Although the laws governing US sanctions are not legally binding on companies organized under the law of Lithuania or the European Union (EU), companies engaged in trade with international partners may violate US sanctions and face severe repercussions. Drawing conclusions from their hands-on experience as well as the latest Office of Foreign Assets Control (OFAC) enforcement action, ECOVIS ProventusLaw experts highly recommend that trade companies establish a formal written export control and sanctions policy that includes guidance for compliance with U.S. sanctions.
Last week, PT Bukit Muria Jaya (BMJ), a paper products manufacturer located in Indonesia, has agreed to pay $1,016,000 to settle its potential civil liability for 28 apparent violations that arose from its exportation of cigarette paper to the Democratic People’s Republic of Korea (DPRK). BMJ directed payments for these exports to its U.S. dollar bank account at a non-U.S. bank, which caused U.S. banks to clear wire transfers related to these shipments, including shipments made to a blocked North Korean person.
BMJ exported cigarette paper to entities located in or doing business on behalf of the DPRK, including to an intermediary in China that procured cigarette paper from BMJ on behalf of OFAC-designated Korea Daesong General Trading Corporation (“Daesong”), a DPRK entity, was designated by OFAC in 2010 for being owned or controlled by the Korean Workers’ Party. Daesong was operating under an alias. BMJ initially referenced DPRK entities on its transactional documents, but at the request of its customers certain BMJ sales employees later replaced such references with the names of intermediaries located in third countries, including on invoices, packing lists, and bills of lading. The settlement amount reflects OFAC’s consideration of both the aggravating and mitigating factors under its Enforcement Guidelines.
BMJ’s remedial response to the Apparent Violations consisted of representations that it has ceased all dealings with the DPRK and implemented a new sanctions compliance program.
Non-U.S. persons may violate OFAC’s regulations by causing U.S. persons to engage in prohibited transactions. Violation occurs when transactions that pertain to commercial activity with an OFAC-sanctioned country, region, or person are processed through or involve U.S. financial institutions (e.g. through USD clearing).
Therefore, all persons, including non-U.S. persons, engaged in international trade and commerce should be aware of sanctions prohibitions and establish a formal written sanctions policy that includes:
- guidance for compliance with U.S. sanctions;
- training for employees, including sales and customer-facing staff;
- know-your-customer (KYC) process that provides for review and escalation whenever high-risk factors are identified, and
- a requirement that all trading partners or agents who purchase goods on behalf of other end-users sign an anti-diversion agreement that includes OFAC sanctions compliance commitments
Should you require assistance with building your sanctions compliance program, please do not hesitate to contact ECOVIS ProventusLaw sanctions experts for sanctions advisory services in English, Mandarin, Russian and Lithuanian.