U.S. Treasury Issues Sanctions-Compliance Guidance

The U.S. Treasury Department on Thursday issued guidance that laid out what it described as a framework of compliance commitments and the essential elements of a corporate sanctions-compliance program, as it also resolved another case of apparent violations.

Though each company’s compliance program varies depending on a variety of factors, ranging from a firm’s size and sophistication to its offerings, customers and counterparties, all should incorporate five essential components commitment from management, risk assessments, internal controls, testing and auditing, and training, the Treasury said.

“As the U.S. continues to enhance our sanctions programs, ensuring that the private sector implements strong and effective compliance programs that protect the U.S. financial system from abuse is a key part of our strategy,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker.

The Treasury said it may incorporate the compliance guidance during the course of its investigations into potential violations. It has already begun requiring companies to establish sanctions-compliance programs when settling egregious cases. The Justice Department earlier this week laid out its own guidance on the programs prosecutors expect to see from companies under investigation.

Formal sanctions-compliance programs are not required under Treasury’s regulations, but any organization subject to U.S. regulatory jurisdiction, as well as foreign entities with business in the U.S. or using U.S.-origin goods, is encouraged to develop one, the guidance document stated.

The document also included an appendix that laid out some root causes for compliance breakdowns or deficiencies, based on prior casework. Though not exhaustive, the list included cases of companies lacking a sanctions-compliance program, misinterpreting the sanctions regulations, experiencing failures in sanctions-screening software, conducting improper due diligence on an organization’s customers, supply chain, intermediaries and counter-parties, and facilitating payments involving sanctioned people or countries.

Also Thursday, the Treasury announced a settlement with MID-SHIP Group LLC, a Port Washington, N.Y.-based cargo logistics company that processed five electronics-funds transfers that pertained to payments in 2011 associated with vessels on the U.S. sanctions list.

According to the settlement, MID-SHIP’s subsidiaries in China and Turkey negotiated charter-party agreements in 2010 involving multiple third parties regarding the transport of goods between foreign ports. The parties nominated two vessels  M/V Haadi and M/V Adrian  as the performing vessels for the respective charter party agreements, the Treasury said.

Both vessels were owned or controlled by sanctioned Iranian state-owned shipping company Islamic Republic of Iran Shipping Lines. Although the vessels were not identified on the U.S. sanctions list at the time, MID-SHIP held documents identifying them by their respective International Maritime Organization (IMO) numbers and connecting the vessels to Iran, according to the Treasury. They were also identified by name and IMO number on the U.S. sanctions list by the time MID-SHIP processed the funds transfers, which constituted the violations, the Treasury said.

“MID-SHIP’s culture of compliance appears to have been deficient at the time of the apparent violations,” the Treasury said.

The case, deemed egregious, included a compliance commitment in the settlement document signed by a U.S. official and the company’s chief executive. MID-SHIP, which did not voluntarily self-disclose the violations, agreed to pay $871,837 to resolve the case.


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