The Treasury Department’s Office of Foreign Assets Control (OFAC) ordered multinational conglomerate 3M to pay more than $9.6 million over apparent Iran sanctions violations by its subsidiary and a U.S. employee of a separate subsidiary.
Switzerland-based 3M (East) AG knowingly sold reflective license plate sheeting (RLPS) via a German reseller to entities linked to Iranian law enforcement, OFAC said in its enforcement release Thursday. Additionally, a U.S. person working for 3M’s Dubai-based subsidiary, 3M Gulf Limited, was closely involved in the sales, OFAC alleged.
OFAC acknowledged 3M voluntarily self-disclosed the apparent violations but deemed the case to be egregious because of the aggravating factors. The company terminated and formally reprimanded six employees involved, among other mitigating factors.
The details: In March 2016, 3M’s trade compliance counsel approved a deal of RLPS to a German reseller to make license plate blanks but misunderstood the paperwork because of an omitted page containing sections on “parties involved” and “product end use,” OFAC alleged.
A week after the approval, 3M Gulf distributed new sanctions guidance, which included “prohibitions on both U.S.-person involvement and transacting with Iranian law enforcement and affiliated entities,” OFAC stated. The guidance included training and notification to managers of both subsidiaries.
The following month, the German reseller told managers at both subsidiaries it would sell the RLPS to Bonyad Taavon Naja, an affiliate controlled by Iranian law enforcement, OFAC said. Despite the recent guidance, the subsidiaries’ managers did not bring this change to the attention of trade compliance counsel.
Further, the managers “obfuscated details of the sale from colleagues for fear that it would be re-reviewed by trade compliance and spur a more fulsome review” and “repeatedly misrepresented the use of the RLPS as for ‘conversion’ into license plates, even after the German reseller clarified that it would be reselling” to a sanctioned entity, OFAC stated.
Meanwhile, the U.S.-person employee of 3M Gulf who received sales incentives for Iran business performed “substantial work” in furtherance of these sales, OFAC alleged, including knowingly approving six credit notes, contributing to two internal assessments, and assisting with a quality control issue.
Compliance considerations: OFAC determined 3M Gulf senior managers willfully violated U.S. sanctions, with other employees reckless in handling sales to sanctioned Iranian entities.
Human rights abuses in both Iran and Syria linked to the sanctioned Iranian entities were cited as an aggravating factor.
Mitigating factors in the case included 3M:
- Having a risk-based OFAC compliance program in place at the time;
- Performing an investigation and instituting changes both in personnel and policies;
- Adding trade compliance counsel to 3M Gulf and 3M headquarters;
- Enhancing sanctions compliance measures specific to the license plate business;
- Introducing enhanced due diligence for any business involving a sanctioned country or region;
- Requiring trade compliance re-review any approved proposals changed; and
- Enhancing trade compliance training for all applicable employees.
The company also agreed to certain compliance commitments for at least five years, according to its settlement agreement.
These include compliance units being provided the proper authority, autonomy, and resources to promote a “culture of compliance,” OFAC said. Other undertakings include a risk assessment, revamped internal controls, testing and auditing, training, and annual certification.
Company response: In an emailed statement, a 3M spokesperson said the company self-reported and disclosed the matter through a filing with the Securities and Exchange Commission in 2019.
“In 2019, 3M determined that a small number of employees had intentionally violated established procedural controls, company trade compliance policy, and our employee code of conduct to arrange sales of license plate sheeting products to prohibited buyers,” the statement read. “3M also conducted an investigation of the situation; fully cooperated with the U.S. government’s investigation; and took appropriate corrective actions, including personnel actions and policy changes for future compliance.”