So far in 2023, the Office of Foreign Assets Control (OFAC) has closed eight enforcement actions. This is consistent with its volume of enforcement actions in recent years. These enforcement actions have resulted in civil penalties of a total of more than $556 million in settlements (all eight enforcement actions so far in 2023 were resolved via settlement), although $508 million of this came from a single settlement with British American Tobacco P.L.C.
An Overview of OFAC’s Enforcement Actions So Far in 2023
As we are now more than half way through the year, here is a mid-year review of the enforcement actions of Office of Foreign Assets Control so far in 2023:
1. Godfrey Phillips India Limited ($332,500 Settlement Reached on March 1, 2023)
Godfrey Phillips India Limited (GPI) agreed to a settlement involving apparent violations of OFAC’s North Korea Sanctions Regulations. According to OFAC, GPI used the U.S. financial system to receive payments for tobacco exported to North Korea—which, despite “harm[ing] U.S. foreign policy objectives by . . . providing a sought-after, revenue-generating good to the North Korean regime,” was classified as non-egregious conduct under OFAC’s Economic Sanctions Enforcement Guidelines (the “Guidelines”). Facing a base penalty amount of $475,000, GPI agreed to settle for $332,500.
2. Wells Fargo Bank, N.A. ($30 Million Settlement Reached on March 30, 2023)
Wells Fargo Bank, N.A. agreed to a settlement involving its predecessor’s provision of software to foreign banks that used the software to process trade-finance transactions with sanctioned jurisdictions and persons. While OFAC classified the 124 apparent violations at issue as “egregious” under the Guidelines, it nonetheless agreed to settle for a small fraction of the $533 million base penalty amount based on Wells Fargo’s history of compliance, voluntary self-disclosure, and prompt remedial measures—among other factors.
3. Uphold HQ Inc. ($72,230 Settlement Reached on March 31, 2023)
Uphold HQ Inc., a money services business based in California, agreed to a settlement involving apparent violations of OFAC’s sanctions against Cuba, Iran, and Venezuela. According to OFAC, Uphold processed 152 transactions totaling $180,575 for customers who self-identified as being located in targeted foreign countries Cuba or Iran or as employees of the Venezuelan government. Classifying the apparent violations as non-egregious and acknowledging Uphold’s voluntary self-disclosure, OFAC agreed to a settlement of $72,230—slightly below the base penalty amount of $90,289.
4. Microsoft Corporation ($2.9 Million Settlement Reached on April 6, 2023)
Microsoft Corporation agreed to a settlement involving “the exportation of services or software from the United States to comprehensively sanctions lists such as sanctioned jurisdictions and to Specially Designated Nationals (SDNs) or blocked persons” in Cuba, Iran, Syria, Russia, and Crimea. While acknowledging that there was no evidence that Microsoft’s U.S. management team was aware of the apparent violations, OFAC also noted that Microsoft and its foreign affiliates “demonstrated a reckless disregard for U.S. sanctions” by failing to identify more than $12 million worth of violative transactions over a seven-year period. Microsoft settled for half of the base penalty amount of just under $6 million.
5. British American Tobacco P.L.C ($508.6 Million Settlement Reached on April 25, 2023)
British American Tobacco P.L.C. agreed to a $508.6 million settlement—the full base penalty amount—following an investigation into its efforts to export tobacco to North Korea while using the U.S. financial system for payment processing. OFAC found that British American Tobacco “willfully conspired to transfer hundreds of millions of dollars through U.S. banks” and that the company’s efforts allowed North Korea to establish a cigarette manufacturing business that has “reportedly netted over $1 billion per year” for the North Korean government.
6. Poloniex, LLC ($7.6 Settlement Reached on May 1, 2023)
Poloniex, LLC, which operates an online trading platform from its headquarters in Boston, agreed to a settlement involving 65,942 apparent violations of “multiple sanctions programs.” According to OFAC, Poloniex failed to prevent the processing of online transactions executed by customers in sanctioned jurisdictions “despite having reason to know their location based on both Know Your Customer information and internet protocol address data.” Due to the volume of violations, Poloniex faced a base penalty amount of more than $99 million; and, after voluntarily self-disclosing the non-egregious violations, agreed to a settlement of just under $7.6 million.
7. Murad, LLC ($3.3 Million Settlement Reached on May 17, 2023)
Murad, LLC, a cosmetics company based in California, agreed to a settlement after exporting $11 million worth of products to Iran in apparent violation of OFAC sanctions. While OFAC classified the violation as egregious, it also noted the “benign consumer nature” of the company’s products as a mitigating factor, along with its lack of enforcement history and thorough remedial response.
8. Swedbank Latvia AS ($3.4 Settlement Reached on June 20, 2023)
Swedbank Latvia AS agreed to settle apparent violations of OFAC’s sanctions on Crimea. According to OFAC’s Enforcement Release, Swedbank Latvia processed 386 transactions for a customer with an IP address in Crimea who sent payments to recipients who were also located in Crimea through U.S. correspondent banks. The non-egregious violations carried a base civil monetary penalty amount of $6.2 million, and Swedbank Latvia and OFAC agreed to settle for just over half of this amount.
As you can see, all of OFAC’s enforcement actions so far in 2023 share some notable similarities. Along with the fact that all eight enforcement actions resulted in settlements, remedial measures and self-disclosure were common factors in OFAC’s settlement negotiations. OFAC agreed to substantially reduced penalties in most cases; and, while it noted multiple aggravating factors in each case, it appears that the mitigating factors in each case carried greater weight.
At the same time, these enforcement actions also show that OFAC casts a wide net. Violators face monetary fines and possible prison time, depending on the crime. For example, violating the International Emergency Economic Powers Act can carry fines over $300,000, which is more than violating the Effective Death Penalty Act, pursuant to the Economic Sanctions Enforcement Guidelines. While OFAC relies heavily on voluntary self-disclosure, it pursues enforcement actions against companies and financial institutions of all sizes and in all jurisdictions worldwide. As a result, all entities that are subject to OFAC’s enforcement jurisdiction need to prioritize sanctions compliance policies, and they should engage defense counsel promptly if they have concerns about possible or apparent economic and trade sanctions violations.