General Electric OFAC Settlement: $2.7M (2019)

Between December 2010 and February 2014, the GE Companies appear to have violated § 515.201(b) of the CACR on 289 occasions by accepting payment from The Cobalt Refinery Company ("Cobalt") for goods and services provided to a Canadian customer. Since June 1995, Cobalt had been identified as a specially designated national (SDN) of Cuba and appeared on OFAC's SDN List. Cobalt is one of three entities owned by a public joint venture between GE's Canadian customer and the Cuban government. From at least 1996, the GE Companies maintained — and renewed on at least 18 occasions — this customer relationship despite the obvious sanctions risk posed by the relationship.

On February 24, 2014, GE Working Capital Solutions discovered that from at least 2010 to 2014, the GE Companies received numerous payments directly from Cobalt for invoices issued to GE's Canadian customer. While the GE Companies negotiated and entered into contracts with GE's Canadian customer and sent all invoices to that customer, Cobalt paid the GE Companies in more than 65 percent of the total transactions. The GE Companies approved Cobalt as a third-party payer and, over a four-year period, failed to appropriately recognize the significant and widely published relationship between Cobalt and their Canadian customer and did not undertake sufficient diligence into their customer's activities. The GE Companies deposited all checks received from Cobalt into GE's bank account at a Canadian financial institution. The checks contained Cobalt's full legal entity name as it appears on OFAC's SDN List as well as an acronym for Cobalt ("Corefco"), but the GE Companies' sanctions screening software, which screened only the abbreviation of the SDN's name, never alerted on Cobalt's name.

In total, the GE Companies received 289 checks directly from Cobalt from on or about December 9, 2010 to on or about February 28, 2014, totaling approximately $8,018,615. Additionally, goods and services the GE Companies provided to their Canadian customer were, in turn, used to supply utility services and other benefits to Cobalt, which is co-located with GE's Canadian customer.

The statutory maximum civil monetary penalty applicable in this matter is $18,785,000. OFAC determined that GE voluntarily self-disclosed the alleged violations, and that the alleged violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, the base civil monetary penalty amount applicable in this matter is $3,377,119. The settlement amount of $2,718,581 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This enforcement action highlights the sanctions risks to U.S. companies and their foreign subsidiaries associated with (i) accepting payments from third parties and (ii) conducting transactions in foreign currency or at a foreign financial institution. Additionally, this action demonstrates the importance of conducting appropriate due diligence on customers and other counter-parties when initiating and renewing customer relationships. Ongoing compliance measures should be taken throughout the life of commercial relationships.

As noted in OFAC's Framework for Compliance Commitments, U.S. companies can mitigate sanctions risk by conducting risk assessments and exercising caution when doing business with entities that are affiliated with, or known to transact with, OFAC-sanctioned persons or jurisdictions, or that otherwise pose high risks due to their joint ventures, affiliates, subsidiaries, customers, suppliers, geographic location, or the products and services they offer.

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