The Office of Foreign Assets Control (OFAC) recently imposed a penalty ($453,003) on a US based steel manufacturer for violations of the Iranian Transactions and Sanctions Regulations. They had imported engineering services from an Iranian company based in Tehran on more than 60 occasions over a 5 year period.

Earlier this year my colleagues and I published an article entitled "Lessons learned from OFAC sanction violation settlements" which analysed the aggravating and mitigating factors considered by OFAC when determining the level of financial penalty so it is significant that in this case, one of the aggravating factors set out by OFAC was that senior management were aware of and participated in the approval process of the transactions. The company asserted that they were unfamiliar with U.S. sanctions requirements and the laws and regulations administered by OFAC which caused its management to allow the apparent violations.

This should serve as an alert for companies that operate in less regulated  sectors and who may not have as much familiarity with sanctions and other financial crime legislation as more heavily regulated industries. Increasingly, companies in these less regulated sectors are being required by their bankers to demonstrate that they have adequate financial crime risk management policies and procedures in place, as the banks themselves strive to meet the expectations of their Regulators. Examples include, trade and commodities, logistics, manufacturing, freight forwarding and customs brokers.

Unfamiliarity is not a defence so companies operating in less regulated sectors would be well advised to consider if they are exposed to the risk of being unwittingly involved in an evasion of sanctions or money laundering scenario and assess if there is sufficient management awareness of the key issues to help ensure that they mitigate that risk effectively.

If you would like some help to do that, please do not hesitate to contact me.