OFAC Puts Amazon in the Crosshairs

Written by: John E. Parkerson, Jr., Esq.

Many individuals and businesses are aware that particular transactions that involve countries such as Cuba, Iran, North Korea, or Syria (just to name a few well-known examples – there are others) or with certain persons or entities engaging in particular activities (such as, for example, narcotics trafficking, global terrorism or transnational criminal organizations) may be illegal; but few understand the intricacies of applicable regulatory and enforcement regimes.  The following case highlights some important points in this area of the law.

A July 8, 2020 settlement between the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and Amazon.com, Inc. serves as a reminder that companies – especially companies that have on-line mechanisms for selling goods or services across borders – must have effective sanctions screening processes for detecting and preventing violations of OFAC sanctions programs.  OFAC found that Amazon violated the sanctions regulations by making sales in sanctioned regions and countries and with sanctioned persons and entities.  The negotiated $134,523 Amazon settlement amount is relatively small by OFAC standards involving companies of that size because OFAC determined that (a) Amazon’s violations were non-egregious and (b) it self-disclosed to OFAC that it failed in not earlier reporting certain transactions involving sanctioned regions, countries and persons.

https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20200708_amazon.pdf

Amazon’s issue was not the result of any intent on its part to violate U.S. sanctions laws;  instead, its problem was the lack of effective screening mechanisms to prevent those sanctioned on-line sales.  OFAC’s investigation, determination and subsequent settlement with Amazon illustrates several important points:

• U.S. authorities continue to monitor transactions for compliance violations and, where merited, prosecute those involved. In other words, there could be very severe consequences for a company’s non-compliance.
• Companies must have effective methods for screening their transactions to ensure that goods and services are not sold to sanctioned regions, countries, persons, or entities.
• Potential OFAC-imposed penalties for violations might be reduced if
  • the company has an effective compliance program,
  • any violations that do occur are non-egregious, and
  • the company voluntarily self-discloses to OFAC any violations that it discovers.

Hall Booth Smith’s international business and trade attorneys provide advice and prepare transactional documents for companies that assist them in meeting their OFAC sanctions obligations.  HBS also assists with the full range of other international business-related laws that govern companies’ lawful business conduct, whether export controls, anti-money laundering, or issues facing foreign companies seeking to do business in the U.S.