IPSA International OFAC Settlement: $259.2K (2017)

IPSA committed 72 apparent violations of the ITSR across two contracts. On 44 separate occasions, IPSA imported Iranian-origin services into the United States in apparent violation of § 560.201 of the ITSR. On 28 separate occasions, IPSA engaged in transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries' payments to providers of Iranian-origin services in apparent violation of §§ 560.206 and 560.208 of the ITSR.

IPSA provides due diligence services for citizenship by investment programs. In March 2012, IPSA entered into an engagement letter and fee agreement with a third country with respect to its citizenship by investment program (Contract No. 1). In October 2012, IPSA's subsidiary in Vancouver, Canada (IPSA Canada) entered into a similar contract with a government-owned financial institution in a separate third country (Contract No. 2). While the majority of applicants to both programs were nationals from countries not subject to OFAC sanctions, some were Iranian nationals. Because most information about Iranian applicants could not be checked or verified by sources outside Iran, IPSA Canada and IPSA's subsidiary in Dubai, United Arab Emirates subsequently hired subcontractors to conduct the necessary due diligence in Iran, and those subcontractors in turn hired third parties to validate information that could only be obtained or verified within Iran.

Although it was IPSA's foreign subsidiaries that managed and performed both contracts, with regard to Contract No. 1, IPSA appears to have imported Iranian-origin services into the United States because the foreign subsidiaries conducted the due diligence in Iran on behalf of and for the benefit of IPSA. With regard to Contract No. 2, IPSA also appears to have engaged in transactions or dealings related to Iranian-origin services and facilitated the foreign subsidiaries' engagement in such transactions or dealings because IPSA reviewed, approved, and initiated the foreign subsidiaries' payments to providers of the Iranian-origin services.

OFAC determined that IPSA did not voluntarily disclose the apparent violations, and that the apparent violations constitute a non-egregious case. The total transaction value of the apparent violations was $290,784. The statutory maximum civil penalty amount was $18,000,000, and the base civil penalty amount was $720,000. The settlement amount of $259,200 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.

The case illustrates that a U.S. parent company can incur OFAC liability for the activities of its foreign subsidiaries when those subsidiaries conduct due diligence on behalf of and for the benefit of the parent, and when the parent reviews, approves, and initiates payments to providers of sanctioned-country services. IPSA's OFAC compliance program was ineffective in that it did not recognize or react to the risks presented by engaging in transactions that involved Iranian-origin background investigation services. OFAC also noted that at least one member of IPSA's senior management knew or had reason to know that the firm was importing and/or engaging in transactions or dealings related to services of Iranian origin.

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