Companies Disclose, Update Potential Sanctions Violations

Several U.S. and multinational companies recently disclosed potential U.S. sanctions violations or updated previous disclosures. The cases involve a destruction of evidence in a sanctions investigation, potentially illegal transactions with Iran, a gaming software company and others.

A U.S. information management services company said one of its employees destroyed material relating to a U.S. sanctions probe and has disclosed the incident to the Office of Foreign Assets Control. Iron Mountain, which provides data and document management, said the incident stemmed from 2020, when it disclosed that one of its non.-U.S. subsidiaries had been providing services to an entity designated under the U.S. weapons proliferators sanctions regime. Iron Mountain said its subsidiary eventually ended its business relationship with the sanctioned entity “and took steps to treat the property held in storage for the Entity as blocked property” as required by OFAC regulations. Although the subsidiary had procedures that placed “blocks and notices on the Entity’s account,” an employee of the subsidiary “authorized the destruction of the Entity’s property,” Iron Mountain said in an Aug. 5 Securities and Exchange Commission filing.

Iron Mountain said the employee was fired and stressed its subsidiary didn’t “receive any revenue in connection with this activity.” The company disclosed the incident to OFAC in an initial notice of voluntary disclosure Aug. 5 and plans to submit a final voluntary disclosure notice after it investigates further. “We will continue to cooperate fully with OFAC in its review of this matter and to enhance our processes and procedures designed to promote compliance with our obligations under applicable international sanctions law,” the company said.

Neogen, a food safety company, said in a July 30 filing OFAC is investigating it for transactions that may have violated U.S. sanctions against Iran. After receiving a subpoena from OFAC last year, the company said it disclosed that it had provided certain “genomic testing services” to an “unrelated U.S.-based party engaged in veterinary activities involving an Iranian party.” Neogen said it is cooperating with OFAC’s investigation and examining whether those activities are eligible for a general license.

The company also said it is implementing “additional compliance measures” to prevent “inadvertent dealings with restricted countries or parties,” which will “further enhance” its trade compliance program. Neogen doesn’t believe OFAC’s investigation will have a “material impact on its operations.” It said it reserved $600,000 last year to cover any “potential fines or penalties on this matter.”

Avianca, the South American airline that said it may have violated U.S. sanctions against Cuba (see 1911190017), said Aug. 13 that OFAC completed its investigation and issued a cautionary letter instead of a monetary penalty. But Avianca said the letter doesn’t “constitute a final agency determination as to whether violations have occurred” and doesn’t mean OFAC won’t take “future enforcement action should additional information warrant renewed attention.”

The airline said it has begun a “comprehensive effort” to improve its global compliance program and will bolster its sanctions screening procedures. It will also improve sanctions training for “key” employees.”

Pactiv Evergreen, a North American food and beverage packaging company, said in its Aug. 5 filing the SEC won't penalize it after the company disclosed potential Foreign Corrupt Practices Act Violations to the Justice Department (see 2103040065). Pactiv previously disclosed that the Justice Department also decided not to penalize the company. “The SEC staff has indicated its intention to close this matter without any action against the Company,” it said, “and we intend to fully cooperate with the SEC, with the assistance of legal counsel, to conclude this matter.”

OFAC will not impose monetary penalties on Unity Software, a gaming software company that disclosed potential sanctions and export reporting violations last year (see 2008310014), according to the company’s Aug. 11 filing. Unity Software said it received a cautionary letter from OFAC but didn’t say whether the Commerce Department’s Bureau of Industry and Security had completed its investigation. “[W]e cannot assure you that our policies and procedures relating to export control and sanctions compliance will prevent violations in the future,” the company said.

A Swiss multinational building material company said in a July 30 report that the Justice Department has contacted it regarding payments to terrorist organizations. LafargeHolcim said it has received “informal inquiries” from DOJ, which is asking about its 2013 and 2014 operations in Syria. French authorities have been investigating whether Lafarge, which was acquired by Swiss rival Holcim in 2015, paid the Islamic State Group to keep its factories running in certain areas controlled by the group, according to a recent Reuters report. “Discussions have recently begun with the DOJ concerning the potential for resolution on the matter,” the company said. “These discussions remain at an early stage at which no assessment can be made of whether a resolution will be reached, the financial or other terms of such resolution, or the potential enforcement action, if any, that the DOJ would pursue if no resolution can be reached.”