On May 21, 2012, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury announced that Genesis Asset Managers, LLP, a U.S. investment manager (“GAM US”), agreed to remit $112,500 to settle potential civil liability for an apparent violation of the Iranian Transactions Regulations (“ITR”), 31 C.F.R. part 560, that occurred on or about August 1, 2007.
GAM US, the investment manager of a UK Fund (“UK Fund”), had contracted with its UK subsidiary, Genesis Investment Management LLP (“GIM UK”) through an Investment Advisory Agreement, pursuant to which GIM UK provided investment advice and recommendations and carried out transactions as an agent of GAM US in accordance with the investment policies and strategies adopted from time to time by UK Fund. In 2007, pursuant to this delegated authority, GIM UK purchased approximately $3 million of shares for UK Fund in a Cayman Islands company that invests exclusively in Iranian securities.
OFAC noted several aggravating factors: GAM US allegedly failed to exercise a minimal degree of caution or care in the conduct that led to the apparent violation of the ITR; officers of GAM US were allegedly aware of the conduct giving rise to the apparent violation; substantial economic benefit was allegedly conferred to Iran, thereby undermining the objectives of the ITR; and GAM US allegedly did not have an OFAC compliance program in place at the time of the apparent violation.
However, OFAC did not consider the violation egregious because GAM US has not received a penalty notice or Finding of Violation from OFAC for substantially similar violations; GAM US substantially cooperated with OFAC’s investigation by responding promptly and completely to OFAC’s requests for information, by voluntarily self-disclosing the apparent violation in question, and by agreeing to settle the matter without the issuance of a Prepenalty Notice; GAM US took appropriate remedial action; and GAM US may not have fully understood its OFAC obligations under U.S. law.