United States: Seed Company Settles Claims With OFAC In "Egregious Case"

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 otherwise.

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