Office of Foreign Assets Control (OFAC)

  • On November 17, American Express Company (AMEX) agreed to pay $204,277 to settle its potential civil liability for 1,818 alleged violations of the Cuban Assets Control Regulations (CACR). The violations occurred between 2009 and 2014, at which time a wholly-owned subsidiary of AMEX, Alpha Card Group, owned 50 percent of BCC Corporate SA (BCCC), a Belgium-based credit card issuer and corporate service company. Alpha Card and BCCC failed to implement controls to prevent its credit cards from being used in Cuba. AMEX and BCCC voluntarily self-disclosed the violations. OFAC determined this was a non-egregious case.
    • Aggravating factors included:
      • Personnel within both Alpha Card and BCCC had reason to know of the conduct that led to the apparent violations.
      • Despite Alpha Card’s business model prior to its acquisition of BCCC in March 2009, in which it dealt exclusively with AMEX-related products (and therefore had insight into all the parties involved in any transactions throughout the network), none of the companies involved appear to have appreciated the possibility or risk that BCCC-issued credit cards could be used in Cuba, and the company should have taken steps to assess the level of sanctions risk, and related controls, for BCCC-issued credit cards.
      • The apparent violations resulted in harm to U.S. sanctions program objectives at the time they occurred.
      • AMEX is a large and commercially sophisticated financial institution.
      • During OFAC’s investigation, AMEX and BCCC provided certain information on multiple occasions that was verifiably inaccurate or incomplete, including material omissions.
    • Mitigating factors included:
      • BCCC has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations.
      • Upon discovering the apparent violations, AMEX took swift and appropriate remedial action.
      • AMEX and BCCC voluntarily self-disclosed the apparent violations to OFAC.
      • BCCC signed a statute of limitations tolling agreement and tolling agreement extensions.
  • On November 28, OFAC issued a Finding of Violation to Dominica Maritime Registry, Inc. (DMRI) of Fairhaven, Massachusetts, for a violation of the Iranian Transactions and Sanctions Regulations (ITSR). On July 4, 2015, the company executed a binding Memorandum of Understanding, which OFAC determined to be a contingent contract, with the National Iranian Tanker Company (NITC), an entity of the Government of Iran. The company did not voluntarily disclose the violation. OFAC ruled it a non-egregious case.
    • Aggravating Factors:
      • DMRI failed to exercise a minimal degree of caution or care by executing a contingent contract with an entity it knew was listed on the SDN List at the time of the violation.
      • DMRI executives had actual knowledge of, and actively participated in, the conduct the led to the violation, and were aware of NITC’s status when DMRI executed the contingent contract.
      • DMRI undermined the policy objectives of the ITSR by dealing in the blocked property of a Government of Iran entity identified on the SDN List.
    • Mitigating factors included:
      • DMRI had not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transaction giving rise to the violation.
      • DMRI is a small company.
      • DMRI took remedial actions, including engaging trade counsel to assist it in understanding its obligations under U.S. sanctions laws, updating its OFAC compliance procedures, and undertaking a process to establish an OFAC compliance training program for all employees.
    • OFAC determined a Finding of Violation was the appropriate enforcement response because DRMI is a small company, the scope of the contract at issue was limited, and there was no performance on the contract.

Bureau of Industry and Security (BIS)

  • On November 20, BIS announced a Settlement Agreement with Pilot Air Freight, LLC (a.k.a. Pilot Air Freight Corp.) of Lima, Pennsylvania, to settle potential civil liability for one alleged violation of the Export Administration Regulations (EAR). In February 2015, Pilot allegedly aided or abetted an attempted unlicensed exported to IKAN Engineering Services in Pakistan, an entity on BIS’ Entity List. The item was an ultrasonic mill cutting machine controlled for Anti-Terrorism reasons, and valued at more than $250,000.
    • Pilot was assessed a civil penalty of $175,000.
    • The company agreed to complete two external audits of its export controls compliance program.