Software Vendor NewTek, Inc. Settles OFAC Violations for $ 189,483 | Michael volkov

The Treasury Department’s Offices of Foreign Assets Control (“OFAC”) continue to run in 2021 and have added another tech company to their target list.

NewTek, Inc. (“NewTek”), a software vendor that develops and supplies live production and 3D animation hardware and software, has agreed to pay $ 189,483 to settle 52 violations of the US sanctions program. ‘Iran.

NewTek’s violations resulted from its sales to foreign third-party distributors that it knew or had reason to know were directed to entities or individuals in Iran. NewTek voluntarily disclosed the conduct.

As described in the regulation, between December 2013 and May 2018 (the “Relevant Period”), NewTek exported 49 products to two third-party distributors that they knew or had reason to know were destined for an Iran-based reseller. The Iranian dealer, in turn, sold three of the exported products to Islamic Republic of Iran Broadcasting (“IRIB”), which is a specially designated national. On three occasions, NewTek has provided support, software updates, reseller training or other sales support services to customers located in Iran.

In addition, NewTek has signed two successive distribution agreements with the Iranian reseller. The first, in October 2014, was with a company located in France (“Distributor 1”). NewTek has authorized the distribution and support of NewTek’s products in the “Middle East” region, which NewTek has been informed to specifically include Iran. As shown by communications from NewTek and the distributor, including the provision of monthly sales forecasts for Iran, NewTek knew that Distributor 1 intended to supply NewTek’s products to the Iranian reseller before NewTek exported. the goods to the distributor. NewTek also provided credits to Distributor 1 for the sale of products to the Iranian reseller.

From 2013 until 2014, NewTek’s COO (“COO”) was responsible for the transfer of the Middle East sales territory from Distributor 1 to a company located in Dubai, United Arab Emirates ( “Distributor 2”). In October 2014, NewTek and Distributor 2 entered into a distribution agreement which specifically authorized the distribution of NewTek products to a list of countries in the Middle East sales territory, which explicitly included Iran. Pursuant to the distribution agreement, NewTek exported goods and services to Distributor 2 intended specifically for the Iranian reseller.

NewTek mistakenly believed that sales made indirectly through a third-party distributor in Iran were not prohibited under the Iran sanctions program. The total value of the illegal transactions was $ 583,024. NewTek’s profits from illegal sales totaled approximately $ 61,070.

NewTek did not maintain an export control or sanction compliance program and did not provide any training to staff regarding export compliance or sanctions.

According to OFAC, NewTek acted with complete disregard for compliance with U.S. sanctions by specifically authorizing the distribution and support of its products in Iran in accordance with its agreements with two third-party distributors, due to its mistaken belief that sales through the Third party intermediaries, as opposed to direct, were not prohibited by the applicable sanctions.

NewTek cooperated substantially with OFAC during the investigation. NewTek has taken a number of corrective actions, including: (1) the design and implementation of an export control and compliance program; (2) hire a compliance manager; (3) provided compliance training to sales, marketing, shipping, service and compliance staff; (4) obtained formal export classifications from the United States Department of Commerce confirming that NewTek’s products are properly designated EAR99 for export control purposes; (5) implemented bulk filtering of the names of its current and pending product owners and distributors against the SDN list; and (6) implemented geo-IP blocking measures to prevent people located in Cuba, Iran, North Korea, Syria and the Crimean region of Ukraine from downloading or registering NewTek products.

OFAC explained that NewTek’s enforcement action underlined the importance of ensuring that third-party distributors can engage OFAC’s liability when the selling company knows or has reason to know that these goods are intended for use. Iran. In this regard, companies should avoid relying on informal sanctions compliance measures and should undertake employee training and education programs to ensure an accurate understanding of the relevant sanctions regulations.

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