{"id":6578,"date":"2022-07-25T22:20:04","date_gmt":"2022-07-25T22:20:04","guid":{"rendered":"https:\/\/www.americanconference.com\/fcpa-dc\/?page_id=6578"},"modified":"2023-01-19T16:53:10","modified_gmt":"2023-01-19T16:53:10","slug":"compliance-measures-to-address-sanctions-enforcement-the-new-fcpa","status":"publish","type":"page","link":"https:\/\/www.americanconference.com\/fcpa-dc\/aci-insights\/compliance-measures-to-address-sanctions-enforcement-the-new-fcpa\/","title":{"rendered":"Compliance measures to address sanctions enforcement: \u2018the new FCPA\u2019"},"content":{"rendered":"
\r\n

By Jaclyn Jaeger<\/p>\r\n

Friday, June 10, 2022<\/p>\r\n<\/div>\r\n

In line with the Biden administration\u2019s declaration<\/a> last year that anticorruption is a \u201ccore United States national security interest,\u201d sanctions evasion enforcement rapidly has become a core priority for the Department of Justice (DOJ). Companies should be looking to enhance their sanctions compliance programs and due diligence practices accordingly.<\/p>\r\n\r\n

During a moderated discussion<\/a> at the New York City Bar Association\u2019s 2022 White Collar Crime Institute in April, Deputy Attorney General (DAG) Lisa Monaco said she is seeing an \u201cincreasing intersection between national security issues and corporate crime and corporate criminal enforcement,\u201d such as terrorist group financing, money laundering, and cybercrime. <\/p>\r\n\r\n

Following Russia\u2019s invasion of Ukraine on Feb. 24, the DOJ remains especially focused on investigating and prosecuting sanctions evasion violations as it concerns Russia. During her remarks, DAG Monaco provided further details around what to expect from this new whole-of-government effort. <\/p>\r\n\r\n

With Task Force Kleptocapture, for example, investigators are \u201cdrawing on money laundering and sanctions enforcement expertise within the Department of Justice and the Treasury Department. We are drawing on cybercrime investigators both in the Criminal Division and in the National Security Division,\u201d she said.<\/p>\r\n\r\n

Moreover, the intelligence community is feeding DOJ investigators and prosecutors information about the location of assets that belong to sanctioned individuals. \u201cYou wouldn\u2019t have seen that years ago, that kind of interaction to help feed our enforcement efforts,\u201d DAG Monaco said.<\/p>\r\n\r\n

The launch<\/a> of the cross-border Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force brings further focus on enforcement of Russia sanctions evasion. \u201cThat means more cross-border investigations,\u201d said Jamie Schafer, a partner at law firm Perkins Coie.<\/p>\r\n\r\n

Sanctions compliance best practices<\/h5>\r\n\r\n

In offering insight about the role legal and compliance professionals can play, DAG Monaco said, \u201cAs you\u2019re having discussions with your clients, they\u2019ve got to be factoring in this changed landscape,\u201d she said, referring to sanctions as \u201cthe new FCPA.\u201d<\/p>\r\n\r\n

That\u2019s not to say Foreign Corrupt Practices Act (FCPA) enforcement isn\u2019t a priority, but rather that sanctions enforcement is now more on par with FCPA enforcement, legal experts said. DOJ is more \u201caggressively and intensively\u201d involved in sanctions enforcement than historically has been the case, Schafer said.<\/p>\r\n\r\n

DAG Monaco further stressed that sanctions enforcement \u201cabsolutely\u201d will spread beyond industries that historically have been at the center of sanctions enforcement, like financial services. She added it\u2019s \u201ccritically important\u201d for all multinational companies to think about how these sanctions regimes affect them and \u201csomething they should be having conversations about.\u201d<\/p>\r\n\r\n

Schafer said we may start to see \u201cmajor enforcement actions around industries where there has not historically been a focus on sanctions compliance, because there hasn\u2019t historically been a big focus on sanctions enforcement [in these industries].\u201d <\/p>\r\n\r\n\"Anti-Corruption<\/a>\r\n\r\n

Thus, it will be important for companies to reevaluate and enhance their sanctions compliance programs in the following ways:<\/p>\r\n\r\n

Map out the company\u2019s jurisdictional touchpoints.<\/strong> \u201cAre you a U.S. company that sells products only out of the United States? In that case, maybe you\u2019re focused only on U.S. sanctions,\u201d said Anthony Rapa, leader of Blank Rome\u2019s national security team. However, if the company has operations in multiple countries, or deals with intermediaries in other countries, \u201cyou need to be mindful not only of the sanctions in the jurisdiction of which you\u2019re organized, but also different touchpoints along the way where you may have exposure to Russia,\u201d he said.<\/p>\r\n\r\n

