OFAC Fines Logistics Firm C.H. Robinson for Subsidiaries' Compliance Failures
The Office of Foreign Assets Control fined C.H. Robinson, one of the world’s largest logistics firms, more than $250,000 after OFAC said its non-U.S. subsidiaries violated sanctions against Iran and Cuba. The five subsidiaries allegedly provided freight brokerage or transportation services for 82 shipments to or from Iran or involving Iranian or Cuban goods, while one of the companies also did business with sanctioned Iranian airline Mahan Air.
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OFAC said C.H. Robinson voluntarily disclosed the alleged violations, which it said were “non-egregious.” It also said the firm put in place “remedial” measures after discovering the breaches, including by creating a trade compliance “task force” to improve its compliance tools.
The alleged violations were committed by C.H. Robinson subsidiaries in China, Spain, Canada, Australia and Peru and took place between November 2018 and February 2022, OFAC said. They were caused mostly because the five subsidiaries’ brokerage management systems hadn’t yet been incorporated into C.H. Robinson’s system or hadn’t been updated to “include the latest sanctions compliance controls.” OFAC said this meant that they didn’t screen for any “potentially violative transactions.”
OFAC said the Chinese subsidiary, C.H. Robinson Guangzhou, did business with Iran’s Mahan Air for a shipment from China to Turkey. OFAC said the carrier listed on the air waybill was “W5,” the International Airport Transport Association code for Mahan Airlines, and the first destination was identified as IKA, the airport code for Tehran Imam Khomeini International Airport. Although the subsidiary’s employees reviewed the airway bill, OFAC said they “failed to recognize either the fact or sanctions implications of Mahan Airlines’ involvement, or the fact that the first destination was Iran.”
Another violation occurred when Space Cargo Group, a Spain-based company acquired by C.H. Robinson in February 2019, sent spare parts for textile machinery from Spain to Iran in March of that same year. OFAC said the Spanish company at the time used its “own export system” and C.H. Robinson didn’t “yet have visibility” into that system.
C.H. Robinson Canada, acquired by the firm in 2017, provided freight brokerage services for 71 shipments of Iranian or Cuban goods destined for Canada. OFAC said the goods were mostly “consumer” items sent between Nov. 14, 2018, snd February 17, 2022. They were worth about $448,731.
C.H. Robinson Australia violated sanctions when it operated as a customs broker for imports of Iranian-origin goods into Australia from Germany, Spain, Singapore and Iran from April 26, 2019, to June 21, 2021, OFAC said. The agency said the goods were valued at about $148,196.
An employee with the company’s Peruvian subsidiary, C.H. Robinson Peru, “facilitated an export” worth about $74,919 from Peru to Iran in December 2019, OFAC said. The employee, who is no longer working for the company, did this by “circumventing internal processes.”
OFAC said C.H. Robinson’s export compliance team discovered the possible violations in 2022 during an audit. The company determined that the issues were caused by a “lag between acquiring the subsidiaries and their integration into” C.H. Robinson’s operating systems, which OFAC said had checks in place to detect possible sanctions breaches. OFAC said the five subsidiaries continued to use their own systems until at least 2022.
The agency said it could have fined C.H. Robinson more than $28 million, but it settled on a $257,690 fine partly because the company hadn’t received a penalty notice in the previous five years and was “highly cooperative” with OFAC’s investigation. It also said the company improved its compliance procedures and made “additional OFAC-specific training mandatory for all relevant employees.” OFAC also said “almost all” of C.H. Robinson’s global offices now use the company’s main brokerage management system.
OFAC also pointed to several aggravating factors, including the fact that C.H. Robinson “failed to exercise due caution or care for its sanctions compliance obligations” after buying the non-U.S. subsidiaries, noting that some of them continued violating U.S. sanctions for more than four years after they were acquired. The agency also said C.H. Robinson “had reason to know” about the violations and noted that the company is a “large and sophisticated global transportation and logistics company.” It also said the shipments harmed U.S. sanctions programs.
OFAC said the case highlights the importance of “appropriate compliance controls” for U.S. companies acquiring businesses overseas. “The need to institute worldwide compliance functions, including sanctions-related technology and systems, is especially important to avoid potential violations,” it said. “While integrating such systems, which can be time-consuming, companies should consider interim measures to minimize risk.”
A C.H. Robinson spokesperson didn’t immediately respond to a request for comment.