The Paper Caper: U.S. Persons Cannot Help Foreign Subsidiaries or Affiliates with Sanctioned Country Transactions
A recent settlement agreement between the Office of Foreign Asset Control (OFAC) and BD White Birch Investment LLC, a U.S.-based paper company, is an important reminder that U.S. companies cannot assist their foreign subsidiaries or affiliates with sales related to sanctioned countries.
In this case, White Birch faced potential civil liability for facilitating the sale and shipment of Canadian-origin paper from White Birch’s Canadian subsidiary to Sudan, which was subject to a U.S. embargo at the time. OFAC determined that while the sale and shipment took place outside the United States, White Birch personnel from both its U.S. headquarters and Canadian subsidiary “were actively involved in discussing, arranging, and executing the export transactions to Sudan.” Such assistance is prohibited under OFAC’s regulations under provisions barring U.S. persons from “facilitating” transactions between non-U.S. companies (such as foreign subsidiaries) and sanctioned countries.
Among other things, facilitation can include helping, assisting, or approving transactions between foreign companies and sanctioned countries or parties. U.S. companies with overseas affiliates that conduct transactions involving sanctioned territories – currently including Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine – must adopt processes to fully wall off their U.S. operations and employees to prevent impermissible facilitation that is prohibited by OFAC’s regulations.