On June 23, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued notice of its settlement with HyperBranch Medical Technology, Inc. for its apparent violations of the Iranian Transactions and Sanctions Regulations (“ITSR”), 31 C.F.R. Part 560. This particular case demonstrates that parties can be the subject of potential civil penalties from OFAC even if several factors seemingly militate against such an enforcement response.

According to OFAC’s notice, Hyperbranch exported certain medical end-use products to a distributor based in the United Arab Emirates (UAE) with knowledge or reason to know that the products were ultimately destined for Iran. These exports – dated April 15, 2011 and May 27, 2011 – constituted an apparent violation of 31 C.F.R. § 560.204, which prohibits U.S. parties from exporting goods to a person in a third country with knowledge or reason to know that the goods are intended specifically for re-export to Iran or the Government of Iran.

OFAC cited several aggravating factors that led to the settlement. First, Hyperbranch had “edit[ed] its destination control statement at the request of its distributor” and had “continu[ed] to conduct business with its distributor after receiving confirmation that the distributor had re-exported HyperBranch products to Iran in apparent violation of U.S. law.” Second, certain of Hyperbranch’s management – namely, its former CEO and former International Sales Manager – had knowledge that the exports at issue were destined for Iran. Finally, Hyperbranch failed to have an OFAC sanctions compliance program in place at the time of the transactions at issue.

Nonetheless, OFAC also identified several mitigating factors – some of which would have suggested that OFAC would have refrained from issuing a civil penalty. First, Hyperbranch had voluntarily self-disclosed the apparent violations of the ITSR to OFAC, and the apparent violations constituted a non-egregious case (i.e., not a particularly serious violation of the law). Second, OFAC determined that the harm to U.S. sanctions objectives vis-à-vis Iran was limited because the goods being exported were medical end-use products that would likely have been specifically licensed had a request been made. Third, Hyperbranch had no previous sanctions history with OFAC and had taken remedial steps following discovery of the apparent violations, including the institution of an OFAC sanctions compliance program. Finally, Hyperbranch cooperated in good-faith with OFAC’s investigation of the matter, including agreeing to toll the statute of limitations for a period totaling 513 days.

As is clear, these mitigating factors were not enough to win a lesser enforcement response from OFAC. That is somewhat surprising, particularly considering that (1) the transactions would likely have been specifically licensed; (2) the transactions were voluntarily self-disclosed; and (3) the aggravating factors were the result of actions taken by former Hyperbranch management. It just goes to show that predicting OFAC’s enforcement response in a particular case is anything but an exact science.