Most Read Contributor in United States, August 2016
On September 13, 2016, the Department of Treasury’s Office
of Foreign Assets Control (“OFAC”) announced a $4.3
million settlement with international seed producer and exporter
PanAmerican Seed Company (“PanAm Seed”). In its official statement regarding the enforcement
action, OFAC alleges that PanAm Seed faced statutory and civil
penalties in the amount of $12 million for “egregious”
violations of US sanctions against Iran.
OFAC alleges that between May 2009 and May 2012, PanAm Seed
repeatedly violated US export controls by exporting seeds to two
Iranian distributors. As part of the alleged scheme, PanAm Seed
made 48 sales to consignees in unrestricted countries who would
then reexport the seeds the Iranian distributors. Among the
aggravating factors which led this case to be labeled
“egregious,” OFAC noted that the Iranian sanctions
program permits the export of certain agricultural products (likely
including the seeds in question) under a specific license; however,
PanAm Seed knowingly chose not apply for a specific license and
instead chose to pursue its reexportation scheme. OFAC also cited
PanAm Seed’s sophistication and substantial international
sales when discussing its reckless disregard for its OFAC
compliance responsibilities and knowledge of its mid-level managers
of the intent to reexport seeds to Iran. Finally, despite
mitigating efforts to implement compliance programs and PanAm
Seed’s history of compliance, OFAC repeatedly noted that
PanAm Seed did not self-report these violations and initially
refused to cooperate in OFAC’s investigation.
It is difficult to understand why PanAm Seed chose not to seek a
specific license which would have permitted the exports in question
and avoided this significant fall out. Whether it was a lack of
clarity regarding the scope of the Iranian sanctions program, a
failure of the company’s employees to appreciate the
ramifications of violating OFAC sanctions, or some combination of
the two, this “egregious” case likely could have been
avoided with comprehensive training and compliance structures which
could not be evaded by transparent sales to consignees. Ensuring
that training and compliance programs are up-to-date and genuinely
robust may be the single most important thing a company to do to
protect itself against future claims of misconduct, egregious or
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This action marks OFAC's first major expansion of the Specially Designated Nationals (SDN) List and Sectoral Sanctions Identifications (SSI) List for the Russia sanctions program since December 22, 2015.
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