New Enforcement Guidelines for Violations of U.S. Economic Sanctions Laws Are Latest Indication Of Aggressive Enforcement By The Office Of Foreign Assets Control

The U.S. Treasury Department's Office of Foreign Assets Control ("OFAC"), which is in charge of administering and enforcing the U.S. economic sanctions laws, has published new Economic Sanctions Enforcement Guidelines ("Enforcement Guidelines") that are intended to implement the vastly increased penalties that went into effect in late 2007. At that time, the maximum civil penalties for most economic sanctions programs were increased five-fold from $50,000 to $250,000 for each violation. As one might expect, criminal fines are significantly higher – up to $1,000,000, with up to 20 years imprisonment for individuals. Companies that violate U.S. economic sanctions laws are thus subject to potentially significant civil and criminal penalties.

OFAC has been steadily building its enforcement team as part of a more aggressive enforcement effort that has emerged in the post-9/11 environment. In parallel, the Department of Justice ("DOJ") has sharpened its focus on violations of U.S. economic sanctions laws as part of its broader Export Enforcement Initiative. One major focus of both OFAC and the DOJ has been financial institutions, including non-U.S. banks that do business with U.S. firms. OFAC has also focused on other sectors whose business has international reach, including the transportation, high tech and energy sectors. Many recent cases have been in the millions of dollars, and many involve non-U.S. companies:

In a recent joint settlement for alleged violations of both the economic sanctions and export control laws, DHL paid a civil fine just under $10 million for shipments to Iran, Sudan, and Syria. Australia and New Zealand Bank ("ANZ") recently paid $5.75 million to settle civil charges that it processed Sudan-related transactions through U.S. correspondent accounts by removing references to Sudan from its instructions to the United States. ANZ is not the first non-U.S. financial institution to pay penalties for such "transaction stripping" activities, and its fine is comparatively low — in 2008 U.K.-based Lloyds TSB paid a record $350 million fine to settle criminal charges for similar activities. A number of other "transaction stripping" investigations are reportedly on-going. In October, 2009, Florida company Gold and Silver Reserve, Inc. ("GSR") paid close to $3 million to settle charges involving currency trades for Cuban and Iranian account holders. GSR also paid criminal fines under money laundering laws for such activities. In...

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