According to the settlement agreement, between April 2011 and October 2014, Expedia allegedly violated U.S. sanctions by assisting 2,221 people, some of whom were Cuban nationals, with travel or travel-related services for travel within Cuba or between Cuba and locations outside the United States.
OFAC said the violations occurred “because certain Expedia foreign subsidiaries lacked an understanding of and familiarity with U.S. economic sanctions laws, and Expedia employees overlooked particular aspects of Expedia’s business that presented risks of non-compliance with sanctions. Specifically, electronically booked travel resulted from failures or gaps in Expedia’s technical implementations and other measures to avoid such apparent violations.”
“With respect to at least one foreign subsidiary, Expedia failed to inform the subsidiary until approximately 15 months after Expedia acquired the subsidiary that it was subject to U.S. jurisdiction and law,” OFAC said. “Expedia was slow to integrate the subsidiary into the Expedia corporate family, including with respect to compliance with U.S. sanctions, and the subsidiary continued operating independently during the integration period.”
In determining the settlement amount, OFAC considered the following to be aggravating factors: Expedia “failed to exercise a minimal degree of caution or care” in avoiding the conduct that led to the violations. Moreover, based on the number of violations, the length of time over which the violations occurred, and the number of Expedia entities involved, the violations “appear to have resulted from a pattern or practice of conduct,” OFAC said.
Expedia, however, voluntarily self-disclosed the violations to OFAC. After discovering the violations, Expedia also implemented “significant remedial measures to strengthen its U.S. economic sanctions compliance program throughout the Expedia corporate family, including domestic and foreign direct and indirect subsidiaries,” OFAC noted.
OFAC also said that Expedia cooperated with OFAC’s investigation “by submitting data analytics associated with the apparent violations, responding to OFAC’s requests for additional information, and entering to multiple tolling agreements.”
As part of the settlement agreement with OFAC, moreover, Expedia has committed to enhancing its compliance procedures by ensuring that Expedia:
- Has a management team in place that is committed to compliance;
- Conducts regular risk assessments to ensure that Expedia’s internal controls appropriately mitigate its sanctions-related risks;
- Conducts regular testing and audits; and
- Provides ongoing sanctions compliance training throughout the Expedia corporate family.
Additionally, Expedia has steadily increased its resources dedicated to compliance with U.S. sanctions, resulting in substantially more robust staffing and resources corporate-wide and has taken measures to increase compliance with U.S. sanctions, including enhanced screening methods and implementation of automated software restrictions, OFAC noted.
OFAC said the case illustrates the sort of benefits that companies can realize—including, with respect to OFAC’s Cuba sanctions, entities owned or controlled by U.S. persons—when they implement corporate-wide compliance measures. “U.S. companies can mitigate risk by conducting sanctions-related due diligence both prior and subsequent to mergers and acquisitions,” OFAC said, “and taking appropriate steps to audit, monitor, train, and verify newly acquired subsidiaries for OFAC compliance.”
Prudent compliance officers will want to heed OFAC’s advice, particularly since OFAC unveiled amendments to the Cuban Assets Control Regulations (CACR) on June 4. These amendments complement changes to the Department of Commerce’s Bureau of Industry and Security (BIS) Export Administration Regulations (EAR). BIS, in coordination with OFAC, is amending the EAR to make passenger and recreational vessels and private and corporate aircraft ineligible for a license exception and to establish a general policy of denial for license applications involving those vessels and aircraft.
“Cuba continues to play a destabilizing role in the Western Hemisphere, providing a communist foothold in the region and propping up U.S. adversaries in places like Venezuela and Nicaragua by fomenting instability, undermining the rule of law, and suppressing democratic processes,” said Treasury Secretary Steven Mnuchin. “This Administration has made a strategic decision to reverse the loosening of sanctions and other restrictions on the Cuban regime. These actions will help to keep U.S. dollars out of the hands of Cuban military, intelligence, and security services.