While there is plenty of confusion surrounding the sanctions regulations administered by the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”), there is even more confusion surrounding how OFAC determines a penalty for a violation of its sanctions programs.
There is essentially a four part matrix which determines what the base penalty calculation will be. The calculation takes into consideration two factors: one factor views whether there was a voluntary self-disclosure involved; the second takes into consideration whether or not the case was egregious.
If the case was not egregious and there was a voluntary self-disclosure involved then the base penalty is one half of the transaction value. This number will be capped at $125,000 per violation. If the case was not egregious and there was not a voluntary self-disclosure involved then the base penalty will be calculated at the applicable scheduled amount. This number will be capped at $250,000 per violation. If the case was egregious and there was a voluntary self-disclosure involved then the calculation is one half of statutory maximum. In the event that the case is egregious and there is no voluntary self-disclosure then the base penalty calculation is the statutory maximum.
Keep in mind that when viewing these base penalties that there is room for adjustments. Some of the factors OFAC looks at in adjusting the base penalty include substanial cooperation without a voluntary self-disclosure and if its a first violation. There are also other factors that can be argued, however, they could be determined as either mitigating or aggravating, thus some factors may actually lead to a higher penalty. The result of the base penalty calculation plus or minus other factors will lead to the proposed penalty amount.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or email@example.com.