Violating sanctions: Black & Decker settlement shows need for effective compliance solutions
Jul 10, 2019 Comments (0)
In March 2019, American power tool manufacturer Stanley Black & Decker and its Chinese subsidiary, Jiangsu Guoqiang Tools Co., agreed to pay some USD1.9 million to settle allegations by the US Treasury Department’s Office of Foreign Assets Control (OFAC) that the company violated sanctions against Iran.
According to the Treasury agency, between June 29, 2013, and December 30, 2014, Jiangsu Guoqiang Tools exported, or attempted to export, 23 shipments of power tools and spare parts, valued at about USD3.2 million, to Iran, either directly or through third-party countries.
As part of the settlement, Stanley Black & Decker said it would enhance its sanctions compliance programme and internal controls. Spokeswoman Abigail Dreher said: “We have taken and will continue to take steps to ensure all employees are compliant with corporate policies and applicable laws.” As part of the civil settlement, Stanley also agreed to enhance its sanctions compliance programme and internal controls, and OFAC agreed to discharge Stanley and Jiangsu Guoqiang Tools from the alleged violations.
The Stanley Black & Decker settlement underscores a rash of recent cases where companies have found themselves on the wrong side of US compliance laws, either knowingly or unknowingly. The US has blacklisted over two dozen other entities and individuals for assisting Iran to exchange currency in order to finance Iranian military operations. In many cases this happened because of some common reasons:
- A failure to understand recent changes to the regulations.
- A conscious decision to circumvent ITAR (International Traffic in Arms Regulations) regulations or sanctions lists.
- Insufficient master data maintenance. Some businesses don’t properly classify products under ITAR and other similar regulations.
- A failure to understand that the laws don’t just cover the physical movement of goods but also the transfer of sensitive data.
- A lack of understanding by non-U.S. firms as to what is expected of them under US law.
To avoid getting caught out, compliance with national and international rules and regulations is a basic prerequisite for long-term success. Companies that want to thrive in the global marketplace need to understand and manage applicable bans and restrictions. This is one of those areas in business where the devil is in the detail, and it pays off to stay up to date on latest developments to assess business impacts and improvement potentials.
IT solutions are deployed by many exporters to screen all ongoing business transactions against restricted party lists, national embargoes, restricted product lists, and designated use definitions, as well as to screen against bans and restrictions from other jurisdictions and countries.
An effective export control compliance programme is fundamental to ensuring regulatory compliance. Any compliance programme must be configured to cater for changing policies, technologies, legislation, etc. It must also be robust and adaptable enough to deal with the uncertainties and unpredictability of today’s global market.
The key to reducing risk and optimising export control processes is checking export transactions against the relevant laws and regulations. Using IT to support the monitoring of these manual restrictions offers a range of benefits, such as lower processing times and staff costs, streamlined processes, and greater transparency and legal protections in the screening process. All of which will help to make a company more competitive – a vital advantage in today’s global marketplace.
Iqubal Singh Pannu
Iqubal Singh Pannu is a Senior Solutions Consultant at AEB (International) Ltd. He has considerable consultancy and project management experience within carrier management solutions, advising companies ranging from SMEs to major multi-national corporations on solutions for optimising their supply chain performance within global trade and logistics. His international experience includes work in North…