According to the announcement of U.S. Attorney’s Office Southern District of New York Micheal ROSE, president of New York-based cosmetic company arrested for conspiring to violate U.S. sanctions against Iran. Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Michael Rose participated in a years-long scheme to violate our sanctions by surreptitiously exporting cosmetics to Iran via front company intermediaries in the Middle East…” The total estimated amount subject to violation is USD 350.000 and the time period was between 2015 to 2018.
The following charges are mentioned in the indictment (1) conspiring to violate IEEPA, in violation of 50 U.S.C. § 1705, which carries a maximum sentence of 20 years in prison; (2) conspiring to launder money, in violation of 18 U.S.C. § 1956(h), which carries a maximum sentence of 20 years in prison; and (3) conspiring to commit bank fraud, in violation of 18 U.S.C. § 1349, which carries a maximum sentence of 30 years in prison.
The case – which is subject to the court now- makes us remember some points related with sanctions compliance.
End User is as important as the origin.
As mentioned in the indictment the company tried to hide the real end-user of the products by showing them as exported to “a front company” in the United Arab Emirates. In fact the real end-user country of these US origin cosmetic products was Iran. The company did not get any required license to sell those items to Iran and miss inform all related US authorities accordingly.
There is not 100% safe product in terms of sanctions
Although the company was selling cosmetics for usage of women; the sanctions have already prohibited any sales of US origin goods to Iran -unless have an authorization, general/specific license-. The transactions subject to ordinary goods can carry a sanction risk, and non of them are away from sanction risk as themselves. Even it is somehow a common view that sanctions are mostly deal with chemicals, machinery for oil/gas, weapons or dual use items. Additional to these high risk products; the nature of business and the geographical risk must not be forgotten. Simple items such as makeup products could even cause sanction violations.
Nothing is small enough to avoid sanctions
The total volume of the transactions has been estimated as only USD 350.000.- and the president of the company faced an indictment for 70 years max. in total. There is not any real profit in case of a sanction violation.
Nothing is old enough to be forgotten
Due to the indictment the violations occur from 2015 to 2018. The indictment have been published and the related real person have been arrested in 2021 (almost 3 years after the latest violation). Time does not covers , but reveals the truths…
Sanctions are for changing the behavior
When we look at the self-disclosure based settlements with US authorities in previous years, there is a self-disclosure door which is open for such companies (in many cases). If the company and the president of the company had applied to self-disclosure; probably the case was going to became a settlement issue – not an issue in a court-… at least there was a possibility such. It is wise to remember that the sanctions priority is to change the behavior not to give punishment.
A compliance culture based on well established analysis is a must even for the companies that are selling cosmetics. Compliance is always the less-costly and easy way to be safe in terms of sanctions.
Abdurrahman ÖZBEK, CGSS
SANCTION OBSERVER 