Cobham Holdings OFAC Settlement: $87.5K (2018)

The three apparent violations arose from two separate transactions involving sales through intermediaries to Almaz Antey Telecommunications LLC ("AAT") in Russia. Although AAT did not appear on the SDN List, it was 51 percent owned by Joint-Stock Company Concern Almaz-Antey ("JSC Almaz-Antey"), which OFAC designated and added to the SDN List on July 16, 2014. As a result, AAT was blocked pursuant to §§ 589.201 and 589.406 of the URSR at the time of each shipment.

The first transaction was a June 18, 2014 order (total value $1,123,182) routed through a Canadian distributor. Because Metelics lacked sufficient stock, it split the order into two shipments. The first shipped on June 27, 2014, before JSC Almaz-Antey's SDN designation. The second shipped on July 31, 2014, approximately two weeks after OFAC's designation. Despite the timing and the near-identical names of the SDN entry and the end-user (both containing the uncommon terms "Almaz" and "Antey"), Metelics' denied party screening returned no warnings for AAT. The Director of Global Trade Compliance approved the shipment in reliance on those screening results. The value of the July 31, 2014 shipment was $745,322.

The second transaction began in October 2014, when Metelics received an order for silicon diode switch limiter samples from a Russian distributor for end-use by AAT. Screenings again returned no matches. Metelics made two shipments (the first on December 19, 2014 and the second on January 15, 2015), each valued at $10 on commercial invoices, following the same procedure of screening just prior to shipment and obtaining Director of Global Trade Compliance approval.

The screening failure arose because Cobham's software applied an all-word match criteria: a search for "Almaz Antey Telecom" would not return a result unless all three words appeared in the SDN entry, even with "fuzzy" matching configured. Because JSC Almaz-Antey's SDN listing did not include the word "telecom," no alert was generated.

OFAC determined that Cobham voluntarily self-disclosed the Apparent Violations on behalf of Metelics, and that the Apparent Violations constituted a non-egregious case. The statutory maximum civil monetary penalty applicable in this matter is $1,990,644. The base civil monetary penalty amount for the Apparent Violations is $125,010. The settlement amount of $87,507 reflects OFAC's consideration of the facts and circumstances pursuant to the General Factors under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.

Companies operating in high-risk industries must implement effective, risk-based compliance measures, especially when engaging in transactions involving high-risk jurisdictions. Persons employing sanctions screening software should take steps to ensure it is sufficiently robust and that appropriate personnel are trained on its functionality. It is essential that companies engaging in international transactions maintain a culture of compliance where front-line staff are encouraged to follow up on sanctions issues, including by promptly reporting to compliance personnel transactions suspected to involve sanctioned parties. OFAC expects companies settling apparent violations to ensure their compliance units receive adequate resources, including human capital, information technology, and other resources.

In response to the Apparent Violations, Cobham acquired and implemented new screening software capable of identifying and flagging potential matches to persons with close name variations to SDN-listed parties; acquired a business intelligence tool capable of identifying persons owned by SDN-listed parties and developed a process for enhanced due diligence on high-risk transactions involving parties in Russia or Ukraine; and circulated a lessons learned bulletin to all U.S.-based international trade compliance personnel reiterating that U.S. law may prohibit transactions with unlisted entities owned or controlled by listed parties and urging personnel to alert the compliance team whenever a proposed transaction involves an entity suspected of being owned or controlled by a prohibited party.

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