On 13 November 2014 the United States Office of Foreign Assets Control (“OFAC”) announced that ESCO Corporation (“ESCO”) paid $2,057,540 in settlement of apparent violations of the US sanctions against Cuba.
It was reported that between 2007 and 2011 ESCO’s subsidiary purchased nickel briquettes made or derived from Cuban-origin nickel to the (total transaction) value of $6,188,149. ESCO made a voluntary disclosure to OFAC in respect of the purchases.
In determining the level of settlement, OFAC took into consideration that ESCO is a “commercially sophisticated company with international operations” which acted with “reckless disregard” for the sanctions against Cuba by failing to identify that the nickel was from Cuba, despite the fact that there were various “red flags in the public domain”. The Cuban nickel was also ultimately sourced from Specially Designated Nationals.
However, OFAC also took into account the following mitigating factors: ESCO had not received a penalty notice or Finding of Violation from OFAC in the five years before the first apparent violation occurred; ESCO has enhanced its compliance plan and conducted a thorough historical audit; and ESCO has cooperated with OFAC’s investigation and entered into a tolling agreement.
The level of fine should act as a reminder to companies potentially subject to US sanctions that OFAC takes seriously any violations of US sanctions programmes, particularly when the parties violating those sanctions are large enough to have proper due diligence processes in place and there is information in the public domain to help avoid any such violations.
The original update by OFAC can be found here.