OFAC Enters into Settlement Agreement with S&P Global, Inc.

On April 1, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) entered a settlement agreement with S&P Global, Inc. (“S&P Global”), a New York-based company that provides business information and financial analytics.  According to a press release, S&P Global agreed to pay $78,750 to settle its potential civil liability for apparent violations of the Ukraine-Related Sanctions Regulations, 31 C.F.R. part 589, and specifically Directive 2 issued pursuant to Executive Order (“E.O.”) 13662 OF March 24, 2014, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine.”  The apparent violations occurred in 2016 and 2017 when S&P Global reissued and re-dated multiple invoices to continue to extend credit to JSC Rosneft (“Rosneft”), a state-owned Russian oil company, in violation of the debt and equity restrictions set forth under E.O. 13662.  After reissuing and re-dating four invoices to extend the original payment dates, S&P Global ultimately accepted payments totaling $82,500 from Rosneft (the “Apparent Violations”).

This settlement agreement serves as a reminder that companies cannot skirt the debt and equity restrictions imposed under E.O. 13662 by simply reissuing and re-dating invoices.  More generally, it underscores the importance of sanctions-related due diligence, particularly when doing business with entities on OFAC’s Sectorial Sanctions Identification (“SSI”) List, such as Rosneft.

The Apparent Violations

According to OFAC, S&P Global acquired Petroleum Industry Associates, Inc. (“PIRA”) in August 2016, and thereafter began integrating PIRA’s business, including its ongoing contracts with JSC Rosneft.  Rosneft, Russia’s largest oil company, was placed on OFAC’s SSI List on July 16, 2014, pursuant to Directive 2 of E.O. 13662.  Under Directive 2, all transactions or other dealings in new debt of Rosneft of longer than 90 days maturity were prohibited.

In August 2015, prior to its acquisition, PIRA issued an invoice for $82,500 to Rosneft.  The invoice had a payment due date of October 2015, but Rosneft did not attempt to make a payment until May 2016.  PIRA’s bank rejected the attempted payment, and Rosneft subsequently notified PIRA that the bank had stopped the payment “in accordance with the sanctions program.”

In August 2016, having still not received payment for the August 2015 invoice, S&P Global employees (formerly of PIRA) reissued and re-dated the invoice with a new date of August 26, 2016 – more than a year after the invoice for the debt was originally issued.  In sending the revised invoice to Rosneft, S&P Global management emphasized to Rosneft the importance of timely payment, and cautioned that “when the payment is made against an old invoice (as recent ones were), the bank may perceive that to be ‘extending credit’ to a Russian company, which we cannot do by law.”  When S&P Global received only partial payments from Rosneft, it reissued and re-dated the original August 2015 invoice several times to extend the payment date until the entire amount was satisfied in October 2017.

The Penalty Analysis

The statutory maximum civil monetary penalty was $1,246,248.  OFAC considered the fact that S&P Global did not voluntarily self-disclose the Apparent Violations and that the Apparent Violations were a “non-egregious case.”  Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), the applicable case civil monetary penalty amount was $175,000.  Ultimately the settlement amount of $78,750 reflected OFAC’s consideration of the General Factors under the Enforcement Guidelines.

In particular, OFAC determined the following to be aggravating factors:

• S&P Global failed to exercise a minimal degree or caution or care, and knew or had reason to know that its conduct would violate U.S. sanctions regulations.
• PIRA management, and later S&P Global managerial staff, were aware of and involved in the conduct giving rise to the Apparent Violations.
• PIRA and S&P Global are commercially sophisticated entities.

OFAC also determined the following to be mitigating factors:

• S&P Global had not received a penalty notice or finding of violation f rom OFAC in the preceding five years.
• S&P Global took remedial measures, including:
  • Enhancing their compliance program to better ensure compliance with OFAC sanctions;
  • Creating more robust training;
  • Adding periodic testing to invoices involving SSI List entities; and
  • Adding additional staff to manage sanctions issues.
• S&P Global cooperated with OFAC during the course of the investigation.

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