OFAC Settlement With Swiss ICT Service Provider Reinforces Message To Foreign Companies: Beware Any US Nexus

Geneva-based Société Internationale de Télécommunications Aéronautiques SCRL ("SITA") has agreed to pay the US Office of Foreign Assets Control ("OFAC") nearly $8 million to settle its potential civil liability for apparent violations of US sanctions laws, despite taking steps to ensure compliance. The new enforcement action—the latest in a series against information and communications technology ("ICT") companies—highlights two key messages: (i) that OFAC views virtually any US nexus as sufficient for OFAC to assert its jurisdiction and (ii) that the failure to implement what OFAC refers to as "comprehensive and detailed" risk-based compliance to properly identify and manage sanctions risk can create substantial exposure for non-US companies. This message is particularly important for non-US companies whose provision of goods or services abroad is tied to US-based ICT infrastructure or support services to process data or transactions.

SITA is headquartered in Switzerland and provides commercial telecommunications network and information technology services to the civilian air transportation industry, including both member and non-member airlines. The settlement announcement notes that the SITA group includes US subsidiaries that develop, host and support certain SITA group products, though it is not clear that the existence of a US subsidiary was essential to the assertion of US jurisdiction.

At issue in the enforcement action was the provision of services by SITA to several airlines that had been designated by OFAC under the Global Terrorism Sanctions Regulations ("GTSR")—Mahan Air, Syrian Arab Airlines, Caspian Air, Meraj Air and Al-Naser Air. Pursuant to the GTSR, all interests in property of such designated entities that are in the United States are blocked, 31 C.F.R. § 594.201(a), and US persons are prohibited from providing any goods or services to such designated entities, id. §594.204(a). OFAC interprets these prohibitions as applying to the provision of any services to designated parties from the United States. 31 C.F.R. § 594.406. SITA itself, being a Swiss entity, is not a US person and so is not directly subject to these prohibitions.

Nevertheless, OFAC determined that SITA's provision of services to the designated airlines was "subject to U.S. jurisdiction." The basis for this conclusion, in OFAC's words, was the fact that SITA provided the airlines services and software (described below) that "were provided from, or transited...

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