The guilty plea follows a six-year investigation by the DOJ and US Department of Commerce into allegations that SOHL had violated the International Emergency Economic Powers Act (IEEPA). IEEPA authorises the US administration to impose sanctions with regard to a targeted country or circumstance, and provides for criminal and civil penalties for violations.
SOHL is registered in the British Virgin Islands, but US officials discovered that a Texas-based unit had illegally facilitated the export of drilling equipment to Iran and Sudan by non-US SOHL subsidiaries between 2004 and 2010 and, in the process, evaded US sanctions. In a news release, the DOJ noted that SOHL had failed to provide adequate employee training. The DOJ specifically highlighted the failure to ensure that all Schlumberger employees, including US citizens and non-US staff who resided in the United States, complied with Schlumberger’s sanctions policies and compliance procedures. Activities that occurred in the US and violated US sanctions included:
- approving and disguising the company’s capital expenditure requests from Iran and Sudan;
- making and implementing business decisions specifically concerning Iran and Sudan; and
- providing certain technical services and expertise for drilling tools and related equipment in Iran and Sudan.
In addition to the fine, Schlumberger has agreed to a three year corporate probation. Under the terms of the probation agreement Schlumberger will:
1) cease all operations in Iran and Sudan;
2) provide regular reports on compliance with sanctions obligations;
3) respond to any future requests by US authorities regarding compliance with US sanctions; and
4) appoint an independent consultant to review the company’s internal sanctions policies and procedures and undertake audits to ensure ongoing compliance.
In recent years the US authorities have fined a number of non-US financial institutions for sanctions violations. For example, earlier this month, Commerzbank AG, a global financial institution headquartered in Frankfurt, together with its US branch, Commerzbank AG New York (jointly Commerzbank), reached a settlement with several US authorities over, among other things, alleged violations of IEEPA and the Bank Secrecy Act. Commerzbank agreed to pay a total of $1.45 billion in penalties and enter into a deferred prosecution agreement.
A number of other banks have recently settled sanctions-related matters with authorities in the US.
The SOHL matter is significant for a number of reasons. First, it may signal a shift from the current focus on enforcement actions against non-US financial institutions towards other high risk sectors. Second was the focus on SOHL’s facilitation conduct in the US, even though the underlying transaction was principally carried out by SOHL’s non-US subsidiary. Third, this action shows that a non-US corporate can be found vicariously liable for sanctions violations by US employees. Facilitation of sanctionable activities by US persons will always subject them to potential prosecution. This action demonstrates that US authorities are willing to pursue a non-US company whose US employees engaged in facilitation activities.
HSF’s Corporate Crime and Investigations team has extensive experience in advising companies on various aspects of US and other sanctions regimes. This includes assessing whether a proposed transaction could potentially breach a sanctions regime, conducting due diligence on proposed transactions and advising on the most appropriate structuring to avoid breaching sanctions.
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