On September 21, 2023, the US Department of the Treasury’s Office of Foreign Assets Control announced a settlement of more than $9 million with Minnesota-based 3M Company, resolving the company’s potential civil liability for more than 54 apparent violations of Iran-related sanctions valued at approximately $10 million. As detailed by OFAC, between 2016 and 2018, 3M (East) AG, a Swiss subsidiary of 3M, knowingly sold reflective license plate sheeting (“RLPS”) to a German reseller, which resold the product to an entity controlled by Iran’s Law Enforcement Forces (“LEF”), a US-sanctioned entity. In addition, a US person employed by a 3M subsidiary allegedly performed substantial work in furtherance of these sales to Iran. According to OFAC, these transactions violated the Iranian Transactions and Sanctions Regulation (“ITSR”), 31 CFR 56, and the settlement amount reflects OFAC’s determination that apparent violations were egregious and voluntarily self-disclosed.
According to OFAC’s Enforcement Release, in late 2015, 3M began working on a proposal to sell RLPS to a German company that would use the product to manufacture blank license plates for export to Iran. On March 3, 2016, the proposal was presented to 3M’s Trade Compliance (“TC”) counsel, and, on March 8, 2016, TC counsel specifically approved the “conversion” of RLPS into license plate blanks for onward sale to Iran. The senior manager who worked on the proposal (“the Proponent”) allegedly omitted a page containing the “parties involved” and “product end use,” which caused a TC employee to only conduct due diligence screening on the German reseller and not the Iranian end-user. A week later, on March 10, 2016, 3M enhanced its internal approval process for business in Iran following the implementation of the Joint Comprehensive Plan of Action (“JCPOA”) that went in to effect in January 2016 – enhancements that required the screening of all third-parties involved with business in Iran, the review and approval of all Iran business by a TC attorney located at 3M’s US headquarters, and a mandate that all Iran-related business be conducted by 3M’s subsidiary in the United Arab Emirates.
In April 2016, shortly after 3M implemented the enhanced policies, the German reseller informed the Proponent that it planned to resell the RLPS directly to the Iranian entity – information that the Proponent kept from the TC counsel and repeatedly misrepresented to numerous 3M managers involved in the logistics of the project. The Proponent also changed the contracting entity to 3M (East) AG despite 3M’s policy that required the UAE subsidiary to handle business with Iran and allowed a US person to perform substantial tasks on the project despite having knowledge that US persons should not be involved in Iran-related business. In late 2018, after a JCPOA-related general license was rescinded, 3M discovered that the sales to Iran had not been authorized and promptly informed OFAC of the apparent violations. 3M also took steps to terminate or formally reprimand the culpable employees, hire a new TC counsel, enhance its sanctions training for employees, and end its business relationship with the German reseller.
OFAC settled with 3M for more than $9 million after considering certain aggravating factors, including the willful violation of US sanctions laws by certain 3M senior managers and several employees, and the fact that the Iranian end-user involved in the sales was affiliated with the Iranian LEF, a perpetrator of human rights abuses in both Iran and Syria. Among the mitigating factors that OFAC considered were 3M’s voluntary self-disclosure to OFAC; its agreement to toll the statute of limitations in the case; the risk-based OFAC compliance program that was in place at the time of the apparent violations; and the other remedial measures taken by 3M when the apparent violations were discovered.