seed”) of potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations. PanAm Seed agreed to pay $4,320,000 to settle potential civil liability for indirectly exporting flower seeds to two Iranian distributors. The statutory and civil penalties could have been as much as $12 million for the “egregious” violations.
OFAC’s official statement explained how PanAm Seed shipped the seeds to consignees based in countries based in Europe or the Middle East, and then PanAm Seed’s customers arranged for the re-exportation of the seeds to Iran. Personnel, including midlevel managers, were aware of U.S. economic sanctions programs involving Iran and the requirement to obtain an OFAC license in order to export the seeds. Despite this, PanAm Seed engaged in a practice designed to conceal the fact that the ultimate destination of the seeds were to distributors located in Iran.
OFAC determined that because PanAm Seed did not voluntarily self-disclose the transactions; employees, including mid-level managers, had contemporaneous knowledge and yet PanAm continued sales to Iranian distributors for nearly eight months after the company’s’ Director of Finance learned of OFAC’s investigation; the conduct continued over a period of years providing over $770,000 in economic benefits to Iran; and furthermore, PanAm did not initially cooperate with OFAC’s investigation, including providing inaccurate information; the violations constituted an egregious case. OFAC also noted that PanAm Seed is a division of Ball Horticultural, a commercially sophisticated, international corporation.
Mitigating factors taken into consideration in the settlement included: PanAm Seed was eligible for a “first offense” mitigation of up to 25 percent; the exports at issue were likely eligible for an OFAC license; PanAm Seed took remedial steps to ensure future compliance with OFAC sanctions, including stopping all exports to Iran, implementing a compliance program, and training employees on OFAC sanctions.
PanAm Seed’s settlement with OFAC provides a warning to international corporations to ensure compliance with U.S. regulations when shipments involve the U.S. division or when conducting transactions in U.S. dollars. A comprehensive compliance policy, including employee training and monitoring program, is vital to safeguard against inadvertent actions that violate OFAC’s country sanctions. PanAm Seed would have avoided the penalties if the company had procedures in place to discover and cease the violating actions before they went any further or had they simply applied for an OFAC license in the first instance. Ensuring a current and comprehensive compliance program is ultimately the most important thing a company can do to protect itself against future misconduct.