Finding of Violations are the least frequent of all OFAC enforcement actions. They seem to be used as educational tools for the rest of us, either to remind us of existing requirements that perhaps we give short shrift, or to set a new compliance bar based on the shortcomings of the firm being highlighted.
In this case, it’s Johnson & Johnson. A US division was involved in 5 shipments of goods (total value $227,818) in 2010 from an Egyptian subsidiary to Sudan, partly due to the lack of adequate sanctions training for the General Manager of the US division.
Here is OFAC’s calculus of how they decided not to go beyond a Finding of Violation:
OFAC considered the following to be aggravating factors:
- JJME acted with reckless disregard for U.S. sanctions requirements when it made two exports to Sudan after being made aware that it might be subject to restrictions under U.S. sanctions;
- JJME’s General Manager for Emerging Markets in the Middle East and North Africa was both aware of and involved in the conduct giving rise to the violations;
- JJME is part of a large, sophisticated corporation with extensive experience in international trade; however, it did not properly take into consideration the implications of OFAC regulations when it restructured its consumer business and placed a U.S. company in charge of sales to Sudan; and
- JJME’s OFAC compliance program did not include any training on OFAC regulations for its General Manager, who was responsible for sales to Sudan.
OFAC considered the following to be mitigating factors:
- JJME took remedial action including conducting an internal investigation of the violations and instituting additional compliance training;
- the harm to sanctions programs objectives was limited because the products exported, while not authorized by OFAC, were consumer hygiene products;
- JJME has no prior OFAC sanctions history, including no penalty notice or Finding of Violation in thefive years preceding the date of the earliest transaction giving rise to the violations; and
- JJME cooperated with OFAC’s investigation, including by providing detailed and well-organized information.
OFAC made sure everyone knew there was a lesson to be learned:
This enforcement action highlights the need for U.S. companies, particularly large, sophisticated entities dealing primarily in international transactions, to ensure that their employees are properly trained on OFAC regulations, especially managers who oversee sales to regions that pose a particularly high risk for violations of the sanctions programs administered by OFAC.