What Happened

Rice Lake Weighing Systems, a Wisconsin company that makes and sells scales and other weighing equipment, has agreed to pay $60,764 to resolve eight apparent violations of U.S. sanctions on Iran. The violations trace back to Rice Lake’s Italian subsidiary, Dini Argeo, which sold weighing equipment to a distributor in the United Arab Emirates while knowing the equipment was ultimately headed to Iran.

In November 2016, Rice Lake bought Dini Argeo S.r.l., an Italian manufacturer of weighing equipment. Before the acquisition, Dini had an existing business relationship with Pand Weighing Control (“Pandtec”), an Iranian weighing systems company, and it kept selling to Pandtec afterward. That was permitted at the time under General License H, which let foreign companies owned by U.S. persons do business with Iran subject to certain conditions.

That changed in 2018. After the United States withdrew from the Iran nuclear deal in May, OFAC revoked General License H that June, though it allowed a short wind-down period running through early November. Once that period ended, Dini – as a company owned by a U.S. parent – was barred from selling to Iran, whether directly or indirectly.

Rice Lake did notify Dini of the change, in an email sent that August by its Import Export Coordinator. The message, written only in English, warned that dealings with Iran or Iranian citizens were now off-limits and quoted directly from the sanctions regulations. But Rice Lake stopped there: it offered no further explanation or translation, and OFAC found no evidence that the company checked whether Dini’s staff actually understood the new rules or took steps to monitor compliance with them.

Dini did stop selling directly to Iranian customers. Its staff, however, don’t appear to have understood that selling to Iran indirectly, through a middleman, was just as prohibited. Between June 2019 and November 2021, Dini filled eight orders – worth roughly $121,527 combined – for a UAE-based distributor of weighing equipment, knowing the distributor would resell the goods into Iran.

The sales paperwork never named Pandtec as the ultimate buyer, but the signs were hard to miss. On at least five occasions in 2019 and 2020, a Pandtec employee emailed Dini staff with product and technical questions, and every one of those emails carried a signature block that referenced Iran. The UAE distributor itself eventually confirmed that the goods were bound for Pandtec. Given Dini’s prior direct relationship with the company, OFAC concluded that Dini knew, or had reason to know, exactly where its products were ending up.

The scheme surfaced in late 2021, when Rice Lake received a tip that its products were showing up in Iran. The company launched an investigation, quickly traced the diversion to Dini’s sales through the UAE distributor, and ordered Dini to cut off that distributor entirely. Rice Lake then reported the violations to OFAC on its own initiative and began strengthening its compliance program.

Legally, OFAC pinned the violations on Section 560.215(a) of the Iranian Transactions and Sanctions Regulations (ITSR), which extends Iran-related trade prohibitions to foreign entities owned or controlled by a U.S. person. Because Dini knowingly conducted trade with a person tied to Iran – conduct that would be barred under the ITSR’s export and trade-related-transaction provisions (Sections 560.204(a) and 560.206(a)(2)) if done by a U.S. person directly – each of the eight shipments counted as a separate apparent violation.

The Penalty

OFAC treated this as a single non-egregious case and credited Rice Lake for voluntarily disclosing the violations – both determinations shaped how the penalty was calculated.

Under OFAC’s Economic Sanctions Enforcement Guidelines (31 C.F.R. Part 501, Appendix A), a non-egregious, voluntarily self-disclosed case starts with a base penalty equal to half the total transaction value involved. Applied to the $121,527 in combined value across the eight orders, that formula produced a base penalty – and the final settlement amount – of $60,764. All eight violations were treated together as a single non-egregious case rather than split by type, so there’s no further breakdown to report beyond that aggregate figure.

From there, OFAC weighed the case against its General Factors for aggravating and mitigating circumstances.

Aggravating factors

• Dini kept selling indirectly to Iran even though it should have recognized that was just as prohibited as selling directly, and Rice Lake never explained to its subsidiary why indirect sales carried the same risk.
  • General Factor A, Willful or Reckless Violation of Law: OFAC found this reflected reckless disregard for U.S. sanctions requirements – a failure to exercise even a minimal degree of caution once the direct-sales ban was already known.
• Dini knew, or had reason to know, that its products were ending up in Iran, even if it mistakenly believed the sales were permitted.
  • General Factor B, Awareness of Conduct at Issue: this is the “reason to know” standard – Dini had enough information in front of it, including the Pandtec emails and the signature blocks that referenced Iran, to know where its goods were headed.
• The equipment sold is the kind ordinary commercial businesses use, so the sales likely supported everyday economic activity in Iran, and they continued for more than two years.
  • General Factor C, Harm to Sanctions Program Objectives: this factor looks at both the economic benefit a transaction confers on a sanctioned country and how long the conduct continued, and both were present here.

