Under the sea… Acteon settles for multiple sets of violations

OFAC Notice:

Settlement Agreements between the U.S. Department of the Treasury’s Office of Foreign Assets Control and Acteon Group, Ltd., 2H Offshore Engineering Ltd., KKR & Co. Inc., and Seatronics Ltd.

This gets pretty dense but, ultimately, jurisdiction hinges in the 2H-related violations because a US investment firm held a majority stake, and in the Seatronics case by KKR (another investment firm). In the latter case, the Seatronics firm was also Texas-based, so there would have been jurisdiction there as well.

Mr. Watchlist notes that the jurisdictional nexus is not clear in the Enforcement Information until you get we’ll into the document – it’s much clearer in OFAC”s Notice on its Recent Actions page.

The 2H violations were egregious, but self-disclosed – the base penalty of $227,500 was also what was meted out. In the Seatronics case, the settlement amount of $213,866 for self-reported, non-egregious violations was a small reduction from the base of $237,629.

Regarding the 2H violations:

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A. OFAC determined the following to be aggravating factors: (1) 2H Offshore’s Global Director and 2H KL’s Technical Director willfully violated U.S. sanctions laws and regulations when they knowingly dealt with Cuban interests despite prior notification of their unlawfulness, and did so in at least one case with the knowledge and approval of Acteon; (2) 2H Offshore demonstrated reckless disregard for U.S. sanctions laws and regulations by failing to exercise a minimal degree of caution or care when it knowingly provided services or personnel for projects in Cuba; (3) senior 2H Offshore and 2H KL managers deliberately concealed their dealings with Cuba on multiple occasions; (4) 2H Offshore engaged in a pattern or practice of conduct that led to the Apparent Violations and spanned several years; (5) 2H Offshore and 2H KL’s senior managers had actual knowledge of the business activity involving Cuba, in addition to Acteon’s Finance Director in one instance; (6) 2H Offshore’s compliance program, established by Acteon, was ineffective, and 2H Offshore failed to adhere to the sanctions compliance guidance Acteon issued in 2007 to all of its businesses that specifically prohibited dealings with Cuba even through third countries; (7) 2H Offshore’s conduct harmed U.S. foreign policy objectives by providing economic benefit to the Government of Cuba, and supported its efforts to extract or exploit valuable natural resources; and (8) 2H Offshore and Acteon are sophisticated international businesses that were aware of the applicable U.S. sanctions laws and regulations.

OFAC determined the following to be mitigating factors: (1) 2H Offshore and Acteon voluntarily submitted information to OFAC, were responsive to follow-up questions, and agreed to toll the statute of limitations on three occasions; and (2) 2H Offshore and Acteon took remedial steps including undertaking appropriate disciplinary actions with respect to the 2H Offshore personnel involved with the Apparent Violations, providing compliance training, and implementing a new sanctions compliance program that includes procedures for elevating issues for review.

Additionally, Acteon and 2H Offshore have confirmed to OFAC that they have terminated the conduct that led to the Apparent Violations, and have taken the following steps to minimize the risk of recurrence of similar conduct in the future:

 Acteon has taken appropriate disciplinary actions with respect to the 2H Offshore personnel who were involved with the Apparent Violations and has provided new sanctions compliance training.

 Acteon’s Head of Trade Compliance and outside counsel have conducted sanctions and export compliance training for each 2H Offshore office. 2H Offshore will continue to conduct export compliance training tailored to its business model. Additionally, written guidelines on U.S. sanctions and export restrictions have been distributed to Acteon’s operating companies.

 2H Offshore has implemented new procedures and processes, including an automated project proposal management process that includes customer screening (including customer billing location), location screening (including field development locations), and screening of new service projects before a new project can be actioned.

 2H Offshore is developing a compliance audit process, including appropriate mechanisms for reporting audit findings and implementing corrective actions. Acteon is assigning appropriate personnel with responsibility for monitoring and periodically assessing 2H Offshore’s compliance with applicable export control and sanctions laws and reporting the results of such assessment. Acteon has appointed a Head of Trade Compliance with responsibility for monitoring and ensuring 2H Offshore’s ongoing compliance, and a Group General Counsel who will provide ultimate oversight of the compliance monitoring function.

