OFAC Alert – Actions Against Executives of Companies and Financial Institutions
On May 2, 2019, the Office of Foreign Assets Control (“OFAC”) issued its “Framework for OFAC Compliance Commitments” outlining the circumstances that frequently cause Sanctions Compliance Programs (“SCPs”) to fail. Among them, OFAC highlighted that the employees of companies and financial institutions, especially executives and those in supervisory or managerial positions, may conduct or facilitate dealings or transactions that violate OFAC Sanctions on persons, regions, or countries. These employees may also conduct efforts to obfuscate or conceal OFAC Sanctions violations. Accordingly, OFAC will consider directing its actions not only against the involved companies and financial institutions but also against the individuals that are responsible.
OFAC had taken this position already in the case of Kollmorgen Corporation on February 7, 2019. In this case, OFAC’s civil action against the company for violating Iran-related sanctions was terminated by a settlement agreement. However, OFAC designated the director of the company that caused these violations and attempted to conceal them from the company’s compliance team and the authorities.
In the past, the Department of Justice (“DOJ”) has presented criminal conspiracy charges against the employees of a number of companies that have violated OFAC Sanctions. The cases against the employees of Sovfracht (2018), Huawei (2019), and Standard Chartered Bank (2019) are good examples. Similarly, certain employees of companies in the air charter industry are under criminal investigation for violations of OFAC Sanctions in U.S. v. Tareck Zaidan El Aissami Maddah et al. (2019).
The possibility of enforcement actions against executives of companies and financial institutions by the U.S. Government is an important reason to design and implement an SCP that sets forth the policies, procedures and controls necessary to prevent, detect, and react appropriately to apparent violations of OFAC Sanctions.