OFAC announces $4.1 million settlement with US conglomerate for apparent violations by a subsidiary

On October 20, 2020, the Department of the Treasury’s Office of Foreign Assets Control announced a $4.1 million settlement with Berkshire Hathaway Inc. to resolve the company's potential civil liability for apparent violations by an indirectly wholly owned Turkish subsidiary, Iscar Kesici Takem Ticareti ve Imalati Limited Sirket.  From December 2012 to approximately January 2016, Iscar employees allegedly transacted with persons and entities under the jurisdiction of the Government of Iran -- activity that was prohibited by the Iranian Transactions and Sanctions Regulations, 31 CFR part 560 -- after the company came under the ownership and control of Nebraska-based Berkshire Hathaway.  

The general manager of Iscar allegedly established a commercial relationship with an Iranian distributor, with the hope that the company would be well positioned to transact with Iran once US and EU sanctions were lifted.  Iscar maintained the relationship despite repeated communications and policies sent by Berkshire Hathaway and its subsidiaries.  Iscar ultimately engaged in transactions to sell cutting tools and related disposable inserts to two Turkish intermediary companies, knowing that the items were intended for an Iranian distributor who planned to resell them to Iranian end users.  In total, Iscar processed 144 orders valued at $383,443, in apparent violation of § 560.215 of the ITSR.  The general manager and several employees attempted to conceal the Iranian transactions from Berkshire Hathaway by using private email addresses to confer with Iranian customers, using false names in internal records related to Iranian transactions, arranging for the Iranian distributor to pay them in cash and denominated Euros, and issuing false invoices to reflect destinations within Turkey rather than Iran.    

In May 2016, Berkshire Hathaway voluntarily disclosed the apparent violations to OFAC after an anonymous tip alerted executives to the prohibited activity.  In light of the company's prompt reporting, voluntary self-disclosure, and full cooperation with the investigation, OFAC agreed to settle the apparent violations for $4,144,651, a fraction of the $18,420,672 base civil monetary penalty amount applicable to the matter.  OFAC also took into account the enhancements that were made to Berkshire Hathaway's compliance procedures for foreign subsidiaries, the replacement of the individuals who had engaged in transactions with Iran, and the company's willingness to enter into three statute of limitations tolling agreements with OFAC.

OFAC Bulletin | OFAC Enforcement Release

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