And the Seatronics violations:

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A. OFAC determined the following to be aggravating factors:

(1) Seatronics demonstrated reckless disregard for U.S. sanctions laws and regulations by failing to exercise a minimal degree of caution or care when it provided goods and services to vessels or persons that ultimately operated in Cuban and Iranian territorial waters; (2) Seatronics engaged in a pattern or practice of conduct that led to Apparent Violations of the CACR and the ITSR over the course of several years; (3) Seatronics’ senior management had actual knowledge of the business activity involving Cuba and should have known about the Iran-related risks associated with business activity involving the two UAE companies; (4) Acteon’s compliance program with respect to the apparent Cuba and Iran violations was, at a working-level, ineffective and Seatronics failed to adhere to the internally distributed sanctions compliance guidance issued in 2007 and 2013 to all of Acteon’s affiliates that specifically prohibited dealings with Cuba or Iran, respectively, including explicitly prohibiting such dealings through third countries or third persons; (5) Seatronics’ conduct harmed U.S. foreign policy objectives by supporting the efforts of the Government of Cuba and the Government of Iran to extract and exploit highly valuable natural resources, namely oil and gas; and (6) Acteon is a sophisticated international business operating in a high-risk industry that was aware of the applicable U.S. sanctions laws and regulations; likewise KKR is a sophisticated and internationally active company.

OFAC determined the following to be mitigating factors: (1) Acteon voluntarily submitted information to OFAC, was responsive to follow-up questions, and provided substantial cooperation, including by agreeing to toll the statute of limitations on three occasions; (2) Acteon stated it took remedial steps, including undertaking appropriate disciplinary actions with respect to the Seatronics managers who were involved in the exportation of goods or services to vessels operating in Cuban and Iranian territorial waters and providing compliance training; and (3) Acteon, Seatronics, and KKR have not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations.

Additionally, Seatronics has confirmed to OFAC that they have terminated the conduct that led to the Apparent Violations, Acteon has agreed to exercise oversight of Seatronics, and both Acteon and Seatronics have taken the following steps to minimize the risk of recurrence of similar conduct in the future:

 Acteon has taken appropriate disciplinary actions with respect to the Seatronics personnel who were involved with the Apparent Violations.

 Acteon’s Head of Trade Compliance and outside counsel have conducted sanctions and export compliance training for each Seatronics office. Seatronics will continue to conduct export compliance training tailored to its business model. Additionally, written guidelines on U.S. sanctions and export restrictions have been distributed to Acteon’s operating companies.

 Seatronics has implemented new procedures and processes, including customer screening and Ultimate Destination/End-User/End-Use Forms.

 Seatronics is developing a compliance audit process, including appropriate mechanisms for reporting audit findings and implementing corrective actions. Acteon is assigning appropriate personnel with responsibility for monitoring and periodically assessing Seatronics’ compliance with applicable export control and sanctions laws and reporting the results of such assessment to appropriate senior-level officials. Acteon has appointed a U.S. Trade Compliance Manager with responsibility for monitoring and ensuring Seatronics’ ongoing compliance, and a Group General Counsel who will provide ultimate oversight of the compliance monitoring function.

The lessons learned? Both settlements have identical concluding sections:

This enforcement action highlights the importance of: (1) implementing risk-based controls, such as regular audits, to ensure subsidiaries are complying with their obligations under OFAC’s sanctions regulations; (2) performing heightened due diligence, particularly with regard to affiliates, subsidiaries, or counter-parties known to transact with OFAC-sanctioned countries or persons, or that otherwise pose high risks due to their geographic location, customers, or suppliers, or products and services they offer; and (3) appropriately responding to derogatory information regarding the sanctions compliance efforts of persons subject to the jurisdiction of the United States.

Links:

OFAC Notice

OFAC Enforcement Information

OFAC Settlement Agreement (2H Offshore Violations)