The U.S. Department of Justice (“DOJ”) recently announced that Italian business owner Gabriele Villone was sentenced to more than two years in prison for his role in a conspiracy to export an American-made turbine to Russia in violation of U.S. sanctions laws. The DOJ had accused Villone and others of purposely evading sanctions administered by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) under the International Emergency Economic Powers Act and the Export Control Reform Act of 2018, which outlawed exports of these turbines to Russia because of national security concerns. In order to avoid the U.S.-imposed sanctions, Villone and his co-defendants concealed the turbine’s final destination from both the manufacturer and the government.
This prosecution serves as an important reminder that a violation of U.S.-imposed sanctions can warrant criminal prosecution and penalties if the violation was willful. In particular, the International Emergency Economic Powers Act makes it a crime to willfully violate, or attempt to violate, any regulation issued under the act. Criminal violations of the U.S. sanctions laws are enforced by the DOJ National Security Division’s Counterintelligence and Export Control Section and the various U.S. Attorney’s offices throughout the United States.
Criminal penalties for U.S. sanctions laws violations can be substantial, as demonstrated by the two-year sentence for Villone. In addition to prison sentences for culpable individuals, DOJ has also sought significant financial penalties and forfeiture, including a $9 billion penalty and forfeiture award against BNP Paribas in 2015. There is also a risk that an administrative or civil investigation conducted by civil enforcement agencies could be referred to DOJ, potentially subjecting a party to both civil and criminal penalties.
Villone’s prosecution reinforces the importance of having an effective, risk-based sanctions compliance program. OFAC has emphasized that sanctions compliance programs should be based on management commitment, risk assessment, internal controls, testing and auditing, and training. A compliance program can also help entities to mitigate the risk of unintentional violations of OFAC sanctions, which often carry significant civil penalties.
Companies should also be aware of the DOJ’s Voluntary Self-Disclosure Policy issued in December 2019. There are significant benefits available to companies that voluntarily disclose a violation, fully cooperate with DOJ and appropriately remediate. Absent aggravating factors, there is a presumption that the company will receive a non-prosecution agreement and will not be assessed a fine. Even if a company is prosecuted, DOJ will recommend a 50% lower fine as long as the company meets the above criteria.