On 7 March 2016, the US District Court for the District of Columbia upheld OFAC’s motion for summary judgment in Epsilon Electronic’s judicial review of OFAC’s decision to impose a $4,073,000 penalty on Epsilon for alleged sanctions violations – Epsilon v US Treasury, Civil Action No. 14-2220 (RBW) F.Supp.3d (D.D.C. 2016). OFAC imposed the penalty on Epsilon in July 2014, for violating US sanctions on Iran by shipping car audio and video equipment, valued at $3,407,491, to a company that re-exports most of its products to Iran. OFAC said Epsilon knew or had reason to know that the goods were intended for Iran, although it did not find any direct evidence that Epsilon’s shipments made their way to Iran.
The judgment is highly deferential to OFAC on the basis that it operates “in an area at the intersection of national security, foreign policy, and administrative law”, applies the “arbitrary and capricious” standard of review, and also rejected Epsilon’s 5th and 8th Amendment arguments (due process & disproportionate penalty). It makes clear that OFAC expects companies to know who their customers’ customers are.