UniControl, Inc. OFAC Settlement: $216.5K (2021)

UniControl processed the 21 export transactions in its own name and in the names of Hays Cleveland and Cleveland Controls Inc., two divisions of UniControl, between on or about July 16, 2013 and on or about March 25, 2017. These apparent violations occurred in large part because UniControl failed to act on multiple warning signs that its European trade partners were reexporting its goods to Iran.

As early as May 2010, one European trade partner informed UniControl that it had a significant market for UniControl's goods in Iran and inquired whether UniControl could serve as a supplier. Although UniControl initially rebuffed the opportunity, it never took steps in the subsequent years of the business relationship to ensure that sales were not being reexported to Iran. A February 14, 2014 Sales Representative Agreement (SRA) between UniControl and a European trade partner explicitly listed Iran as a country to which the European company could re-sell UniControl goods; UniControl never sought to update or amend the SRA to make clear that reexports to Iran were impermissible.

When UniControl offered on May 31, 2016 to ship goods directly to a purported third-party European end-user to overcome a trade partner's delays, the trade partner rebuffed the offer citing documentation and transportation issues. UniControl did not question or follow up on this obfuscation nor otherwise try to engage directly with the ostensible end-user. UniControl management also attended European trade conferences in 2012, 2013, 2016, and 2017, meeting with Iranian nationals in March 2016 at a European trade partner's booth without questioning the Iranian interest in its products, and meeting one-on-one with an Iranian end-user and a European trade partner at the March 2017 trade conference.

A February 23, 2017 email from a European trade partner requested that UniControl remove its "Made in USA" label from switches slated for export, explaining that the Iranian end-user may have problems with the stated origin. Although this prompted UniControl to seek guidance from outside counsel in March 2017, UniControl nonetheless sent two subsequent shipments to its European trade partner for reexport to Iran. UniControl acknowledged that these final two of the 21 transactions were intended specifically for reexport to Iran by its European trade partners. One European trade partner returned the goods to UniControl, while the other disregarded UniControl's request and reexported the switches to Iran. UniControl appears to have violated § 560.204 of the ITSR in 21 prohibited transactions valued at $687,189.

The statutory maximum civil monetary penalty amount for the apparent violations in this matter is $5,423,766. OFAC determined that UniControl voluntarily self-disclosed the apparent violations and that the apparent violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A., the base civil monetary penalty amount for the apparent violations equals the sum of one-half of the transaction value for each apparent violation, which in this case is $343,595. The settlement amount of $216,464 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This enforcement action highlights the importance of identifying and assessing multiple warning signs that indicate a foreign trade partner may be re-exporting goods to a sanctioned jurisdiction. In this case, the multiple indicia of sanctions risks should have prompted a commensurate compliance response. In particular, U.S. businesses should seek transparency when dealing with foreign trade partners and follow up on activities that raise concerns or suspicion. For example, should a foreign trade partner indicate an interest in reexporting goods to a sanctioned jurisdiction, a U.S. business should actively communicate with the partner about relevant trade restrictions, review relevant trade documents, and conduct other risk-based due diligence to ensure that the trade partner understands the relevant prohibitions and does not engage in violative activity.

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