Latest OFAC Settlement Should Serve as Compliance Guide, Lawyers Say

Treasury’s March settlement with Stanley Black & Decker serves as a compliance guide for U.S. companies and represents an important peek into how the Treasury's Office of Foreign Assets Control plans to issue enforcement settlements throughout 2019, according to an April 1 report by WilmerHale.

OFAC reached a $1.9 million settlement with the Connecticut-based industrial tool manufacturer and its China-based subsidiary, Jiangsu Guoqiang Tools Co. (GQ), after the two companies allegedly violated U.S. imposed-sanctions on Iran. WilmerHale’s report states that companies should compare their own sanctions compliance programs to the expectations OFAC listed in the settlement, because “OFAC will likely consider these the standard for ‘best practices’ going forward.” While the settlement contains requirements related specifically to GQ, the report said it “effectively set(s) out the elements of compliance that OFAC would expect of” other companies and “crystallizes OFAC’s expectations for sanctions compliance in an integrated, organized fashion.”

Stanley Black & Decker and GQ attempted to export more than $3 million worth of power tools and spare parts to Iran from mid-2013 to the end of 2014, OFAC said. As part of the settlement, the companies were required to agree to several terms, including bolstering their compliance programs, implementing a “culture of compliance,” demonstrating “recognition of the seriousness of apparent violations” and maintaining a “risk assessment” program that adequately accounts for “potential risks” with “frequency.”

In outlining the extensive settlement agreement, OFAC created a “transparent and predictable standard for compliance,” WilmerHale’s report said, which can be split into five categories: management commitment, risk assessment, internal controls, testing and audit, and training. In the settlement, OFAC stressed that all compliance programs should clearly “demonstrate and communicate its commitment to compliance,” the report said, frequently conduct risk assessments, establish internal controls to identify and report potential violations, conduct periodic testing of its compliance programs and provide “tailored sanctions-related training” to its staff.

Companies should expect similar settlement agreements in the future, the report said, referencing a December 2018 speech by Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker. “To aid the compliance community in strengthening defenses against sanctions violations, OFAC will be outlining the hallmarks of an effective sanctions compliance program” in future settlement agreements, Mandelker said.

OFAC’s settlement with Stanley Black & Decker and GQ was its fifth enforcement action this year compared to just seven actions all of last year, the latest sign of the increasingly aggressive nature and number of actions taken by OFAC on sanctions violators (see 1902150053).