The Office of Foreign Assets Control (OFAC) fined C.H. Robinson (CHR), one of the world’s largest logistics firms, more than $250,000 after OFAC said the company’s non-US subsidiaries violated sanctions against Iran and Cuba.
The five subsidiaries allegedly provided freight brokerage or transportation services for 82 shipments to or from Iran or involving Iranian or Cuban goods, while one of the companies also did business with sanctioned Iranian airline Mahan Air.
Not using and misusing tech tools
The alleged violations were committed by CHR subsidiaries in China, Spain, Canada, Australia and Peru and took place between November 2018 and February 2022, OFAC said.
A failure to use technology tools was the culprit here. More specifically, the five subsidiaries’ brokerage management systems had not yet been incorporated into CHR’s system or hadn’t been updated to include the latest sanctions compliance controls. OFAC said this meant that they didn’t screen for any “potentially violative transactions.”
In 2022, CHR’s export compliance team discovered the sanctions-breaching conduct during regular sample audits. The apparently violative conduct occurred due to the lag between acquiring the subsidiaries and their integration into CHR’s operating systems, which has checks in place to detect possible sanctions violations. These subsidiaries, acquired between 2016 and 2019, continued to use their own operating systems until at least 2022.
Penalty and cooperation credit
The settlement amount reflects OFAC’s determination that the apparent violations were voluntarily self-disclosed and were not egregious, OFAC said.
OFAC said the firm put in place “remedial” measures after discovering the breaches, including by creating a trade compliance “task force” to improve its compliance tools. OFAC said the company hadn’t received a penalty notice in the previous five years and was “highly cooperative” with OFAC’s investigation. It also said the company improved its compliance procedures and made “additional OFAC-specific training mandatory for all relevant employees.”
OFAC also said “almost all” of CHR’s global offices now use the company’s main brokerage management system.
The statutory maximum civil monetary penalty applicable in this matter is $28,629,270, and the base civil monetary penalty applicable in this matter equals the sum of one-half of the transaction value for each apparent violation, which is $322,112. The settlement amount of $257,690 reflected the agency’s recognition of the firm’s self-disclosure and remedial efforts.
Compliance considerations
OFAC’s enforcement release in this case concludes with a summary of compliance considerations that offer helpful best practices to companies with recently acquired businesses in the areas of compliance controls and integrating separate compliance systems. With some minor edits, here is what OFAC says.
“This case highlights the importance for US companies acquiring non-US firms of establishing appropriate compliance controls and training as soon as possible after acquisition. The need to institute worldwide compliance functions, including sanctions-related technology and systems, is especially important to avoid potential violations. While integrating such systems, which can be time-consuming, companies should consider interim measures to minimize risk.
“Similarly, companies that may become acquired by US persons may wish to consider taking steps to limit the exposure potential buyers may face, including through compliance with US sanctions, as potential acquirers may be liable for any subsequent violations set in motion prior to closing, and may factor such considerations into their decision-making.
“This matter also emphasizes the benefits of foreign subsidiaries of US companies having a compliance program that takes into account OFAC sanctions, as imports and exports not involving the United States may nonetheless be subject to US jurisdiction.
“Finally, implementing systems and escalation protocols to ensure the careful review of all shipping documents such as air waybills, bills of lading, and certificates of origin can help prevent violations. Such documents may contain important information relevant to sanctions, such as port locations, product origin, and names and addresses of buyers, sellers, shippers and intermediaries.”
