OFAC Enforcement Action: You can’t fight the power…

Epsilon Electronics was assessed a civil monetary policy for $4,073,000 for $3.4 million in car audio and video equipment reexported to Iran from their customer in Dubai. Five of the 39 invoices Epsilon issued for these goods were after receiving a cautionary letter from OFAC in 2012.

None of the transactions were voluntarily self-disclosed. The 34 invoices issued before the cautionary letter were consider non-egregious, while the other 5 were considered egregious.

Here’s what factors OFAC considered in its penalty assessment:

(1) Epsilon demonstrated reckless disregard for U.S. sanctions
requirements by exporting its products to a company it knew or had reason to know distributed
most, if not all, of its products to Iran;

(2) it appears that Epsilon attempted to hide or purposely
obfuscate its sales to Iran, when it changed a Web site to remove a photo gallery of Epsilon’s
products that was labeled “Iran;”

(3) the alleged violations constituted or resulted in a systematic
pattern of conduct;

(4) five of Epsilon’s shipments occurred after Epsilon received a cautionary
letter from OFAC, in connection with similar conduct;

(5) Epsilon exported goods valued at
$3,407,491;

(6) Epsilon had no compliance program at the time of the alleged violations;

(7)
Epsilon attempted to mislead OFAC by providing false information in its subpoena responses
and other letters to OFAC;

(8) Epsilon has not received a penalty notice or Finding of Violation in the five years preceding the transactions that gave rise to the alleged violations;

(9) Epsilon is
a small business; and

(10) Epsilon provided some cooperation to OFAC, including entering into
an agreement to toll the statute of limitations for one year.

As you can see, Epsilon went down swinging. In return, OFAC deemed it necessary to post its Penalty Notice, explaining in great detail why the penalty was warranted:

You responded to OFAC by letter dated June 6,2014. In your response, you asserted that no
violation
of the ITSR occurred, and that: you did not know or have reason to know that the goods
were being shipped to Iran; Epsilon did not authorize Asra to export goods to Iran; the invoices
were
addressedto Dubai, the U.A.E.; Epsilon is not “specifically aware” ofthe circumstances
surrounding
a photo gallery on your Web site that referenced Iran; and, Epsilon would not ship its products to Iran because of

After a thorough review ofthe facts and circumstances pertaining to this matter, including your
response to the Notice, OFAC has determined that you have violated § 560.204 of the ITSR and
that no reduction from the proposed penalty amount set forth
in the Notice is warranted.
Multiple facts tend
to show that the goods exported to Asra were sent to Iran and that Epsilon
knew or had
reason to Icnow that the goods were intended specifically for supply, transshipment,
or reexportation, directly or indirectly, to fran. Specifically, Asra’s Web site indicates that it
only distributes in I
ran; Epsilon attempted to send one shipment of goods directly to Asra’s
address in Iran;and Epsilon posted pictures on its Web site of its products in Iran. Asra also
posted these photos on its Web site, and labeled them as being from Iran.

Links:

OFAC Enforcement Information

OFAC Penalty Notice

 

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