OFAC Compliance

Shipping company settles with OFAC for past owner’s non-compliance of export license denial decision

Eagle Shipping International (USA) LLC recently settled a potential civil liability for violating now-defunct Burmese sanctions regulations that were in place in 2011.

In a case that demonstrates the importance of having an established and robust export compliance program—especially for companies that do business across borders, such as those in the shipping and logistics industry—Eagle Shipping International (Eagle) is one for the books.

It also highlights the importance of doing robust due diligence when looking to acquire a company, for it was not until after new ownership took over that these violations came to light. And while the infractions took place years prior to the acquisition, the new owners understood they were still accountable and self-disclosed to the Office of Foreign Assets Control (OFAC).

Profit over compliance isn’t in any organization’s best interest
The settlement amount of $1,125,000—a significant reduction from the statutory maximum civil monetary penalty of $9,000,000—came as a result of a litany of deliberate, past decisions to ignore a Specially Designated National (in this case a company Myawaddy), and and country-specific OFAC sanctions. In fact, even after OFAC denied their export license requests,  the company still went ahead with the shipments.

Full details of the case and settlement agreement can be found here, but it essentially boils down to a foreign subsidiary simply ignoring sanctions for a profit of $1,796,400. It was not until Eagle came under new management, and conducted a compliance review, that they discovered the infractions and moved to resolve the situation.

What happened in the past can be prevented in the future
While the above Burmese sanctions, and the SDN designation against Myawaddy, were ultimately revoked in 2016, violations are retroactive. As such, organizations should not assume they are in the clear if they have either willfully or inadvertently committed an infringement prior to a sanction being lifted.

This is why the case of Eagle is such an important example of having a top-notch export and sanctions compliance program in place—though to be fair, there appears to have been a deliberate attempt to flout the law in this instance. But to go from a potential penalty of $9M to just over $1M is remarkable. And the following are just some of the reasons Eagle was able to reduce their penalties to such a degree:

  1. They voluntarily self-disclosed.
  2. They appointed a dedicated compliance champion. By having a corporate compliance officer in place, it brings compliance to the forefront of both management and employees—including U.S. and globally-based—to improve and centralize export compliance activities and help prevent violations before they happen.
  3. They implemented a formal sanctions compliance program.
  4. They trained staff on the importance of export compliance.

And those are just a few of the measures Eagle instituted to help prevent an export compliance and license violation in the future.

Some industries are at a higher risk than others
Though every industry has to comply with export compliance in one way or another—whether it’s simply screening for denied or restricted parties, adhering to country-specific sanctions, having the appropriate license approvals, or filling out and filing the necessary export documents—some have the greater task to do all the above.

Shipping, transport, logistics and supply chain companies are perhaps some of the industries most at risk, so having a robust export compliance process and program in place is paramount to help avoid a violation. And, if nothing else, what organization wants to see themselves in the news in a negative light?