USA: Danfoss has reached a settlement of over $4m with the US Treasury to settle potential civil liabilities against the Danish manufacturer for sanctions violations.
The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced the $4,379,810 settlement with Danfoss A/S over an alleged 225 violations of US sanctions against Iran, Syria and Sudan.
Between approximately November 21, 2013, and August 28, 2017, Danfoss FZCO, Danfoss’s wholly owned UAE-based subsidiary, is said to have sold cooling and heating equipment and related components to customers in Sudan, Syria, and Iran. During this period, Danfoss FZCO employees directed these customers to remit payments to at least three accounts at banks located in the UAE, including Danfoss’s US branch account.
Danfoss FZCO’s customers in Iran, Syria, and Sudan are said to have used third-party agents such as money exchangers in non-sanctioned jurisdictions to pay Danfoss FZCO at this account. The company is also said to have used third-party payers to make five transfers from its US branch account to parties in Syria and Iran.
The OFAC says the use of third-party payers disguised the originator or beneficiary of these transactions. As a result, the payments at issue were not stopped by the bank’s transactional screening filters. The total value of all transfers was approximately $16,959,683.
While OFAC found no evidence that Danfoss wilfully used third-party payers for the purpose of evading sanctions, OFAC says that Danfoss FZCO was aware since at least 2011 that using a US financial institution to send or receive payments related to sanctioned jurisdictions could be prohibited.
Both prior to and during the relevant period, Danfoss FZCO received communications from its parent company as well as from various financial institutions regarding Danfoss FZCO’s banking activity giving rise to sanctions concerns, including rejected transactions.
For example, in March 2011 Danfoss’s US bank is reported to have rejected a payment that was related to Iran, and in February 2016 Danfoss’ compliance division discovered that an Iranian customer had been invoiced in US Dollars and advised Danfoss FZCO that such activity was impermissible.
Despite these communications, the OFAC says that Danfoss FZCO continued to use its US branch account to collect payments from customers in sanctioned jurisdictions until on or about August 28, 2017.
The OFAC blames these apparent violations on deficiencies in Danfoss’s global sanctions compliance programme. Danfoss FZCO is said to have relied on compliance guidance from Danfoss. However, Danfoss did not have in place procedures to regularly monitor Danfoss FZCO’s activities to identify potential sanctions issues. As a result, Danfoss lacked the means to know when problems arose unless Danfoss FZCO proactively contacted Danfoss’ Compliance programme manager.
While Danfoss disclosed the apparent violations to OFAC at the end of October 2017, the OFAC was already in possession of relevant information and assessed that Danfoss’ submission did not qualify as a voluntary self-disclosure.
The OFAC recognised that Danfoss took quick action to ascertain the root causes of the conduct at issue. It also adopted new and more effective internal controls and procedures to prevent a recurrence of the apparent violations and ceased doing business entirely in Iran, Syria, and Sudan.