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Policy & Regulatory Update: Liability of U.S. parent companies in case of foreign subsidiaries' sanctions violations

Publié mercredi 10 avril 2019

On 14 March 2019, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") concluded a settlement agreement with Stanley Black & Decker, Inc. ("Stanley Black & Decker"), an American manufacturer of industrial tools and household hardware, and its Chinese subsidiary Jiangsu Guoqiang Tools Co. ("GQ"), for an amount of roughly US$1.9 million in the context of U.S. economic sanctions against Iran.

The settlement presents an instructive example of "strict liability" for U.S. parents in relation to transactions by their foreign subsidiaries with Iran, following the expansion of Iran sanctions restrictions to foreign subsidiaries of U.S. companies in 2012. Given GQ was acquired by SBD, the circumstances of the apparent violation also provide lessons with regard to sanctions risk in M&A transactions. As set out below, the settlement agreement provided a detailed example of the type of compliance procedures and controls that OFAC expects U.S. parents to implement in this regard.