Latest OFAC Regulations Show the Need for an Integrated Compliance Program – Export Controls and Trade and Investment Sanctions

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On April 25, 2022, the United States Department of Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement with Toll Holdings Ltd. (“Toll”), an Australian logistics company, regarding apparent violations of several US sanctions programs. As part of the settlement, Toll agreed to pay a fine of more than $6 million to settle liability for approximately 3,000 apparent violations related to payments it made to sanctioned jurisdictions and entities using the US financial system. The settlement is particularly noteworthy for several reasons:

  • Action against a non-U.S. entity – As described in the settlement announcement, the hook for US jurisdiction, in this case, was Toll’s use of financial institutions in the United States as well as foreign branches of financial institutions incorporated in the United States to process payments to sanctioned entities and jurisdictions. This jurisdictional hook highlights OFAC’s continued appetite to apply US sanctions extraterritorially. This is particularly relevant in the current geopolitical climate, as non-U.S. businesses assess trade relations with Russia and Ukraine in light of extensive U.S. sanctions against both countries and the U.S. government’s public commitment to enforce aggressive sanctions against Russia.

  • Importance of built-in compliance checks and filtering – As described in the Notice of Settlement, although Toll’s leadership has emphasized to staff Toll’s commitment to meeting international sanctions compliance obligations, Toll has not reflected this commitment through the implementation of policies , procedures and “strict controls“. OFAC notes that this “enforcement action underscores the importance of instituting strong internal controls and procedures” and that companies should “respond quickly and fully to address compliance weaknesses when issues arise, identify their magnitude and their causes, and implement changes necessary to bring them into compliance”. programs, practices and procedures.

  • Scaling compliance resources and onboarding acquired businesses – OFAC also notes that Toll’s outages are due in part to Toll’s rapid international growth, resulting in Toll having more than 600 billing, data, payment and other applications spread across its entities and units businesses acquired. Toll’s initial compliance policy failed to keep pace with this acquisition activity and the growing complexity of the business. OFAC specifically notes that this action “further underscores the need for entities to identify and implement measures to mitigate the risk of sanctions when merging or acquiring other businesses. The need for such efforts can be particularly acute during rapid expansion, including when disparate IT systems and databases are integrated across multiple entities. In such cases, the need to have adequate resources for compliance functions, including compliance personnel and sanctions-related technologies and systems, is particularly important.

While this action does not involve the recent and extensive sanctions imposed on Russian and Belarusian individuals and entities, companies should review this OFAC action in light of the US government’s increased emphasis on enforcement. economic sanctions and trade control restrictions, especially against Russian targets.

Ankura helps clients design and deploy effective and integrated economic sanctions and export control programs. Our seasoned professionals have served as U.S. federal prosecutors, OFAC, and as compliance officers and leaders at global corporations. We understand how to design and, more importantly, integrate effective, risk-appropriate compliance programs and controls for entities of all sizes.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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