OFAC Fines US Companies for Violating Cuba Sanctions
The Office of Foreign Assets Control last week fined Colorado-based Newmont Corp. and Florida-based Chisu International Corp. after the two mining companies bought Cuban-origin “explosives and explosive accessories” from a third-party vendor. The agency announced a $141,442 settlement with Newmont and a $45,908 settlement with Chisu for violating the Cuban Assets Control Regulations.
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Newmon's violations began after the Suriname government granted it an "exploitation license" to mine gold in the country in 2014, OFAC said. Newmont Suriname, a subsidiary of Newmont, purchased Cuban-origin explosives and explosive accessories for the mining operations from a third-party vendor on at least four occasions, the agency said. In 2016, OFAC said a Newmont Suriname employee exchanged shipping documents with an operations manager for Newmont Suriname’s distributor, which showed the goods were provided by Cuba-based Union Latinoamericana de Explosivos (ULAEX). Newmont Suriname’s distributor fulfilled two more orders from ULAEX "without Newmont’s awareness," OFAC said.
All four bills "clearly identified" ULAEX and its address in Cuba, the agency said, adding that the Newmont Suriname employee "failed to understand the implications of engaging in transactions related to merchandise of Cuban origin." The employee didn't participate in the company's export control and sanctions compliance training and "did not understand the relevant sanctions prohibitions," OFAC said.
OFAC said the maximum civil penalty was $367,264, but the fine was reduced partly because the case was non-egregious and Newmont voluntarily self-disclosed the violations. Other mitigating factors included the fact that Newmont hadn't received a penalty notice in the previous five years, the total amount of payments stemming from the violations "were not significant" and Newmont cooperated with OFAC's investigation. The company also agreed to remedial compliance measures, including " comprehensive" training on export compliance, country-specific embargoes and denied persons screening. Newmont also agreed to create formal written compliance policies and procedures.
OFAC also pointed to several aggravating factors, including the fact that Newmont "failed to exercise a minimal degree of caution or care with respect to U.S. sanctions." It also said the company is a "large and sophisticated business" and a leading gold producer with experience conducting international transactions. A Newmont spokesperson didn't respond to a request for comment.
In the second settlement, OFAC said Chisu and its affiliates in 2016 and 2017 bought Cuba-origin explosives and "related accessories" from ULAEX on behalf of an unnamed U.S. company for that company’s mining project in Suriname. The bill of lading associated with the first transaction "clearly identified" ULAEX as the exporter of the goods, and the import permit indicated the goods originated in Cuba, OFAC said. The address provided for ULAEX was in Cuba and the point of export was a separate Cuban city.
OFAC said the violations "primarily" began because Chisu, a small company operated by one person, "failed to understand U.S. prohibitions on dealings in Cuban property." Chisu had no compliance program in place, OFAC said, and didn't know it couldn't deal indirectly in Cuban goods until a customer brought it to the company's attention. The agency said the "transaction value" stemming from the violations was $688,689.
OFAC said the maximum civil penalty was $367,264, but reduced the fine due to several mitigating factors, including the fact that the case was non-egregious. The agency said Chisu is a small company that had not received a penalty notice within the previous five years and cooperated with OFAC's investigation, including through a tolling agreement.
But OFAC also pointed to several aggravating factors, including Chisu's failure to voluntarily self-disclose the violations. OFAC also said the company "failed to exercise a minimal degree of caution or care" in procuring the goods and had "actual knowledge" that it was "financing the provision of Cuban-origin goods for export to Suriname." OFAC also said the violations "caused harm" to U.S. sanctions programs objectives. Chisu didn't respond to a request for comment.
OFAC said both cases highlight the importance of sanctions compliance for companies of "any size" if they are operating internationally. The agency said sanctions risks may arise "even where there is no direct dealing with a sanctioned person or jurisdiction." Companies should make sure they have strong controls in place to screen suppliers and are "conducting sufficient transactional due diligence to identify and promptly remediate compliance deficiencies."