DOJ and OFAC Sanctions Enforcement Actions Highlight New Sanctions Risks for Non-U.S. Companies Based on Use of U.S. Financial System

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Source: Smith Pachter McWhorter

On July 16, 2020, the U.S. government announced criminal and civil enforcement actions against Essentra FZE Co. Ltd. (“Essentra”), a global supplier of cigarette products incorporated in the U.A.E., for North Korea Sanctions violations.  In the criminal enforcement action, Essentra entered into a deferred prosecution agreement (“DPA”) with the U.S. Department of Justice (“DOJ”) for conspiring to violate the International Emergency Economic Powers Act and defrauding the United States in connection with evading sanctions on North Korea. This DPA is noteworthy because it marks the DOJ’s first ever corporate enforcement action for violations of sanctions on North Korea.  In the civil enforcement action, Essentra entered into a settlement agreement with the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”).  Under these agreements, Essentra admitted that it received payments in bank accounts operated by the foreign branch of a U.S. financial institution that were for the sale of cigarette products that Essentra knew were destined for North Korea.  It is notable that Essentra was targeted for criminal enforcement for receiving U.S. dollar or other currency payments into accounts held at a non-U.S. branch of a U.S. bank.  By contrast, OFAC’s 2017 landmark TransTel enforcement action involved a company initiating U.S. dollar payments, thereby causing U.S. intermediary banks to export financial services to a sanctioned country.  Here, DOJ and OFAC make clear that, regardless of which way the money flows, the facts may support liability under U.S. sanctions regimes.  These actions signal that OFAC and the DOJ may be adopting a broader approach to sanctions enforcement.

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