The Office of Foreign Assets Control of the US Department of the Treasury has announced a settlement of Murad, LLC’s potential civil liability for apparent violations of the Iran Transactions and Sanctions Regulations. Murad is a skincare and dietary supplements company based in El Segundo, California. A former senior executive of the company has also agreed to settle his or her potential civil liability for three apparent Iran sanctions violations.
According to the documents, Murad entered into an agreement with an Iranian distributor in 2009, granting the distributor exclusive rights to distribute Murad’s products throughout the Middle East, including Iran. The agreement was renewed in similar form in May 2015, using a United Arab Emirates-based distributor. Meanwhile, the company twice applied for – but did not receive – a specific license from OFAC in relation to the 2009 and 2015 agreements, and nonetheless exported goods to Iran. The company knew, according to the statement of facts, that the exported goods were not covered by a general license, and that a specific license would therefore be necessary in order to legally export the goods. During the same period, the UAE distributor opened a company-branded store in Teheran, with Murad’s knowledge, and a Murad website with an Iranian address was active in Iran from 2012 to 2018.
Murad was acquired by Unilever United States, Inc. in September 2015, but did not disclose its Iran business to Unilever; nor did Unilever discover the involvement with Iran during its pre-acquisition due diligence. Two months later, when Unilever did become aware of the Iran connection, the company’s corporate counsel directed the then-senior Murad executive to cease all exports of the company’s products to Iran. The executive complied with this request, but at the same time asked another Murad executive to ensure that the UAE distributor’s chief executive officer would not disclose approval by Murad executives of exports to Iran. According to OFAC, Murad, through its senior executive, the Iranian and UAE distributors and others, continued exporting goods to Iran until January 2018, “concluding an apparent eight-year conspiracy that resulted in the export of services and more than $11 million in goods to Iran on at least 62 occasions,” in violation of the Iranian Transactions and Sanctions Regulations, 31 CFR part 560.
With regard to Murad, OFAC viewed as aggravating factors the company’s willful violation of US sanctions – knowing, as it did or should have known, that its conduct was prohibited and would require a license in order to be permitted – and the actual knowledge of Murad’s senior executives during a period of eight years. At the same time, OFAC deemed as mitigating factors:
- the company’s record of no penalty notices during the five years preceding these apparent violations;
- the company’s cooperation with OFAC’s investigation;
- the small share of overall sales represented by the Iran transactions;
- the nature of Murad’s products, which OFAC termed “benign consumer” products, and;
- the remedial measures taken by the company, including a thorough internal investigation, implementing sanctions and export control policies and procedures, training key personnel and senior management, screening for all parties to international transactions, and identifying both the responsible parties and the deficiencies that led to the apparent violations.
The settlement amount, $3,334,286, reflects OFAC’s consideration of these factors, and the company’s voluntary self-disclosure of its apparent violations; it is about 15% of the maximum civil monetary penalty of over $22 million applicable in this case.
In addition to payment of the penalty, the settlement agreement requires Murad to maintain specific sanctions compliance measures for a period of five years; to conduct periodic risk assessments and address the identified risks; to implement adequate internal controls, including written policies and procedures; to keep accurate sanctions-relevant records; to provide sanctions training for personnel and to communicate the company’s sanctions compliance program to them; to enforce the company’s sanctions policies and procedures, and; to take immediate and effective action to identify weaknesses and implement compensating controls. Under the settlement agreement, the company must certify its compliance annually for five years.
With regard to the former senior Murad executive, OFAC found that he or she did not voluntarily self-disclose the apparent violations, which constituted an egregious case. OFAC viewed the executive’s knowledge of the exports to Iran, his or her failure to ensure that the UAE distributor would cease sales in Iran once asked to do so, the executive’s senior position in the company overseeing exports, and knowledge that sales to Iran were prohibited as aggravating factors. The executive’s cooperation with OFAC, clean record of previous violations, the benign nature of the goods involved, and the fact that the executive is no longer employed by Murad and is no longer engaged in international business activity were deemed to be mitigating factors in OFAC’s assessment of a penalty. In light of these considerations, OFAC determined the appropriate civil monetary penalty to be $175,000, which is well below the statutory maximum of nearly $2.8 million.
OFAC took the opportunity, in its enforcement release, to emphasize several compliance considerations. First, OFAC warned against senior management engaging in conspiracies to engage in activities prohibited by US sanctions regulations, and noted the importance of appropriate training. Second, OFAC advocated the implementation of a robust sanctions compliance program, preferably (and thirdly) with a clear US-based chain of command. Finally, OFAC emphasized the importance of pre- and post-acquisition due diligence.