OFAC Announces $2.7 million Settlement With GE for Cuba Sanctions Violations

The Treasury’s Office of Foreign Assets Control announced a $2.7 million settlement with Boston-based General Electric for 289 violations of the Cuban Assets Control Regulations by three of GE’s current or former subsidiaries, OFAC said in an Oct. 1 notice. The subsidiaries -- Getsco Technical Services Inc., Bentley Nevada, and GE Betz -- accepted payments from The Cobalt Refinery Company, a U.S.-sanctioned company, “for goods and services provided to a Canadian customer” between 2010 and 2014, OFAC said.

Cobalt has been listed on OFAC’s Specially Designated Nationals and Blocked Persons List since 1995, OFAC said, and the Canadian customer was a corporation with “strong historic and then-current economic ties” to the Cuban mining industry and the Cuban government. GE maintained and renewed their relationship with the Canadian corporation at least 18 times since 1996 “despite the obvious sanctions risk posed by the relationship,” the notice said.

In 2014, GE discovered it had received “numerous payments” from Cobalt for invoices issued to the Canadian customer, OFAC said. Cobalt paid GE for more than 65 percent of the transactions between GE and the Canadian corporation despite GE negotiating and entering into contracts only with the corporation, the notice said. GE approved Cobalt as a “third-party payer,” failing to “appropriately recognize the significant and widely published relationship between Cobalt and their Canadian customer” and to “undertake sufficient diligence into their customer's activities,” OFAC said.

The GE companies deposited the checks from Cobalt, which listed Cobalt’s “full legal entity name as it appears on OFAC’s SDN List” as well as an acronym, into an account at a Canadian bank, OFAC said. But GE’s sanctions screening software did not catch Cobalt because it “screened only the abbreviation of the SDN’s name.” GE received 289 checks from Cobalt worth about $8 million, the notice said.

OFAC said the violations constituted a non-egregious case and said GE voluntarily self-disclosed the violations. Aggravating factors included the GE companies’ failure to “take proper or reasonable care” of U.S. sanctions obligations, “particularly given GE’s commercial sophistication; the fact that GE’s actions caused “substantial harm” to the Cuban sanctions program; and the fact that the “substance” of GE’s disclosures and other communications with OFAC “leave substantial uncertainty about the totality of the benefits conferred to” Cobalt. OFAC also said GE did not “provide its primary submissions to OFAC in a clear and organized manner” and the submissions “contained numerous inaccuracies,” which placed a “substantial resource burden” on OFAC’s investigation.

Mitigating factors included that no GE companies received a penalty during the previous five years, and that GE introduced remedial measures, improved its compliance procedures and cooperated with OFAC by “executing and extending multiple statute of limitations tolling agreements.”

OFAC said the settlement highlights the risk U.S. companies face when they accept payments from third parties and do business in a foreign currency or at a foreign bank. “Additionally, this action demonstrates the importance of conducting appropriate due diligence on customers and other counter-parties when initiating and renewing customer relationships,” OFAC said. “Ongoing compliance measures should be taken throughout the life of commercial relationships.”