So, BIOMIN America and its foreign subsidiaries made 30 sales of non-U.S. agricultural commodities to a company in Cuba without getting a license for it. Interestingly enough, those 30 sales resulted in 44 violations of the Cuban Assets Control Regulations (CACR) – my guess is that some of these were for actions of the American parent, and others for the actions of the foreign subs that were subject to U.S. jurisdiction.
These sales, which occurred between July 2012 and September 2017, included $17,391,950.23 of goods. BIOMIN voluntarily self-disclosed these violations, which were considered non-egregious. That resulted in a base penalty amount of $973,691. It should be noted that even the statutory maximum isn’t all that much, given that the maximum fine under the Trading with the Enemy Act (Cuba being the only country still sanctioned under TWEA) is a tiny fraction of that under other authorities like the International Emergency Economic Powers Act (IEEPA) or the Foreign Narcotics Kingpin Designation Act (FNKDA or “Kingpin Act”).
So, here is OFAC’s description of the conduct:
Believing that BIOMIN America could not directly export its agricultural products to Cuba, and in order to secure a sales opportunity with Alfarma, BIOMIN America’s managers developed a transaction structure that they incorrectly determined would be consistent with U.S. sanctions requirements. Under this structure, BIOMIN America processed purchase orders from Alfarma on behalf of BIOMIN America’s foreign affiliates that would then fulfill the orders for Alfarma. BIOMIN America coordinated, and received commissions on, these sales to Alfarma as executed by its foreign affiliates. As a result, BIOMIN America and its owned or controlled foreign entities dealt in blocked property in apparent violation of the CACR.
BIOMIN America could potentially have availed itself of an existing general license under
§ 515.533(a) of the CACR or applied for a specific license from OFAC, provided the exports had been consistent with the Export Administration Regulations, but it failed to seek appropriate advice or otherwise take the steps necessary to authorize these transactions. During the time in which the apparent violations occurred, BIOMIN America did not have an OFAC compliance program in place.
And here are OFAC’s stated aggravating factors:
BIOMIN America was reckless in its actions to develop, direct, and execute a transaction structure to export its products to Cuba, as fulfilled by its owned or controlled foreign entities and a foreign affiliate, in a manner that violated the CACR for a period of several years;
BIOMIN America’s management, as well as the management of another of its owned or controlled foreign entities, was aware of and involved in the development and execution of the transaction structure; and
BIOMIN America and its owned or controlled foreign entities are actively managed divisions of the ERBER Group, a commercially sophisticated, international company.
and mitigating factors:
- BIOMIN America and its owned or controlled foreign entities’ transactions may have been eligible for authorization through an existing general license or a specific license, if the relevant general license conditions had been complied with or a specific license obtained;
- BIOMIN America and its owned or controlled foreign entities have not received a Penalty Notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the Apparent Violations;
- BIOMIN America, on behalf of itself and its owned or controlled foreign entities, engaged with outside counsel and export control consultants to conduct comprehensive training sessions for logistics, compliance, and senior management on country-specific embargoes, denied persons screening, and export license requirements, among others. Further, BIOMIN America developed formal written policies and procedures to prevent sales to or for unauthorized destinations, parties, or activities; and
- BIOMIN America provided information to OFAC in a clear, concise, timely, and well-organized manner, and executed a tolling agreement to extend the statute of limitations.
which helped them arrive at the final amount.
Noticeably absent is the aforementioned fact that BIOMIN America had no compliance program. How did OFAC not mention that in the aggravating factors?
Similarly, how is management knowledge (aggravating factor #2) relevant when you think you are doing the proper thing? It’s one thing in the case where the firm is trying to evade sanctions, but that’s not the case here.
And here is the lesson OFAC wants you to learn from this action:
This case demonstrates the importance of U.S. companies with a global presence maintaining appropriate sanctions compliance programs, particularly when dealing with foreign subsidiaries and affiliates. Furthermore, U.S. companies can benefit from seeking appropriate advice and guidance when contemplating business involving U.S. sanctions programs rather than developing alternative methods through non-U.S. companies in order to avoid prohibitions on U.S. companies.
All in all, this action is not a shining moment for OFAC. The inconsistency of the aggravating factors with the facts of BIOMIN’s actions makes this action seem almost picky – after all, there is no note of the damage to U.S. policy objectives, the extended period of time and number of underlying transactions. Had it properly written, focusing on the lack of an OFAC compliance program at a division of a “commercially sophisticated international company”, it might seem more appropriate.
I also note that the parent company, ERBER Group, is an Austrian company. What sort of sanctions compliance program do they have? If they don’t have one – or much of one – is it any wonder that BIOMIN didn’t have one?