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Once again, foreign subs ignore US parent: OFAC Enforcement Action

From the Enforcement Information:

Keysight Technologies, Inc. (“Keysight”), a company based in Santa Rosa, California, on behalf of its former Finnish subsidiary, Anite Finland Oy (“Anite”), has agreed to pay $473,157 to settle its potential civil liability for reexports of U.S. export-controlled test measurement equipment to Iran. Anite had business with Iran prior to its acquisition by Keysight in August 2015. After Keysight’s acquisition of Anite, and after Keysight implemented its policy to restrict sales to Iran, Anite employees nonetheless continued sales to Iran and obfuscated such sales from Keysight. Keysight and Anite subsequently implemented remedial measures intended to prevent future unauthorized sales.

From the Settlement Agreement, after the Vice President for EMEA emailed the regional director and two other Middle East office employees “I need to advice you NOT to sell into any [Syria, Sudan or Iran]”:

Later that same day, the Regional Director ME responded to the Vice President EMEA in an email copying two of his colleagues ongoing Iranian business.
The Regional Director suggested his resistance to the idea of terminating sales in Iran and with other U.S.-sanctioned countries. Evidence of this resistance continued over text message later that same evening in an exchange between the Regional Director ME and the other two employees that were copied to the reply email to the Vice President EMEA.
employees were not always successful in preventing mentions of Iran in their correspondence. On January 12, 2016,
sent an email to the Vice President EMEA and the Regional Director ME regarding the negotiation of a sale between Anite and a Pakistani telecommunications company, and mentioned that the Pakistani company about [the] . . . Iran Pricing
providing for its products.
Less than two hours after receiving the email, the Regional Director ME and the business partner who sent the email exchanged communications via text message and noted they should not mention Iran in their emails and have references to Iran deleted. The Regional Director ME also expressed fear that he would lose his job or end up in jail.

The base penalty for the voluntarily self-disclosed, but egregious violations was $1,051,460 (1/2 the statutory maximum).

The aggravating factors:

(1) Anite willfully violated the ITSR when it shipped six orders of products that incorporated 10 percent or more U.S.-export controlled content exported from the United States, as part of a scheme specifically to circumvent Keysight’s directive to cease Iran- related business;
(2) Senior Anite branch and sales managers knew of and actively participated in the violative conduct; and
(3) The value of Anite’s reexports to Iran combined with its attempts at concealment and obfuscation significantly harmed the program objectives of the ITSR.

Mitigating factors:

(1) Neither Keysight nor Anite had received a penalty notice or Finding of Violation from
OFAC in the five years preceding the transactions giving rise to the apparent violations;
(2) Keysight fully cooperated with OFAC’s investigation, including by producing records and information to OFAC in a clear and organized fashion, responding in a timely and
efficient manner to all follow-up requests for information, and entering into a statute of limitations tolling agreement;
(3) Keysight undertook several remedial measures by conducting a thorough internal investigation to identify the causes of the apparent violations. Specifically, Keysight has terminated the employees that were involved in the apparent violations and immediately took steps to ensure that there would be no further Anite transactions involving restricted countries, such as assessing past and current transactions for compliance with OFAC regulations, implementing mechanisms to halt current transactions, and ensuring that no further transactions involved restricted countries;
(4) Keysight has enhanced its sanctions compliance program, and specifically has undertaken the following measures as part of its compliance commitments to minimize the risk of recurrence of similar conduct in the future:
• Fully integrated Anite into Keysight’s compliance program, to include the company’s detailed policies, procedures, and resources regarding trade compliance;
• Implemented enhanced training for Anite personnel, to include annual trade compliance training for sales representatives and their supervisors, and additional training for Anite management, legal, logistics, sales, and customer service personnel at the time of integration into Keysight; and
• Implemented enhanced screening of each Anite transaction for trade compliance, to include full visibility and manual screening by Keysight.

And the lesson to be learned:

This case highlights the potential benefits of implementing proactive and ongoing sanctions compliance controls in foreign companies that source U.S.-export controlled content from the United States, including when U.S. persons, directly or indirectly, acquire foreign companies with preexisting relationships with sanctioned persons and jurisdictions. In such circumstances, as part of a risk-based approach, U.S. persons in particular are encouraged to assess the sanctions risk associated with newly acquired foreign subsidiaries and ensure that those subsidiaries adopt and maintain the compliance controls necessary to mitigate that risk. This may include appropriately integrating newly acquired foreign subsidiaries into an organization’s sanctions compliance program and promoting a culture of compliance across the organization.

Two recent cases with employees taking matters into their own hands to ignore directives to obey sanctions regulations…

Links:

OFAC Enforcement Information

Settlement Agreement

Categories: Civil Monetary Penalties Enforcement Actions Iranian Sanctions OFAC Updates

eric9to5

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