Chisu International Corporation OFAC Settlement: $45.9K

Between June 2016 and November 2017, Chisu and its affiliates in Suriname and Panama on four occasions procured Cuban-origin explosives and related accessories originating from Cuban entity Unión Latinoamericana de Explosivos (ULAEX) on behalf of a U.S. company for the U.S. company's mining project in Suriname. ULAEX is a joint venture of the Government of Cuba with a non-U.S. person third-party manufacturer and distributor of explosives, and is listed by the Department of State as being under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services. Chisu oversaw the processing of purchase orders and invoices for these transactions while its affiliates in Suriname were responsible for importing the goods into Suriname, including customs clearance, storage, and delivery of the commodities to the U.S. company's mining project.

Although Chisu procured these explosives and explosive accessories through a non-U.S. person manufacturer and distributor, the bill of lading associated with the first transaction clearly identified ULAEX as the exporter of the goods and the importation permit indicated the goods originated in Cuba. The address provided for ULAEX on the bill of lading was La Campana Manicaragua, Villa Clara, Cuba; the point of export was Villa Clara; and the port of loading was Cienfuegos, a Cuban port city. Bills of lading for the three additional transactions explicitly identified both ULAEX as the provider of the explosives and associated accessories and Cuba as the country of origin.

Chisu had no compliance program in place at the time the four transactions occurred and was not aware that its indirect dealings in Cuban-origin goods were prohibited until its customer raised the issue in January 2018. These transactions appear to have violated §§ 515.201 and 515.204 of the Cuban Assets Control Regulations, 31 C.F.R. part 515.

The transaction value of these apparent violations is $688,689, and the statutory maximum civil monetary penalty applicable in this matter is $367,264. OFAC determined that Chisu did not voluntarily self-disclose the Apparent Violations, and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC's Enforcement Guidelines, 31 C.F.R. part 501, app. A, the base civil monetary penalty applicable in this matter equals the applicable schedule amount for each apparent violation, capped at $91,816 per transaction. The settlement amount of $45,908 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations. Such risks can arise from a variety of sources, including a firm's supply chain, even where there is no direct dealing with a sanctioned person or jurisdiction. Companies should accordingly conduct an appropriately scoped risk assessment to ascertain where sanctions risks might arise, including from goods, services, intermediaries, counterparties, or jurisdictions dealt with, directly or indirectly. Such assessments are essential to establish controls to prevent engaging in prohibited transactions.

Controls developed in response to identified risks should be incorporated into a company's day-to-day operations and procedures and be designed to capture indicators of sanctions risks, including information from sources reasonably available to the company, particularly those used in routine activities, such as trade and transactional documentation. Clear, written procedures laying out the steps to be taken in response to such indicators is similarly essential, as is communicating these steps to all relevant personnel, including affiliates and related business units.

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