Rearranging the deck chairs… OFAC Enforcement Action?

On Thursday, OFAC announced a settlement with Tofasco of America for violations of the WMD non-proliferation regulations. This is a weird one, but actually quite reasonable once you consider the details.

Tofasco had a blocked letter of credit that they got a bank to pay out on by providing a bill of lading that omitted the reference to Iran. The goods? Recreational chairs.

Now, why does this fall under the WMD regs? Because the client removed from the bill of lading was IRISL, the Iranian shipping lines.

The violation was non-egregious, but also not voluntarily self-disclosed. The maximum fine for this one violation was $250,000 (had it been egregious), but the base penalty was $25,000.

Here’s the calculus from the horse’s mouth:

Tofasco demonstrated reckless disregard for U.S. sanctions
requirements in its presentation of trade documents to a second bank and by making payment for
ocean freight for an underlying shipment of recreational chairs after the trade documents were
rejected by a prior bank;

Tofasco undertook deliberate steps to evade or avoid U.S. sanctions
requirements by obtaining and submitting altered bill of lading documents that concealed
IRISL’s involvement;

Tofasco knew of IRISL’s involvement in the transactions;

Sanctions
program objectives were harmed because the transactions provided a direct economic benefit to a
designated entity and because payments were successfully effectuated without OFAC
authorization;

Tofasco did not appear to have had an OFAC compliance program in place at the
time of the apparent violation;

Tofasco has no prior sanctions history with OFAC; and

Tofasco
appears to be a small company lacking the sophistication of a larger company conducting
international trade.