Supply Chain Risk — Sanctioned Entity Exposure
Identifying hidden OFAC SDN exposure in a Fortune 500 supply chain
Overview
A Fortune 500 consumer goods company received a confidential whistleblower tip through its ethics hotline alleging that one of its Tier 2 suppliers was indirectly sourcing raw materials from a region subject to US economic sanctions. The company’s general counsel engaged Atlas Veracity to investigate.
The Client
A Fortune 500 consumer goods company with over $15B in annual revenue, operating in 80+ countries. The company maintained a robust compliance program but had limited visibility beyond its direct Tier 1 supplier relationships. The whistleblower tip named a specific Tier 2 supplier based in Southeast Asia.
The Challenge
The company’s existing compliance processes screened Tier 1 suppliers against sanctions lists, but did not extend screening to Tier 2 or Tier 3 suppliers due to the complexity and scale of its global supply chain.
The whistleblower’s tip was specific enough to warrant investigation but did not provide documentary evidence. The company needed to independently verify or refute the allegation before deciding on remediation.
If the allegation was true, the company faced potential OFAC enforcement action, which could result in penalties ranging from $50M to over $300M depending on the scope and duration of the sanctions exposure.
The investigation needed to be conducted discreetly to avoid alerting the supply chain participants, who might destroy evidence or restructure to obscure the sanctioned connection.
Our Approach
Supply Chain Mapping
Working with the company’s procurement team, we mapped the full supply chain from Tier 1 through Tier 3 for the product line identified in the whistleblower tip. This involved analyzing procurement contracts, shipping records, and certificates of origin to identify all entities in the chain.
Corporate Ownership Analysis
For each entity identified in the supply chain, we conducted corporate ownership analysis using corporate registries, beneficial ownership databases, and proprietary intelligence sources across five jurisdictions: Vietnam, Malaysia, Myanmar, Singapore, and Hong Kong.
Trade Record & Customs Analysis
We analyzed import/export records, bills of lading, and customs declarations to trace the physical flow of raw materials through the supply chain. We identified transshipment patterns consistent with sanctions evasion — materials originating in a sanctioned region being routed through third countries to obscure their origin.
Sanctions Screening & Source Intelligence
All identified entities and their beneficial owners were screened against OFAC SDN, Sectoral Sanctions, and Non-SDN lists, as well as EU and UN consolidated lists. We also deployed on-the-ground source inquiries through our network in Southeast Asia to verify physical operations at key facilities.
Key Findings
Outcome
Atlas Veracity’s findings were presented to the company’s general counsel and chief compliance officer in a classified briefing. The company immediately terminated its relationship with the affected Tier 2 supplier and implemented an emergency sourcing plan with pre-screened alternative suppliers. The company self-reported the potential sanctions exposure to OFAC, presenting the investigation findings and the immediate remediation steps. OFAC acknowledged the voluntary self-disclosure and the company’s good-faith compliance efforts. No enforcement action was taken.
Impact
By identifying the sanctions exposure before regulatory discovery, the company avoided potential penalties estimated at $50M to $300M. The voluntary self-disclosure, combined with the thoroughness of the investigation and the immediacy of remediation, were key factors in OFAC’s decision not to pursue enforcement. The company subsequently engaged Atlas Veracity to implement an ongoing Tier 2/3 supply chain screening program.