U.S. toolmaker nailed for OFAC violations

   The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has reached a $1,869,144 settlement with Stanley Black & Decker for violating the Iranian Transactions and Sanctions Regulations through a Chinese subsidiary.
   The New Britain, Conn.-based toolmaker’s Chinese subsidiary Jiangsu Guoqiang Tools Co. Ltd. (GQ), between about June 29, 2013, and Dec. 30, 2014, exported or attempted to export 23 shipments of power tools and spare parts, valued at about $3.2 million, to Iran, either directly or through third-party countries. 
   Stanley Black & Decker began acquisition negotiations with GQ in 2011, during which it engaged in due diligence and discovered GQ exported to Iran. The company asked GQ to cease shipping to Iran, which it agreed to do prior to the acquisition in May 2013. 
   The toolmaker then conducted a series of compliance training with GQ’s employees, which included business conduct guidelines, the Foreign Corrupt Practices Act and U.S. sanctions. 
   According to OFAC, an employee of Stanley Black & Decker in charge of global trade compliance for China reviewed the company’s trade compliance policies and procedures with GQ’s export sales manager by telephone in August 2013 and then asked her to provide the training to her team within GQ. However, the toolmaker failed to monitor this activity or audit GQ’s operations to ensure that its Iran-related sales ceased. 
   GQ continued to export goods to Iran during 2013 and 2014. Once Stanley Black & Decker became aware of the potential violations of U.S. economic sanctions, it initiated an internal investigation, subsequently hired a third-party independent investigative company, and ultimately reported the matter to OFAC.
   “Stanley Black & Decker’s internal investigation determined various GQ board members and senior management participated in these activities with knowledge that such conduct violated its parent company’s policies and U.S. economic sanctions against Iran,” OFAC said in a statement. “These personnel and other GQ employees appear to have engaged in nonroutine business practices in order to conceal and facilitate GQ’s prohibited exports to Iran.”
   According to OFAC, it was discovered that GQ used six trading companies — four in the United Arab Emirates and two in China — to conceal the Iran-bound shipments. To further cover its tracks, the toolmaker’s Chinese subsidiary’s employees “created fictitious bills of lading with incorrect ports ofdischarge and places of delivery and instructed their customers not to write ‘Iran’ on business documents, such as bills of lading,” the agency said.
   OFAC said this case is a reminder that U.S. companies must conduct “sanctions-related due diligence” before and after mergers and acquisitions, as well as take necessary steps to audit, monitor, and verify newly acquired subsidiaries and affiliates for compliance. 
   “Foreign acquisitions can pose unique risks that U.S. person parent companies need to address fully at all stages of its relationship with the subsidiary,” the agency said.