On June 26, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control announced that it reached a $538,000 settlement with Mondo TV, S.p.a, an animation company based in Italy, for apparent violations of OFAC sanctions on the Democratic People’s Republic of Korea (“DPRK” or “North Korea”). OFAC reported the company paid Scientific Educational Korea Studio (“SEK”), a government-owned animation firm in North Korea, approximately $538,000 through U.S. financial institutions between 2019 and 2021. According to OFAC, the transactions caused several U.S. financial institutions to violate North Korea Sanctions Regulation (“NKSR”), 31, CFR part 510. The settlement amount reflects OFAC’s determination that Mondo’s actions were non-egregious in nature and were not voluntarily self-disclosed.
According to the enforcement release, Mondo had a long-standing relationship with SEK and had been subcontracting animation work to SEK since the 1990s for a variety of programming, including children’s animation. While Mondo had stopped working with SEK in 2016 due to humanitarian concerns, Mondo allegedly initiated new projects with SEK in 2019. By that time, Mondo had reportedly incurred more than $1.1 million in debt to SEK for several projects that SEK had completed prior 2016 and for two new projects that SEK performed in 2019. In accordance with a payment agreement executed with SEK in July 2019, Mondo agreed to pay SEK in monthly installments made to third-party companies – two companies based in China and one based in the United States – into their respective accounts at several U.S. financial institutions. When Mondo executives agreed to this payment arrangement, they allegedly believed that they were making payment to these third-party companies to satisfy debts that SEK owed to these companies.
According to OFAC, between May 2019 and November 2021, Mondo initiated 18 wire transfers that were processed by or settled at U.S. financial institutions – payments that Mondo executives allegedly knew were intended for North Korea-based company. While the transactions were all personally approved by Mondo’s Chief Operations Officer and Head of Legal and Corporate Affairs, Mondo did not have a sanctions compliance program at the time the payments were made. These transactions reportedly caused the U.S. financial institutions to violate the NKSR and, more specifically, to deal in blocked property concerning the Government of Korea and export financial services to the DPRK.
The settlement amount of $538,000 was reached based on OFAC’s consideration of certain aggravating factors such as Mondo’s senior management that knowingly engaged a DPRK entity and made payments to that entity through intermediaries’ U.S.-based accounts. Certain mitigating factors were also considered, including Mondo’s cooperation with OFAC investigators and the company’s lack of violations or penalty notices in the five years prior to the apparent violations. OFAC also emphasized that this case demonstrates how a non-U.S. entity that engages in foreign transactions with U.S. financial institutions might be exposed to civil liability for U.S. sanctions violations. It also demonstrates the importance of having a robust sanctions compliance program and how the lack of such a program increases the likelihood of potential sanctions violations.