Logistics Company Toll Reaches Settlement With Regulator Over Alleged Sanctions Violations

Date: Tuesday, April 26, 2022
Source: The Wall Street Journal

Logistics provider Toll Holdings Ltd. has reached a $6.1 million settlement with the U.S. Treasury Department over alleged sanctions violations involving several nations.

The Melbourne, Australia-based company was alleged to have originated or received payments through the U.S. financial system related to shipments transacted by Toll, its affiliates or suppliers routed via North Korea, Iran or Syria, or related to entities on the Office of Foreign Assets Control’s list of specially designated nationals or blocked persons.

OFAC said the fine could have been as high as around $826.4 million, but that it had reduced the amount based on several mitigating factors, including Toll’s voluntary disclosure of the violations to OFAC and the measures it had taken to fix the problems in its compliance program. The agency said Toll had restructured its compliance department and streamlined its approach to screening for sanctions.

“Regrettably, this situation occurred because of a misunderstanding about regulations regarding payments through the U.S. financial system related to otherwise permissible shipments,” Thomas Knudsen, managing director of Toll Group, said in an emailed statement. “We take compliance seriously and have acted to keep this from happening again, instituting rigorous control systems and enhanced training and accountability. None of the individuals involved in the transactions at issue are employed any longer by Toll Group.”

OFAC said that between January 2013 and February 2019, Toll originated or received nearly 3,000 payments for shipments made by Toll, its affiliates or providers and suppliers valued at around $48.4 million. The transactions were processed through at least four U.S.-based financial institutions, which violated U.S. sanctions regimes.

Of the alleged payments, 424 involved two Iran-based entities, Mahan Airlines and Hafiz Darya Arya Shipping Co.

OFAC added that Toll “failed to adopt or implement policies and controls that prevented it from conducting transactions that involved designated parties or persons in sanctioned jurisdictions,” stemming in part from the company’s rapid expansion, which it said occurred without sufficient compliance controls put in place to keep up with the number of entities it acquired.

By May 2015, according to OFAC, some Toll personnel had reason to believe payments were being made in potential violation of U.S. sanctions. It said that the same month, an unnamed bank restricted a Toll subsidiary’s use of its U.S. dollar account after identifying a U.S. dollar transaction involving Syria. Concerned that this would hold up a separate large pending transfer, a Toll employee sent an email to employees in Toll’s United Arab Emirates and South Korea affiliates, asking them to avoid using the names of sanctioned jurisdictions on future invoices.

Under a June 2016 threat of its relationship with the bank being terminated, Toll said it would cease all business with U.S.-sanctioned countries. OFAC, however, alleges that the company had insufficient compliance controls to prevent payments from sanctioned persons through the U.S. financial system. In February 2017, Toll implemented hard controls, which disabled the country and location codes for ports and cities in sanctioned countries in its freight-management system and made it impossible to ship to or from those nations.

About 105 of the 2,958 payments that violated sanctions occurred after the hard controls were implemented. The company subsequently hired an accounting firm to do a forensic examination of its payments regarding sanctioned individuals and locales and disclosed its findings to OFAC.

State-controlled financial giant Japan Post Holdings Co. acquired Toll for $5.1 billion in May 2015 and two years later reported a $3.6 billion write-down for its Toll unit. Last year, Toll agreed to sell its Global Express business in Australia and New Zealand to Australian private-equity fund manager Allegro Funds.

 

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