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

Client Alert
March 30, 2021

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. 

International LawKevin Burwell
Client Alert, Multimedia

WEBINAR SERIES RECAP | Ending the Public Health Emergency + Post-Pandemic Check-Up

May 10, 2023Some may take the position that the rest of the country already returned to a new “normal” following the COVID-19 pandemic.  But healthcare providers continue to implement COVID protocols and navigate the ever-changing healthcare regulations at both the federal and state levels.  It is important for healthcare providers to take time for a “Healthcare Check-Up” with the start of 2023 and the ending of the Public Health Emergency (“PHE”).Client Alert

Sharp Rise in False Claims Act Cases - Navigating the FCA Waters

May 5, 2023Recently, on April 18, 2023, the United States Supreme Court heard arguments regarding the FCA’s scienter, or mental state, requirement. To prove violation of the FCA, the statute requires that a defendant “knowingly” file false claims for payment. The term “knowingly” is defined within the statute to mean a person that acts with actual knowledge, deliberate ignorance, or reckless disregard. Circuit courts are split on how to interpret and apply the knowledge element of the FCA, and based on the Supreme Court’s decision, there will be a large impact on healthcare defendants and their businesses as well as anyone who contracts with, or receives money from, a federal program. A broader interpretation of the FCA would unnecessarily target and stifle healthcare, and other businesses, for simple errors in daily operations. This goes against the intended application of the FCA, which was to prevent fraudulent activity.Client Alert

Areas of Opportunity in Columbus: Highlights from the Columbus Opportunity Summit

May 5, 2023On April 27, 2023 Columbus Business First held its annual Columbus Opportunity Summit, bringing together business and economic development leaders to provide an update on how Central Ohio is preparing for expected growth in the coming years, an issue heightened by the arrival of Intel at its 1,000 acre site in Licking County, just outside of Columbus. The site will be home to two new chip factories with room to grow to a total of eight factories and is a $20 Billion investment.Client Alert

BREAKING: Biden Administration Has Officially Ended the Two Remaining COVID Vaccine Mandates

May 2, 2023As of May 1, 2023, the Biden Administration has officially ended the two remaining COVID vaccine mandates: (1) the Federal Contractor Mandate, and (2) the CMS Healthcare Provider Vaccine Mandate.Client Alert

Important Update: New Advanced Beneficiary Notice in Effect for Medicare on June 30, 2023

April 19, 2023On April 4, 2023, the Office of Management and Budget (OBM) approved an updated Advance Beneficiary Notice of Non-coverage (ABN) form CMS-R-131.[1] Providers can continue using the current ABN form with an expiration date of June 30, 2023.[2] However, all providers are mandated to use the new ABN starting on June 30, 2023, which has an expiration date of January 31, 2026.
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