The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $9,618,477 settlement with 3M Company (“3M”).
3M has agreed to settle its potential civil liability for 54 apparent violations of OFAC sanctions on Iran that arose from its subsidiary’s sale of reflective license plate sheeting to an Iranian entity controlled by the Iranian Law Enforcement Forces. Between September 2016 and September 2018, 3M East AG sold 43 orders of this product to a reseller with knowledge that it was destined for a customer in Iran.
This case involving 3M Gulf and the subsequent sanctions violations can be summarized as follows:
Background:
- In 2015, 3M Gulf intended to sell Reflective License Plate Sheeting (RLPS) to a German company, believing the sheeting would be used to produce license plates for Iran.
- In January 2016, the JCPOA took effect, along with General License H (GL H). GL H allowed foreign subsidiaries of US companies to engage in certain Iran-related transactions but with notable exclusions, including prohibiting transactions with Iranian military or law enforcement agencies.
The Violations:
- In March 2016, a proposal was submitted indicating that the RLPS would be used by a German company to produce license plates for “transport authorities in Iran.”
- Despite internal guidance and new procedures set by 3M, 3M Gulf’s plan deviated from the original proposal.
- In April 2016, the German reseller informed 3M Gulf that it would sell the RLPS to Bonyad Taavon Naja (BTN) in Iran, an entity connected to Iran's Law Enforcement Forces (LEF). This change was not properly reported.
- Despite concerns and warnings from multiple channels, the sales went through. From September 2016 to September 2018, 43 shipments were made.
Consequences:
- A US employee, against guidelines, had significant involvement in the sales to Iran, further violating sanctions.
- When the sales were discovered, 3M voluntarily disclosed the violations to OFAC, took action against the involved employees, and put new compliance measures in place.
- OFAC determined that 3M Gulf's actions were an "egregious case" of violations.
- The potential maximum penalty was $27,481,363, but given mitigating factors, 3M settled with OFAC for $9,618,477.
Lessons:
- This situation emphasizes the need for companies to have robust, effective, and dynamic sanctions compliance programs. Proper oversight, clear communication, and active monitoring are vital, especially when transacting with high-risk areas.
- Even with a compliance program in place, companies must be vigilant and ensure that employees adhere to established procedures. Changes in the sanctions landscape can introduce nuances that require heightened scrutiny.
- The case also illustrates the importance of clear and effective processes, especially when exploring new business opportunities in high-risk areas.
For more information, please visit the following web notice and settlement agreement.
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