Musical instrument manufacturer’s OFAC settlement demonstrates value of self-reporting
Córdoba Music Group LLC, a manufacturer of musical instruments based in California, agreed to pay $41,591 to settle its civil liability for violations of sanctions on Iran. On nine occasions from November 2019 to March 2022, Córdoba shipped instruments and related accessories that it knew were ultimately destined for Iran. The shipments totaled $118,831 in value.
Córdoba’s customer, an Iranian musical product distributor, instructed Córdoba to bill and ship products to a Dubai-based general trading company for further shipment to Iran.
In February 2023, Córdoba was acquired by another U.S. company. About two months after the acquisition, a salesperson forwarded to the new owner an email concerning the Iranian distribution relationship. Upon receiving the email, the new parent company’s leadership directed Córdoba to terminate the business relationship and began investigating the activity and submitted a voluntary self-disclosure to OFAC.
While Córdoba’s prior ownership admitted it knew the products were destined for Iran, it apparently did not realize that indirect exports to Iran violated U.S. sanctions. Prior management also noted that competitors allegedly sell their products in Iran and they mistakenly believed that indirect musical instrument sales to Iran were not prohibited.
The maximum statutory penalty that could have been imposed was $3,313,224. OFAC found that the conduct was non-egregious and that Córdoba self-reported the conduct. As such, the base monetary penalty under OFAC’s penalty guidelines was $58,416. As mitigating factors, OFAC noted that Córdoba is a very small company with no history of sanctions violations, and that Córdoba created a sanctions compliance program in response to this matter and cooperated with the investigation.
The deep discount on the settlement amount shows the value of self-reporting and cooperating with OFAC, both factors recognized in OFAC’s regulations as warranting deep discounts to settlement amounts.
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