September 26, 2017

OFAC Takes Action Against the Retail Jewelry Industry

by Jeremy Paner

Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $334,800 settlement with Richemont North America, Inc., d.b.a. Cartier, to resolve potential civil liability arising from apparent violations of the Kingpin Sanctions Regulations.  According to OFAC, between late 2010 and early 2011, an individual made four purchases of jewelry from Cartier locations in California or Nevada, which Cartier then shipped to Shuen Wai Holding Limited, a designated entity in Hong Kong.

Treasury regulations implementing the Bank Secrecy Act require dealers in precious metals, precious stones, or jewels to establish and maintain anti-money laundering  (AML) programs.[1]  These programs should be part of a larger compliance framework, which enable dealers to identify and prevent sales and shipments involving designated individuals and companies.  Retailers such as Cartier, however, are generally exempt from the AML program requirement.[2]  As a result, retailers that ship products internationally should establish a process to identify prohibited dealings, independently of any legally mandated program requirements. 

The Financial Crimes Enforcement Network (FinCEN) mandates certain AML program requirements for banks and non-bank financial institutions.  OFAC, on the other hand, will not evaluate the existence or efficacy of sanctions compliance programs prior to its consideration of potential enforcement responses to apparent violations.

Although OFAC does not mandate the specific requirements in greater detail than the core program elements, sanctions compliance programs should be commensurate with the unique risk profile of each business entity.  Today’s settlement establishes the minimal expectation on retailers that serve an international clientele to identify and screen all transactional parties.

We will continue to monitor developments in the enforcement of economic sanctions and publish updates as new developments arise.


[1] 31 C.F.R. Part 1027

[2] 31 C.F.R. §1027.100(b)(2)