The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has started making examples of companies that did not take its administrative subpoenas for information involving alleged sanctions violations seriously.
On Aug. 8, OFAC published findings of violation against two companies — DNI Express Shipping Co. of Virginia and Southern Cross Aviation of Florida — for insufficiently addressing its administrative subpoenas. The subpoenas were first issued to these companies in 2015 and 2016, respectively.
In May 2015, OFAC asked DNI to supply it with information related to its involvement in the sale and shipment of farm equipment to Sudan, in violation of the U.S. Sudanese Sanctions Regulations. According to OFAC, DNI’s response was “contradictory, false, materially inaccurate, incomplete and contained misleading statements.”
In June 2016, Southern Cross’ president at first denied OFAC’s allegations in its administrative subpoena that the company engaged in discussions with an Iranian businessman in Ecuador to purchase two helicopters. After OFAC sent a second administrative subpoena to Southern Cross in October 2016, the company then provided documents outlining email exchanges with the Iranian businessman.
OFAC said both companies “demonstrated reckless disregard for its U.S. sanctions requirements by failing to provide accurate and complete information in response to an OFAC administrative subpoena.”
The agency recently updated its “Reporting, Procedures and Penalties Regulations” (RPPR) as part of an interim final rule published in the Federal Register on June 21. OFAC said both DNI and Southern Cross specifically violated Chapter 31 of the Code of Federal Regulations § 501.602, which requires companies that receive an administrative subpoena to expeditiously provide accurate and complete information.
The administrative subpoenas cover a range of information, including “any written, recorded or graphic matter or other means of preserving thought or expression.” Examples may include all manner of correspondence, diaries, invoices, bills of lading and air waybills, receipts, photographs, and audio and video recordings.
It’s uncertain if OFAC will publish details about additional companies that have violated its administrative subpoenas in recent years.
While neither DNI nor Southern Cross received civil penalties for the wrongdoing involving the OFAC administrative subpoenas at this time, the agency said, “This enforcement action highlights the compliance obligation of persons subject to the RPPR and the importance for all subject persons to cooperate with OFAC investigations.”
