Following in the steps of the Commerce and State Departments, among other federal agencies, the Office of Foreign Assets Control has announced inflation-based adjustments to its maximum civil monetary penalty amounts. We already discussed here the increases adopted by Commerce, State and the Census Bureau pursuant to the curiously-titled Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (it has no “improvements” that I can see.) As with these other agencies, some of the increases in OFAC’s penalty authorization are quite substantial.
Substantial Increases to Be Imposed
Violations of the Trading With the Enemy Act, the underpinning for the OFAC embargo on Cuba, will be subject to a penalty of $83,864. That represents an increase of $33,864 over the statutory amount of $50,000, which has been in place since 1992.
The current maximum statutory penalty under the International Emergency Economic Powers Act, $250,000 or twice the amount of the underlying transaction, whichever is higher, was put in place in 2007. The 1.13833 inflation multiplier since then leads to an upward adjustment of $34,582 for a new maximum penalty of $284,582; the alternative of twice the transaction value remains unchanged.
Penalties imposed by the remaining three statutes that OFAC enforces were augmented as well. The Anti-terrorism and Effective Death Penalty Act of 1996 provides for a penalty of the higher of $55,000 or twice the amount of which a financial institution was required to retain possession or control; it has been adjusted to $75,122. The $1,000,000 amount under the Foreign Narcotics Kingpin Designation Act will be bumped to $1,414,020, and the new maximum for the Clean Diamond Trade Act is $12,856, up from $10,000.
In light of these changes, OFAC also is revising its Economic Sanctions Enforcement Guidelines to reflect the higher penalties for egregious and non-egregious penalty cases.
When Are the Changes Effective?
OFAC’s new penalty amounts will be effective August 1, 2016. The agency is accepting comments on the revisions until that date. The changes were adopted as an interim final rule, which means they will take effect but can be modified.
According to OFAC, they “are applicable only to civil penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015 . . . Therefore, violations occurring on or before November 2, 2015, and assessments made prior to August 1, 2016 whose associated violations occurred after November 2, 2015, will continue to be subject to the civil monetary penalty amounts set forth in OFAC’s existing regulations.” I guess that qualifies as the good news.
