Building Your Compliance Program: Some Records You Don't Want to Challenge
In April of 2022, Toll Holdings Limited agreed to pay over $6,000,000 to settle potential liabilities with the Office of Foreign Assets Control (OFAC). Toll is an international freight forwarding and logistics company headquartered in Melbourne, Australia. The apparent violations occurred when Toll processed payments with sanctioned jurisdictions and persons through the U.S. financial system.
The apparent violations between January 2013 and February 2019 resulted from transactions conducted with individuals affiliated with North Korea, Iran or Syria; or blocked entities and individuals. Toll violated the broad sanctions programs against the three mentioned countries as well as two executive orders. Many of the transactions originated from or were received by twenty-three of Toll's various entities across Asia, Europe, the Middle East, and North America but were conducted through American financial institutions.
This is an interesting settlement because of the volume of the transactions and violations:
The value of the apparent violations was nearly $48,500,000
There were 2,958 transactions in violation
The transactions violated five separate regulations and two Executive Orders
The transactions involved at least four financial institutions
Even though these are horrifying figures, it is important to mention the statutory figures as well:
The statutory maximum civil monetary penalty was just over $826,000,000
The base civil monetary penalty was slightly over $15,000,000
There are many lessons to be taken from Toll's actions. In outlining the basis for potential civil liabilities, OFAC does not blatantly mention but implies that some of the transactions violated both an Executive Order and at least one of the codified regulations. It is important to note that single transactions can violate multiple sanctions programs at once, resulting in twice as much civil liability for that particular transaction.
Toll had grown exponentially over the years without implementing a growing and adaptable compliance program. As Toll acquired and built foreign subsidiaries that grew and conducted business independently, there was a lack of understanding of the strong U.S. nexus standard for OFAC violations. Toll was able to build a cohesive and strict compliance system soon after realizing that the company as a whole was committing regular violations. This compliance system was one of the major factors that allowed OFAC to determine a settlement amount that was half of the base civil monetary penalty.
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