On May 6, 2020, the Office of Foreign Assets Control (OFAC) announced a civil financial penalty against BIOMIN America, Inc. (BIOMIN), for facilitating the export of agricultural products to Cuba without going through the appropriate channels.
BIOMIN agreed to pay $257,862 USD—a huge reduction given the base penalty of $2,149,230 USD.
Between July 2012 and September 2017, BIOMIN used its foreign subsidiaries to facilitate sales to Cuba via Alfarma S.A. (Alfarma) 44 times—an apparent violation of the Cuba Assets Control Regulations (CACR). The case is interesting in that BIOMIN understood there were Cuban sanctions in place but believed they had taken measures to circumvent said sanctions. BIOMIN used their foreign subsidiaries to process exports to Cuba to the tune of more than $17M USD.
What happened
The situation is somewhat ironic give that, at the time, BIOMIN could have availed themselves of the various export licenses that might have rendered these exports legal under U.S. law, provided the exports were “consistent with the Export Administration Regulations (EAR).” Unfortunately, BIOMIN chose to not take the appropriate steps that would have made potential illegal transactions land on the right side of export compliance regulations, and instead prioritized revenue generated from the sales.
During the time of the violations, BIOMIN did not have an OFAC compliance program in place. But the point is moot given that BIOMIN management and its foreign subsidiaries/entities were fully aware of their sanction-breaking conduct. Had BIOMIN simply done their due diligence in gaining an understanding of export license requirements, even in an age of sanctions and embargoes—and then applying for the appropriate licenses—they might very well have avoided the civil monetary penalty altogether.
Remedial efforts can go a long way to lessening export compliance penalties
Despite these violations being willful, the measures undertaken since the enforcement actions played an important role in lessening the monetary penalties. These include:
- The transactions may have been eligible for authorization by applying for an existing general or specific license had they been obtained,
- Implementing measures and processes to reduce the risk of an export violation in the future, including engaging “export control consultants to conduct comprehensive training sessions for logistics, compliance, and senior management on country-specific embargoes, denied persons screening, and export license requirements, among others,”
- Developing formal written policies and procedures to prevent sales to unauthorized destinations, parties, or activities, and
- Eventually disclosing to OFAC its apparent export compliance violations.
That BIOMIN had not received a Penalty Notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions was also considered a mitigating factor.
Additional resources
For organizations wishing to learn more about license and other export compliance requirements—which in turn should help lessen the risk of an OFAC violations—there is valuable guidance in their 2019 publication, “A Framework for OFAC Compliance Commitments.”