Recent Raid on U.S. Company Underscores Need to Be Wary When Dealing with Syria, Sudan, and Iran

You may not have heard of the Office of Export Enforcement (OEE), but if you or your subsidiary are doing business abroad, you should take note. Last month, the OEE, which is part of the Department of Commerce’s Bureau for Industry and Security (BIS), raided the U.S. headquarters of a company whose European subsidiary is suspected of violating U.S. export control and sanctions laws.

The company had historically done business with Syria, Sudan, and Iran, all of which are subject to comprehensive economic and trade sanctions and to which exports are severely restricted by U.S. export controls. While foreign subsidiaries of U.S. companies are allowed some leeway to operate in these countries, doing so bears significant risk. As I have written here before, the jurisdictional reach of both BIS and the Treasury Department’s Office of Foreign Assets Control is considerable. Foreign subsidiaries of U.S. companies are not necessarily out of reach.

As OFAC’s recent nearly $1.2 billion settlement with Zhongxing Telecommunications Equipment Corporation (ZTE), it is absolutely critical that companies operating abroad implement rigorous compliance programs that include numerous accounting controls and extensive training not only of senior management but also sales representatives. Although violations may unintentionally happen, a rigorous compliance program mitigates the risk. Further, under OFAC and BIS penalty guidelines, such a program is a mitigating factor when assessing penalties.

According to Commerce Secretary Wilbur Ross, speaking after the ZTE settlements were announced, “We are putting the world on notice: the games are over. Those who flout economic sanctions and export control laws will not go unpunished–they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

If you have any concerns about your compliance program, now is the time to put those concerns front and center.