On July 5, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued notice of its settlement with Alcon Laboratories, Inc.; Alcon Pharmaceuticals Ltd.; and Alcon Management, S.A. (collectively known as “Alcon”), for their apparent violations of the Iranian Transactions and Sanctions Regulations (“ITSR”), 31 C.F.R. Part 560, and the Sudanese Sanctions Regulations (“SSR”), 31 C.F.R. Part 538. This is the second consecutive occasion on which OFAC has rendered firms civilly liable for apparent sanctions violations relating to the export of medical end-use products to U.S.-sanctioned jurisdictions. In late June, OFAC had entered into a settlement with Hyperbranch Medical Technology, Inc. for its export of medical end-use products to Iran.

According to OFAC’s notice, Alcon engaged in the prohibited export of goods to Iran and Sudan on more than 500 occasions between August 2008 and December 2011. Specifically, Alcon had exported medical end-use surgical and pharmaceutical products from the United States to distributors based in Iran and Sudan absent U.S. license authorization to do so. Pursuant to 31 C.F.R. § 560.204, the export from the United States or by a U.S. person of goods, services, or technology to Iran or the Government of Iran is prohibited. The export to Sudan of goods, services, or technology from the United States or by a U.S. person is prohibited, as is the export to Sudan of goods, services, or technology requiring the issuance of a license by a U.S. federal agency, under 31 C.F.R. § 538.205.

Parties interested in a deeper dive into the facts behind Alcon’s settlement should turn to Alcon’s settlement with the U.S. Department of the Commerce’s Bureau of Industry and Security (“BIS”).  BIS has posted them here.

OFAC cited a number of aggravating factors that led to its enforcement response. First, Alcon failed to have an OFAC sanctions compliance program in place, despite the fact that it undertook “significant business involving the exportation of goods from the United States to Iran and Sudan.” This evidenced reckless disregard for U.S. sanctions requirements – as did Alcon’s failure “to take adequate steps to investigate a third-party freight forwarder’s cessation of shipments to Iran on behalf of Alcon.” Second, Alcon’s senior management was aware of the conduct giving rise to the sanctions violations. Lastly, Alcon is a sophisticated multinational corporation with significant international business and, as such, did or should have known of U.S. sanctions requirements.

Nonetheless, OFAC also identified several mitigating factors. First, as with Hyperbranch, Alcon’s prohibited exports involved medical end-use products that would likely have been and were licensed. As a result, the harm to U.S. sanctions objectives was limited. Second, Alcon had no prior sanctions history, particularly in the five years preceding the date of the earliest transaction at issue. Third, Alcon took remedial action by stopping the prohibited exports to Iran and Sudan and initiating an internal investigation to determine the cause of the apparent violations. Moreover, Alcon put in place a robust OFAC sanctions compliance program to ensure that such conduct does not recur in future. Finally, despite the fact that its violations were not voluntarily self-disclosed to OFAC, Alcon did make great effort to cooperate with OFAC in its investigation of the matter, including by acceding to several tolling agreements with OFAC extending the statute of limitations.

Despite certain distinctions with the recent settlement with Hyperbranch, Alcon’s settlement with OFAC highlights the fact that medical exporters are not immune from civil liabilities for U.S. sanctions violations – even if the goods being exported are humanitarian in nature. These settlements reflect OFAC’s intent to sustain the integrity of its sanctions programs by taking a strong enforcement response towards those engaged in prohibited exports to U.S.-sanctioned jurisdictions, regardless of the goods being exported.