12 May 2020
The U.S. division of a global maker of animal feed additives reached a settlement with the Treasury Department over possible sanctions violations—a case that underscores the importance of maintaining a compliance program and seeking guidance from regulators.
Biomin America, which agreed to pay about $258,000 in the settlement, and its foreign affiliates allegedly coordinated 30 sales of agricultural products to a Cuban company, Alfarma SA, between 2012 and 2017, according to the Treasury’s Office of Foreign Assets Control.
Biomin America, a division of Getzersdorf, Austria-based Erber Group, set up a transaction structure to process orders worth about $17.4 million from Alfarma, according to the agreement released Wednesday. Through the structure, Biomin America would coordinate and receive commission on the sales and its foreign affiliates would fulfill the orders, according to the agreement.
The U.S. has a broad trade embargo on Cuba, and Biomin America completed the transactions without authorization from OFAC, according to the agreement. Overland Park, Kan.-based Biomin America didn’t have an OFAC compliance program in place at the time and incorrectly deemed the structure would be compliant with U.S. sanctions laws, OFAC said.
The structure was set up by former managers who didn’t seek proper advice regarding the export at the time, according to Simon Walley, president of Biomin’s North American region. The transactions were discovered in October 2017 during the training of new logistics managers, said Mr. Walley, who joined the company in April 2016.
“This was very much a technical violation from the perspective on how we set up the transactions and it came from a place of ignorance,” Mr. Walley said.
Under the arrangement, sales initially were processed through Biomin America and later transacted through its Canadian subsidiary and European affiliates, Mr. Walley said. The process made it difficult to spot possible U.S. sanctions violations, he said.
After discovering possible breaches, the company conducted an internal investigation and reported the potential lapses to OFAC, according to Mr. Walley.
The company might have avoided the situation had the former managers sought guidance from OFAC and specialized compliance experts, Mr. Walley said. The company could have applied for a license to export its agricultural products to Cuba. The lesson: “Get proper advice and follow the rules,” he said.
OFAC gave the company credit for disclosing the alleged violations and for taking actions to prevent future unauthorized sales by issuing a penalty lower than the maximum $2.1 million.
By Mengqi Sun, The Wall Street Journal, 11 May 2020
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