Murad to pay $3.3M for ‘egregious’ Iran sanctions lapses

In December 2009, Murad entered into an exclusive agreement with an unnamed Iranian distributor to sell the company’s products in the Middle East, including Iran, OFAC explained in its enforcement release Wednesday. The scheme continued until January 2018 and was largely driven by the alleged misconduct of senior executives at the company.

One unnamed former senior executive at Murad separately agreed to pay $175,000 to settle their potential civil liability for three apparent violations of Iran sanctions arising from their role as a manager at the company, according to OFAC. The individual’s actions occurred between June 2016 and September 2017 and were not voluntarily disclosed, the regulator noted.

Unilever, which acquired Murad in 2015, tried to stop the alleged scheme on multiple occasions, according to OFAC. The company voluntarily self-disclosed the apparent violations to the regulator, which determined the case to be “egregious.”

The details: Following its 2009 agreement, Murad began exporting its products to Iran through the Iranian distributor despite not receiving a specific license or other applicable guidance from OFAC, according to the regulator. The company applied for a license that was not authorized; none of its exported goods were either generally authorized or exempt from prohibition.

In May 2015, Murad reached an agreement with an unnamed United Arab Emirates (UAE) distributor that also resulted in products being shipped to Iran, OFAC continued.

These activities, including the opening of a company-branded store in Iran, were not disclosed to Unilever during its acquisition of Murad, according to OFAC. Nearly two months after the deal closed, Unilever became aware of the alleged scheme, and its corporate counsel directed the unnamed executive to cease exports of company products to Iran. However, work with the UAE distributor continued until 2018, when the company finally stopped the activity and concluded more than $11 million in goods were exported to Iran across at least 62 occasions during the relevant period, OFAC stated.

Compliance considerations: Compliance deficiencies at Murad stemmed from multiple factors, most notably the conduct of its senior executives, according to OFAC. The company was also found to have an inadequate sanctions compliance program exacerbated by its compliance reporting line to a Unilever division in the United Kingdom that “lacked an adequate understanding of OFAC sanctions,” the regulator said.

“[B]ecause businesses that lack a robust sanctions compliance function face significant risks, clear and efficient reporting streams that can rapidly identify red flags for further evaluation and action are important,” said OFAC. “In some circumstances, placement of a U.S. entity under the compliance structure of a non-U.S. entity that may lack sufficient familiarity with U.S. sanctions laws could prevent the prompt identification of and response to potentially prohibited conduct.”

Mitigating factors in the case included the company’s cooperation, remedial response, and the “benign consumer nature” of its products.

Company response: “Murad is committed to complying with U.S. economic sanctions laws and has adopted appropriate sanctions and export control policies and procedures,” a company spokesperson said in an emailed statement. “We extended our full cooperation to U.S. authorities to resolve this matter.”