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More compliance guidance from OFAC, via an enforcement action

The U.S. Treasury Department’s Office of Foreign Assets Control used a settlement agreement Thursday to set out management’s role in creating and running an effective sanctions compliance program.

Dubai-based Essentra FZE Co. Ltd. paid about $665,000 in penalties for illegal sales to North Korea. The company — a subsidiary of UK-based Essentra plc — makes filters for cigarettes.

Although all the parties were “non-U.S. persons,” they violated OFAC sanctions by involving the U.S. banking system, OFAC said. Essentra FZE’s customers in North Korea paid for the goods using three wire transfers that involved either U.S. banks or U.S. dollars.

Essentra FZE resolved OFAC’s civil enforcement action by signing a ten-page settlement agreement. The terms of the settlement tracked guidance set out in OFAC’s 2019 Framework for Compliance Commitments, with sections about management commitment, risk assessment, internal controls, testing and auditing, and training.

Essentra FZE also agreed to enhance its customer due diligence, generate internal compliance reports to the group compliance chief, and submit annual compliance certifications to OFAC for five years.

In a parallel criminal enforcement action, the DOJ charged Essentra FZE with conspiring to violate the International Emergency Economic Powers Act and defrauding the United States. The company entered into a three-year deferred prosecution agreement that the DOJ filed in federal court in DC.

The DOJ said Thursday’s public filing against Essentra FZE is the “first ever Department of Justice corporate enforcement action for violations of these regulations.”

Essentra FZE used a front company in the UAE to buy goods it knew were destined for North Korea, OFAC said. The invoices showed a company in China as the consignee instead of the real customers.

In a statement Thursday, Essentra plc said, “None of the transactions were approved or known by senior management outside of the UAE and both employees have since been exited from the business.”

CEO Paul Forman said: “A very thorough and in depth investigation has been carried out to fully understand the root cause of the issues we have seen. We have made a very significant investment of both time and money, which has now equipped us with enhanced protection against any potential future issues of this nature.”

Here’s the July 16, 2020 settlement agreement between OFAC and Essentra FZE Co. Ltd.

20200716_essentra_fze_settlement

Download the settlement agreement here.

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1 Comment

  1. When I read about Essentra’s case, the first thing I looked for was jurisdiction. I can see use of the US banking system as a predicate, but not solely use of US dollars.

    Otherwise, just about anything could have a basis for US jurisdiction.


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