The United States has a long arm in imposing financial restrictions. U.S. companies cannot assist their foreign subsidiaries or affiliates with sales to sanctioned countries or persons on the blocked persons list. A US company got caught doing this.
White Birch was accused of facilitating the sale and shipment of Canadian paper from White Birch’s Canadian subsidiary to Sudan. Sudan was subject to a U.S. embargo under the Sudanese Sanctions Regulations, 31 C.F.R. part 538. The Office of Foreign Asset Control determined that White Birch personnel from both its U.S. headquarters and Canadian subsidiary “were actively involved in discussing, arranging, and executing the export transactions to Sudan.” Assistance is prohibited under OFAC’s regulations that bar U.S. persons from “facilitating” transactions between non-U.S. companies (such as foreign subsidiaries) and sanctioned countries.
I’m not sure “discussing” by itself is enough to trigger a sanctions violation. Many companies discuss how to deal with potential transactions that implicate sanctions. The discussion will generally end in “no.” It was taking the steps to help with arranging and executing that are the problem.
This was not a little paper. It was over 500 metric tons of paper worth over $300,000 when the sale and shipment happened in 2013.
As with the recent diamond case, FinCEN was short on details. The enforcement information did note that White Birch tried to conceal the ultimate destination of the paper shipment from its bank. The bank was involved as the confirming bank on the letter of credit for the export. I would assume that the bank would have filed a suspicious activity report that caught FinCEN’s attention.
FinCEN brought the charges even though the Sudan ban has now been lifted. Effective January 17, 2017, all transactions prohibited under the Sudanese Sanctions Regulations are authorized pursuant to the general license (31 C.F.R. § 538.540). In the enforcement action, FinCEN made it clear that this general license does not affect past, present, or future OFAC enforcement investigations or actions related to any apparent violations of the Sudanese Sanctions Regulations relating to activities that occurred prior to the effective date of the general license.
Sources:
- U.S. Paper Company Penalized for Breaching Sudan Sanctions by Samuel Rubenfeld in the WSJ’s Risk & Compliance Journal
- BD White Birch Investment LLC (“White Birch USA”) Settles Potential Civil Liability for Apparent Violations of the Sudanese Sanctions Regulations
- U.S. Announces Revocation of Sudanese Sanctions Regulations: New Opportunities and Familiar Risks
- Diamonds Are A Sanctions Violation