NewTek fined $189K over Iran sanctions violations

NewTek made 49 separate sales of its products worth more than $500,000 from 2013 to 2018 to customers in Iran through third-party distributors located in France and the United Arab Emirates, according to the U.S. Treasury’s Office of Foreign Assets Control (OFAC). The company was aware, through communications, sales projections, and within written contracts with the distributors, that NewTek products were being sold in Iran, OFAC stated in its web notice.

On three occasions, NewTek products were allegedly re-exported by an Iranian reseller to a sanctioned entity, the Islamic Republic of Iran Broadcasting, resulting in a total of 52 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).

NewTek also provided support, software updates, reseller training, and other services to customers in Iran on at least three occasions, OFAC said.

The regulator added NewTek “did not have export control or sanctions compliance policies or procedures in place during the relevant time period and did not provide training to personnel regarding export control or sanctions compliance.”

“NewTek incorrectly believed that its product sales through third-party distributors to the Iranian Reseller were in accordance with applicable sanctions regulations in part because NewTek did not deal directly with Iran, but rather through a third-country intermediary,” OFAC stated.

NewTek voluntarily disclosed the violations to OFAC, and the agency considered the case non-egregious. The company did not respond to a request for comment.

Compliance takeaways: NewTek was lauded for its “substantial” cooperation. The company agreed to implement a host of remedial actions to prevent future violations of U.S. sanctions against Iran, including:

• Hiring a director of compliance;
• Establishing export controls and sanctions compliance policies and procedures;
• Providing compliance training to employees;
• Obtaining formal export classifications for its products from the U.S. Department of Commerce; and
• Implementing geoblocking features to prevent individuals in sanctioned countries from downloading or registering NewTek products. In addition to Iran, those countries being blocked include Cuba, North Korea, Syria, and the Crimea region of Ukraine.

“This enforcement action serves as a reminder that sales to third country distributors with knowledge or reason to know that such goods are intended specifically for Iran can give rise to apparent violations of the ITSR,” OFAC stated. “Moreover, reliance on the understanding of an individual in a managerial or supervisory role, or reliance on informal sanctions compliance measures, may not be sufficient to mitigate sanctions compliance risks.”