In a recent enforcement action that underscores the significance of robust whistleblower programs in corporations, OFAC (Office of Foreign Assets Control) announced a settlement with Construction Specialties Inc. (CS) worth $660,594 for alleged infringements of the Iranian Transactions and Sanctions Regulations (ITSR). The announcement, made on August 16, 2023, revealed that the violations involved CS’s fully-owned subsidiary in the United Arab Emirates, Construction Specialties Middle East (CSME), who willfully reexported U.S. goods to Iran.[1]
The violation, as alleged by OFAC, was especially egregious as it was found that CSME’s general manager and another senior manager not only disregarded company policy but also manipulated trade documents. This flagrant violation of both internal and external compliance rules sheds light on the importance of robust whistleblower programs within corporations to prevent similar occurrences.[1]
According to legal experts such as Skadden, Arps, Slate, Meagher & Flom LLP, who has provided commentary on the case, corporations can no longer afford to treat whistleblower programs as a mere tick-box routine. These programs prove pivotal in uncovering unethical and illegal practices that can lead to severe penalties and reputational harm. Every multinational company must assess and reinforce its internal controls and risk management structures, ensuring that they include well-implemented, transparent, and accessible whistleblower systems.
OFAC’s enforcement action serves as a timely reminder of the risks associated with weak internal compliance measures, particularly for companies with international operations that are subject to a complex matrix of regulations. Robust whistleblower programs bring transparency, promote lawful behavior, and protect businesses by preempting violations. Ultimately, adopting such measures is good governance and good business.