A New Jersey-based wholesale building materials company agreed to pay more than $660,000 as part of a settlement with the Treasury Department’s Office of Foreign Assets Control (OFAC) addressing three apparent sanctions violations in Iran.
Construction Specialties (CS) has 10 offices in the United States and 25 foreign affiliates, including Construction Specialties Middle East (CSME) located in the United Arab Emirates. CSME knowingly violated sanctions when it imported building materials from the United States, then reexported them to Iran, according to OFAC.
The penalty reflects the agency’s determination CSME’s apparent violations were egregious and voluntarily self-disclosed, OFAC said in its enforcement release Wednesday.
The details: During a visit by CS executives in June 2016, CSME’s general manager, a non-U.S. person, made a pitch about supplying building materials to construct a shopping mall in Tehran, Iran. CS executives said CSME should not pursue any business in Iran without first consulting with counsel to confirm it would not violate U.S. sanctions, per the release.
After consulting with outside counsel, CS informed CSME of the U.S. restrictions against Iran and updated its policies to reflect the sanctions. Despite these documented policies and procedures, CSME’s general manager and another CSME senior manager imported goods from CS and another U.S. supplier and then reexported them to Iran, according to OFAC.
The agency further alleged the “rogue” employees concealed the destination of the goods from the U.S. suppliers by falsifying the ultimate destinations on seven purchase orders, omitting the ultimate destination on another purchase order, using a false project name to avoid linkage to Iran, and altering CSME records.
When a U.S. person working at CSME brought suspicions of elevated levels of sales, general, and administrative expenses to the senior manager, the former was immediately dismissed, the release said.
The U.S. person then flew to the United States and reported the apparent misconduct to CS headquarters, which opened an internal review, terminated all Iran-related business activity, and voluntarily reported the matter to OFAC.
Compliance considerations: As part of its settlement agreement with OFAC, CS agreed to maintain certain compliance commitments for five years, including to:
- Promote a culture of compliance;
- Conduct routine OFAC risk assessments using a risk-based approach;
- Recalibrate internal controls to the company’s risk profile and compliance needs, routinely testing them to ensure effectiveness;
- Implement training, testing, and auditing appropriate to the level and sophistication of its sanctions compliance program; and
- Certify its compliance program with OFAC on an annual basis.
Company response: In a phone interview, a CS spokesperson confirmed the dismissed U.S. person employee got their job back in the Middle East. The spokesperson agreed with OFAC’s assertion the misconduct was carried out by two CSME “rogue employees.”