U.S. Person-1 OFAC Settlement: $45.2K (2024)

Beginning in 2006, a U.S. company in the equine industry retained U.S. Person-1 to provide professional services, including managing its legal, financial, and administrative affairs. U.S. Person-1 served as the secretary and treasurer of the company and worked closely with its chief executive officer (the "SDN"), who was the only other company employee.

In December 2020, OFAC added the SDN to the SDN List pursuant to Executive Order 13818, "Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption," blocking all of the SDN's property and prohibiting the provision of services to the SDN. U.S. Person-1 and the SDN learned of the designation shortly after it occurred, but U.S. Person-1 did not consider the prohibitions the designation imposed, did not seek information or guidance about its legal implications, and did not seek or obtain authorization from OFAC to continue dealing with the SDN.

As a result, business operations at the company continued without interruption and U.S. Person-1 continued executing payments on behalf of the SDN. Between January 26, 2021, and June 1, 2021, U.S. Person-1 executed, at the SDN's direction, six payments with a total value of $45,179. U.S. Person-1 made most of these payments directly from the company's bank accounts and the remainder through their U.S.-based professional services firm in order to earn credit card points.

The six apparently violative payments fell into two categories: (i) three payments valued at $25,359 designed to serve as indirect compensation to the SDN for the SDN's duties as CEO, by way of payments for certain travel and educational expenses of the SDN's minor child; and (ii) three payments valued at $19,820 that facilitated the operations of an affiliated entity managed by the SDN in the United Arab Emirates (UAE), where the SDN was not subject to sanctions. OFAC considers the apparent violations arising from the compensatory payments to be egregious, in large part because they were intended to confer a benefit to the SDN despite U.S. Person-1's knowledge that the SDN was subject to sanctions.

The statutory maximum civil monetary penalty applicable in this matter is $2,208,816. OFAC determined that U.S. Person-1 did not voluntarily self-disclose the apparent violations and that three of the six apparent violations, the indirect compensation payments, constitute an egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 CFR part 501, app. A, the base civil monetary penalty applicable in this matter equals $1,134,408. The settlement amount of $45,179 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case highlights the risks that arise when gatekeepers like U.S. Person-1, professional service providers such as investment advisors, attorneys, and accountants, fail to exercise reasonable care in complying with OFAC's sanctions. Gatekeepers serve crucial financial and legal functions that place them at heightened risk of knowingly or unwittingly furnishing access by blocked persons or other illicit actors to the licit financial system. Gatekeepers with actual knowledge or reason to know that clients or others with whom they deal have been the subject of an OFAC sanctions designation should rapidly take all necessary steps to understand the implications for their conduct and ensure compliance with applicable prohibitions. This could include, for example, reaching out to OFAC for guidance.

This case also highlights the risks involved in dealing with a blocked person acting through or on behalf of a non-blocked entity. As noted in multiple OFAC Frequently Asked Questions (FAQs), even dealings such as entering into a contract signed by a blocked person, including when the blocked person is acting through or on behalf of a non-blocked entity, can violate OFAC prohibitions.

Finally, this case serves as a reminder that all U.S. persons, including individuals, are required to comply with U.S. sanctions, regardless of their familiarity with sanctions-related issues.

This page summarizes an OFAC enforcement case based on the document archived below. SanctionsLookup assumes no liability for errors, omissions, or inaccuracies in the original documents, this summary, or any changes made to the source documents at any time.

Provided for informational purposes only and does not constitute legal or compliance advice. Always consult the source document directly rather than relying on this summary.