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Latest OFAC Settlement Shows Need for Integrated Compliance Program

On April 25, 2022 the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement with Toll Holdings Ltd. (“Toll”), an Australian logistics company, related to apparent violations of multiple U.S. sanctions programs. As part of the settlement, Toll agreed to pay a $6 Million+ fine to settle a liability for approximately 3,000 apparent violations related to payments it made to sanctioned jurisdictions and entities using the U.S. financial system. The settlement is of special note for a few reasons:

  • Action Against Non-U.S. Entity – As described in the settlement announcement, the hook for U.S. jurisdiction, in this case, was Toll’s use of financial institutions in the U.S. as well as foreign branches of financial institutions incorporated in the U.S. to process payments to sanctioned entities and jurisdictions. This jurisdictional hook highlights OFAC’s continuing appetite to apply U.S. sanctions extraterritorially. This is particularly relevant in the current geopolitical climate as non-U.S. companies weigh business dealings with Russia and Ukraine in light of extensive U.S. sanctions against both countries, and the U.S. Government’s public commitment to aggressively enforcing sanctions against Russia.
  • Importance of Integrated Compliance Controls and Screening – As described in the settlement notice, although Toll executives emphasized to personnel Toll’s commitment to abide by international sanctions compliance obligations, Toll failed to reflect this commitment through implementation of policies, procedures, and “hard controls”. OFAC notes that this “enforcement action highlights the importance of instituting strong internal controls and procedures” and that companies should “respond promptly and fully to address compliance weaknesses when issues first arise, identify their full extent and causes, and implement necessary changes to their compliance programs, practices, and procedures.”
  • Scaling of Compliance Resources and Integration of Acquired Businesses – OFAC also notes that the failures at Toll occurred partly due to Toll’s rapid international growth, resulting in Toll having over 600 invoicing, data, payment, and other applications spread over its acquired entities and business units. Toll’s original compliance policy failed to keep pace with this acquisition activity and growing business complexity. OFAC specifically notes that this action “further emphasizes the need for entities to identify and implement measures to mitigate sanctions risks when merging with or acquiring other enterprises. The need for such efforts can be particularly acute when expanding rapidly, including when disparate information technology systems and databases are being integrated across multiple entities. In such cases, the need to adequately resource compliance functions, including compliance personnel and sanctions-related technology and systems, is especially important.”

Although this action does not involve the recent, extensive sanctions on Russian and Belarusian individuals and entities, companies should review this OFAC action in light of the U.S. Government’s increased emphasis on enforcing economic sanctions and trade control restrictions, particularly against Russian targets.

Ankura helps clients design and deploy effective, integrated economic sanctions and export control compliance programs.  Our seasoned professionals have served as U.S. federal prosecutors, within OFAC, and as compliance executives and leaders within global enterprises.  We understand how to design and, more importantly, embed risk-appropriate and effective compliance programs and controls for entities of all sizes.

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

Tags

risk & compliance, f-risk, economic sanctions, anti-money laundering, c-russia, memo

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