Recent Developments in Sanctions Enforcement: Schlumberger Oilfield Holdings Pleads Guilty to Criminal Sanctions Charges Related to Conduct that “Facilitated” Business from the United States; PayPal Resolves Apparent Sanctions Violations with OFAC Caused in Part by the Failure to Employ Adequate Screening Technology and ProceduresSullivan & Cromwell LLP - April 8, 2015
On March 25, 2015, Schlumberger Oilfield Holdings, Ltd. (“SOHL”), a non-U.S. wholly-owned subsidiary of Schlumberger Ltd. (“Schlumberger”), also a non-U.S. corporation and one of the largest oilfield services organizations in the world, entered into an agreement with the U.S. Department of Justice (“DOJ”) to plead guilty to conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) by facilitating the provision of oilfield services to customers in Iran and Sudan through Schlumberger’s U.S.-based business segment. As a part of the plea agreement, SOHL agreed to pay approximately $232.7 million in criminal penalties, including a $77.5 million criminal forfeiture and a $155.2 million criminal fine. The criminal fine represents the largest criminal fine (but not total penalty) in connection with an IEEPA prosecution. SOHL also agreed to submit to a three-year corporate probation period. SOHL’s plea agreement marks the first time DOJ has taken criminal action against a non-U.S. corporation for sanctions program violations based primarily on a “facilitation” theory premised on “business decisions” and business support from the United States of otherwise lawful conduct by non-U.S. entities within the corporate organization but that related to sanctioned countries (in this case, Iran and Sudan). In the Statement of Offense filed with the United States District Court for the District of Columbia, it was acknowledged that it was lawful for SOHL, a non-U.S. entity, to operate in Iran and Sudan under certain circumstances, and it was also acknowledged that SOHL had policies and procedures designed to ensure that the company did not violate U.S. economic sanctions. However, Schlumberger was alleged to have inadequate training to ensure that all of its employees acted in accordance with these sanctions compliance policies and procedures.
On that same day, PayPal, Inc. (“PayPal”), a licensed money services business (“MSB”), agreed to pay over $7.65 million to the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) to settle potential civil liability for apparent violations of various OFAC economic sanctions programs, including those related to Iran and Sudan. Notably, the Settlement Agreement with OFAC, as well as OFAC’s posting describing the settlement, highlighted PayPal’s failure to employ adequate screening technology and procedures as an important factor contributing to the apparent violations.
Among other things, these matters involving SOHL and PayPal highlight the importance for companies that engage in international business of having in place policies and procedures reasonably designed to ensure compliance with U.S. economic sanctions, following those policies strictly, and providing appropriate training for all employees.