On April 25, 2022, the Office of Foreign Assets Control of the US Department of the Treasury announced a settlement with Toll Holdings, Limited, to resolve the company’s potential civil liability for apparent violations of US sanctions regulations.
Toll is an international logistics and freight forwarding company based in Australia. According to OFAC, between January 2013 and February 2019, Toll received or originated 2,958 payments through the US financial system in connection with shipments to sanctioned jurisdictions, or involving the property of an entity on the List of Specially Designated Nationals and Blocked Persons. The payments totaled over $48 million, and involved entities such as Mahan Airlines and Hafiz Darya Shipping Lines, which were sanctioned pursuant to Executive Orders 13224 and 13882, respectively, or shipments to, from or transshipping through, the Democratic People’s Republic of Korea, Iran, or Syria.
In some instances, the payments involving sanctioned jurisdictions or persons were included in larger invoice amounts involving non-sanctioned parties. As noted in the settlement, Toll failed to implement policies and controls that would have prevented the company from conducting transactions involving designated persons and sanctioned jurisdictions, due in large part to Toll’s rapid expansion between 2007 and 2017, and the company’s failure to increase compliance resources proportionately. Moreover, as early as May 2015, Toll was put on notice that the payments might violate US sanctions regulations, when one of the company’s banks restricted a Toll subsidiary’s use of its US dollar account; in response, an employee at Toll headquarters emailed employees in the United Arab Emirates and South Korea affiliates reminding them to avoid including the names of sanctioned jurisdictions on invoices. The same bank followed up with additional concerns, demanding supporting documents for Toll transactions, and eventually threatening to terminate its relationship with Toll. However, even after June 2016 when Toll resolved to cease business with US-sanctioned countries because of the compliance risks, the company did not implement compliance policies and procedures sufficient to prevent payments to sanctioned persons. Finally, controls introduced by the company in February 2017 prevented most shipments to or from sanctioned jurisdictions.
According to OFAC, Toll’s conduct appears to have violated § 510.212 of the North Korea Sanctions Regulations, 31 CFR part 510; § 542.205 of the Syrian Sanctions Regulations, 31 CFR part 542; § 560.203 of the Iranian Transactions and Sanctions Regulations, 31 CFR part 560; § 544.201 of the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 CFR part 544; and § 594.201 of the Global Terrorism Sanctions Regulations, 31 CFR part 594.
In calculating the civil monetary penalty, OFAC took into account aggravating factors such as Toll’s reckless disregard for US sanctions laws, the large number of apparent violations, the company’s failure to take immediate and adequate measures to address the problem after receiving the bank’s warnings, and the high level of commercial sophistication and size of the company. OFAC deemed as mitigating factors the company’s violation-free record for the past five years, its voluntary self-disclosure of the apparent violations, its cooperation with OFAC’s investigation, and the extensive actions taken in order to remedy the company’s compliance deficiencies. These measures include:
- A risk-mapping to identify the root causes of compliance lapses within the company;
- Restructuring the company’s compliance division;
- Development and implementation of a compliance audit plan;
- Implementation of sanctions compliance training for over 500 employees in five countries;
- Application of “hard controls” to prevent the possibility of booking shipments involving sanctioned jurisdictions;
- Risk-based screening of transactions and parties, and;
- Terminating franchise relationships and enhancing measures for onboarding new agents.
In light of these factors, OFAC imposed a civil monetary penalty of $6,131,855.
OFAC emphasized in its Enforcement Release on this matter the importance of prompt and complete responses to compliance weaknesses as soon as issues arise, and the heightened risks inherent in merging with or acquiring existing enterprises.