Mitigating factors

• Neither Rice Lake nor Dini had faced an OFAC enforcement action in the five years before the earliest of these transactions.
  • General Factor D, Individual Characteristics: OFAC treats a clean sanctions history over that five-year window as grounds for a “first violation” reduction.
• The transactions at issue were a very small share of either company’s overall sales during the relevant period.
  • General Factor D, Individual Characteristics: this factor also weighs the volume of apparent violations against a company’s total transaction volume, and here the violations were a small fraction of business.
• Rice Lake acted quickly once it learned of the problem. It hired outside sanctions counsel and ran a thorough investigation, including a check for other possible violations. It then strengthened its compliance program on three fronts: training for subsidiary employees, vetting of end distributors, and reexport control warnings added to its commercial invoices.
  • General Factor F, Remedial Response: this factor rewards how fast and how thoroughly a company responds once a violation surfaces, and Rice Lake’s response touched every area OFAC looks at – stopping the conduct, investigating fully, and fixing the underlying gaps.
• Rice Lake cooperated fully with OFAC’s investigation, responding promptly to inquiries and document requests and agreeing to toll the statute of limitations while the case was under review.
  • General Factor G, Cooperation with OFAC: prompt responsiveness and a willingness to toll the statute of limitations are both cooperation factors OFAC credits favorably.

What are the Takeaways?

This case is a reminder of the sanctions exposure U.S. companies carry for their foreign subsidiaries and affiliates. The Iran program is especially strict on this point: foreign entities owned or controlled by a U.S. person have to comply almost as fully as the U.S. parent itself.

That exposure is separate from the liability foreign companies can face under other rules that apply to non-U.S. persons directly, such as causing a U.S. person to violate sanctions. Here, the risk ran through ownership rather than through any direct U.S. nexus.

U.S. companies need to make sure any foreign subsidiaries they own or control actually understand, and fully comply with, the sanctions rules that apply to them. A subsidiary’s compliance failure becomes the parent’s liability. And as this case shows, that risk includes goods flowing back into Iran through the subsidiary’s own sales channels.

The fix starts with effective, risk-based controls at the subsidiary level. That means training and guidance for everyone who touches the relevant transactions, not just management. Misunderstandings at the staff level can create liability just as easily as decisions made higher up, and enforcement is more likely where a company hasn’t taken reasonable steps to prevent them.

Training should be tailored to the subsidiary’s actual environment, accounting for things like local language and business customs, rather than a one-size-fits-all policy translated, or not translated, from headquarters.

Oversight controls matter too. Centralized monitoring and regular testing and auditing give a company the chance to catch weaknesses before they turn into violations, and those controls should be calibrated to a given entity’s specific risk profile. Companies with counterparties in jurisdictions known for diversion risk, the UAE among them, should pay particular attention to the danger of indirect dealings with sanctioned parties.

Finally, sanctions programs shift, sometimes quickly, and a company needs to keep pace with those changes rather than treat a compliance framework as something it can set once and leave alone.

OFAC ties this discussion to Treasury’s March 2024 Tri-Seal Compliance Note on foreign-based persons’ sanctions obligations, along with OFAC FAQs 11 and 644.

Other resources

OFAC’s 2019 publication, A Framework for OFAC Compliance Commitments, lays out the agency’s view of what belongs in an effective sanctions compliance program, along with an appendix on the common root causes behind apparent violations.

For the mechanics of the civil penalties process itself, the relevant sources are the regulations for each sanctions program, the Reporting, Procedures, and Penalties Regulations at 31 C.F.R. Part 501, and the Enforcement Guidelines discussed above. OFAC keeps these references, along with its recent civil penalties and enforcement actions, on its website.

Separately, Treasury’s Financial Crimes Enforcement Network runs a whistleblower program covering OFAC sanctions violations as well as violations of IEEPA, the Foreign Narcotics Kingpin Designation Act, the Trading with the Enemy Act, and the Bank Secrecy Act. Whistleblowers, whether based in the U.S. or abroad, may be eligible for an award if their information leads to a successful enforcement action with penalties over $1,000,000, across any commercial sector.

and the source document: