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American ShipperTrade and Compliance

German firm fined $5.5 million for sanctions violations

OFAC said the violations were the result of rogue managers at AppliChem continuing illicit exports from Europe to Cuba under the nose of their U.S. owner.

   The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has fined Darmstadt, Germany-based AppliChem GmBH $5,512,564 for 304 violations of the Cuban Assets Control Regulations.
   The illegal shipments, which were valued at $3,433,495, occurred between May 2012 and February 2016, OFAC said.
   On Jan, 1, 2012, Glenview, Ill.-based Illinois Tool Works (ITW) acquired AppliChem, which manufactures chemicals and reagents for the pharmaceutical and chemical industries. 
   While performing its preacquisition due diligence, ITW discovered references to countries subject to U.S. economic and trade sanctions on AppliChem’s website. On Dec. 19, 2011, ITW warned AppliChem management that it must cease all Cuban transactions after the acquisition.
   AppliChem claimed to share U.S. export compliance details with all its European branches upon completing the acquisition. However, the company’s Spanish branch continued to facilitate orders to Cuba through 2012. 
   Upon discovery, ITW submitted a voluntary self-disclosure to OFAC on Jan. 23, 2013. In the disclosure, ITW stated that based on representations from AppliChem’s former owners, “all [of AppliChem’s] open [Cuba] transactions were canceled.” On May 29, 2015, OFAC issued a warning letter to ITW in response to AppliChem’s post-acquisition Cuba sales.
   However, on Jan. 27, 2016, an anonymous report was made through the ITW ethics helpline alleging that AppliChem continued sales to Cuba via an intermediary in Berlin. ITW conducted an investigation and found that AppliChem’s former owners had concealed this activity, OFAC said.
   OFAC said this case demonstrates the importance for companies to implement “risk-based controls,” which include conducting routine audits and follow-ups with their overseas management, to ensure subsidiaries are complying with U.S. sanctions regulations.

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Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.
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