The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) assessed the General Electric Co. (NYSE: GE) a $2.7 million civil penalty on Oct. 1 for violating the Cuban Assets Control Regulations.
Between December 2010 and February 2014, three GE subsidiaries—Getso Technical Services, Bentley Nevada and GE Betz—violated the Cuban sanctions regulations on 289 occasions by accepting payments from The Cobalt Refinery Co. for goods and services provided to a Canadian customer of GE.
Cobalt, which has connections to the mining industry, was placed on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List in June 1995 for its ties to the Cuban government.
In February 2014, GE Working Capital Solutions discovered that its three subsidiaries received “numerous payments” from Cobalt for invoices issued to GE’s Canadian customer and self-disclosed the violations to OFAC. The invoices totaled more than $8 million over the four-year period.
“The GE Companies failed to take proper and reasonable care with respect to their U.S. economic sanctions obligations—particularly given GE’s commercial sophistication,” OFAC said.
The company was also negligent in its “restricted party” screening. The checks should have contained Cobalt’s full legal entity name and the acronym for the company, Corefco, as it appears on the SDN List. However, the sanctions screening software used by the GE companies to screen names against the SDN List only picked up Corefco and not Cobalt, according to OFAC.
“The GE Companies approved Cobalt as a third-party payer and, over a four-year period, failed to appropriately recognize the significant and widely published relationship between Cobalt and their Canadian customer and did not undertake sufficient diligence into their customer’s activities,” the agency added.
The maximum civil penalty for the violations was $18,785,000, but OFAC considered mitigating factors, including GE’s self-disclosure and cooperation with the investigation, and the conclusion that alleged violations constituted a “non-egregious” case, in reducing the fine to $2.7 million.
However, the agency chastised GE for failing to provide “clear and organized” information related to the alleged wrongdoing, adding “the submissions contained numerous inaccuracies, placing a substantial resource burden on OFAC during the course of its investigation.”
On Feb. 26, 2019, OFAC’s Office of Compliance and Enforcement published its Data Delivery Standards Guidance: Preferred Practices for Productions to OFAC. “Every party that conducts international business needs to review this document to ensure compliance with these standards,” Paul DiVecchio, a 40-year export compliance consultant based in Boston, told American Shipper.
OFAC said this enforcement action demonstrates the sanctions risks associated with U.S. companies and their foreign subsidiaries accepting payments from third parties, as well as the need to conduct “appropriate due diligence on customers and other counterparties when initiating and renewing customer relationships.”