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Cleveland Manufacturer Violated OFAC Sanctions By Allowing Shipments To Iran - Know Your Customer and Know Their Customer

Client Alert

Between 2013 and 2017, UniControl exported 21 shipments of its products to two European customers. These 21 shipments were subsequently reexported to Iran, which violated the Iranian Transactions and Sanctions Regulations (“ITSR”) listed in 31 CFR Part 560.

WARNING SIGNS

UniControl encountered multiple alerts before and during this period and failed to take proper actions. In 2010, several years prior to the first of these shipments, a European trade partner of UniControl inquired whether UniControl could supply a significant market it had identified in Iran. UniControl turned down the opportunity but did not confirm that the sales to this European partner were not then being shipped to the Iranian market.

In 2014, UniControl and a European customer entered a sales agreement that listed Iran as a country to which the partner could re-sell these products. In 2016, UniControl offered to ship products directly to a purported third-party European end user, but the customer refused this offer in an attempt to obfuscate the end user. At European trade conferences, UniControl had direct interactions with Iranian nationals, but did not question their European trade partner on the interest. Finally, UniControl received a request from its European partner to remove the “Made in USA” labels from its products with the explanation that the Iranian end user may have issues with the product origin.

FIXING THE PROBLEM

UniControl consulted with outside counsel and then voluntarily self-disclosed these violations. In total, UniControl engaged in 21 prohibited transactions with a total product value of $687,189. The maximum statutory penalty that UniControl faced was $5,423,766. However, once all mitigating and aggravating factors were weighed, UniControl was able to reach a settlement with OFAC for $216,464.

Parallel to UniControl’s cooperation with OFAC and ceasing all shipments to its European trade partners, the company also righted its own “compliance ship.” This began by retaining outside counsel to strengthen their export control procedures. End-user certificates were created to make sure that buyers are not reselling to prohibited end users. These certificates are also requested from second and third level buyers of reexported products. UniControl added a Destination Control Statement within the footer of many of their trade documents to remind recipients of the restrictions on reselling, transferring, manipulating, or otherwise disposing of their products.

For a review of your export policies and processes, or questions on trade compliance, please contact International Law Attorney Kevin Burwell at kdburwell@bmdllc.com or 330-253-3715. 


Community Banks: Collaboration, not isolation, is the key to protecting/ enhancing the cannabis business you pioneered

As we prepare for the plenary session of the informal institutional cannabis lenders community announced in my previous article, I am pleased to advise that participants now include 5 of the best-known dedicated loan funds; a select group of commercial banks ranging in size from single state community banks to mid-size regionals making cannabis loans into the mid-8 figures; and, a syndicator of credit union cannabis loans.

Inflation Reduction Act: Healthcare Provisions

On August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act (the “Act”), a landmark climate, healthcare, and tax bill. Though the Act’s climate provisions have received most of the media attention, the healthcare aspects of the Act present some of the most significant changes to the American healthcare system since the passage of the Affordable Care Act.

The Current State of Assignment of Benefits Litigation in Florida

On May 25, 2022, Florida lawmakers approved property insurance reforms that remove attorney’s fees, with respect to assignment of benefits (“AOB”) property insurance litigation. One-way attorney’s fees are a longstanding problem in Florida and the reforms come at a time when AOB litigation increasingly affects homeowners in a negative way.

Proposed Community Revitalization Grants for Ohio Projects

Jason A. Butterworth client alert ohio tax credits historic preservation tax credits community revitalization grants

Ohio Senate Bill 225 Paves the Way for Greater Investment in Opportunity Zones and Historic Districts

Ohio Senate Bill 225 is poised to make dramatic enhancements to certain tax credit programs in Ohio, specifically those surrounding investments in “Opportunity Funds” and historic buildings. Signed into law by Governor Mike DeWine in June 2022, the Bill is positive news for real estate developers working to revitalize Ohio communities with investment and rehabilitation projects.