Don\u2019t ignore indirect ties to Russia.<\/strong> \u201cOne place where I see U.S. companies come up short in analyzing their risk and conducting diligence is thinking through the indirect exposure they might have to Russia,\u201d Schafer said. That requires performing due diligence on high-risk suppliers and distributors and understanding where products are coming from, and where they are going, she said.<\/p>\r\n\r\n

Companies should ensure their high-risk suppliers and distributors have their own risk mitigation practices in place as well. \u201cYou want to make sure they are doing the proper due diligence as well,\u201d said Mark Bini, a former U.S. assistant attorney for the Department of Justice and now a partner at ReedSmith.<\/p>\r\n\r\n

Watch for new industry-focused sanctions.<\/strong> Sanctions and enforcement actions by the Treasury Department\u2019s Office of Foreign Asset Control (OFAC) are increasingly sweeping in new industries. Companies cannot afford to ignore sanctions compliance lapses, as \u201cRussia enforcement matters likely are the top enforcement priority for OFAC right now,\u201d Rapa said.<\/p>\r\n\r\n

One recent example: OFAC\u2019s sanctioning of Moscow-based virtual currency mining company, BitRiver. OFAC stated it designated its holding company, BitRiver AG, \u201cfor operating or having operated in the technology sector of the Russian Federation economy.\u201d<\/p>\r\n\r\n

That signals to the legal and compliance profession that \u201cthere are entities and individuals that are ending up on the sanctions list in places you wouldn\u2019t expect,\u201d Bini said. \u201cI wouldn\u2019t have expected a crypto miner to be on the sanctions list.\u201d<\/p>\r\n\r\n

Additionally, effective June 7, U.S.-based accounting, management consulting, and trust and corporate formation services are banned from providing services to any person or entity located in the Russian Federation, under new OFAC sanctions<\/a>. Service providers should also be conducting diligence, ensuring they\u2019re not facilitating transactions with a nexus to Russia, Schafer said.<\/p>\r\n\r\n

Currently, legal services do not fall under OFAC\u2019s service provider ban. However, during a recent press conference<\/a>, a White House official stated that U.S. sanctions could be broadened at a later date to include legal services.<\/p>\r\n\r\n

Implement robust screening tools.<\/strong> In several sanctions enforcement cases of late, sanctioned persons or sanctioned countries were able to remotely access the servers of U.S. companies. So, it\u2019s important to screen the names of those who are using the company\u2019s servers. \u201cThat is a level of diligence OFAC has made clear it expects, but a lot of companies really aren\u2019t meeting that expectation,\u201d Schafer said.<\/p>\r\n\r\n

Stay apprised of FinCEN advisories.<\/strong> An April 14 advisory<\/a> issued by the Financial Crimes Enforcement Network (FinCEN) listed 10 common red flags designed \u201cto assist financial institutions in detecting, preventing, and reporting suspicious transactions associated with kleptocracy and foreign public corruption.\u201d FinCEN noted that suspicious transactions include not just bank accounts, but physical property like luxury real estate, private jets, yachts, and artwork.<\/p>\r\n\r\n

Examples of specific red flags include transactions involving foreign government business conducted through personal accounts; funds moving to and from countries not tied to the public officials; and public officials\u2019 assets that aren\u2019t commensurate with the public official\u2019s reported source of wealth or that fall outside that individual\u2019s normal lifestyle.<\/p>\r\n\r\n

Other red flags FinCEN cited include the use of third parties to shield foreign public officials\u2019 identities; and assets held in the name of intermediate legal entities whose beneficial owner or owners are tied to a kleptocrat or his or her family member. \u201cThat could be particularly challenging for the financial service industry, trying to detect, for example, the involvement of oligarchs through webs of ownership and shell companies,\u201d Rapa said.<\/p>\r\n\r\n

Educate key stakeholders on red flags.<\/strong> Business units that are most often directly impacted by sanctions restrictions include procurement, sales, risk management, accounts payable, and accounts receivable, Bini said. All these departments need to be trained on identifying which red flags, such as those cited by FinCEN, to raise to the compliance department.\r\nKnow your customer (KYC). Prudent legal and compliance professionals know the importance of conducting due diligence and identifying the owners of sanctioned firms, but that\u2019s challenging in situations where the ownership structure is complex, or the customer or counterparty is opaque.<\/p>\r\n\r\n

Even before Russia\u2019s invasion of Ukraine, the DOJ and Treasury Department were placing greater emphasis on beneficial ownership transparency. \u201cFinCen is looking at additional regulations in that area, and that appears to be a priority of this administration,\u201d Bini said. The Financial Action Task Force (FATF) has issued some helpful guidance<\/a> for companies seeking clarity in this area.<\/p>\r\n\r\n

Stay apprised of sanctions developments.<\/strong> Rapa recommended financial institutions and multinational companies sign up for OFAC\u2019s newsletter to stay apprised of its latest enforcement actions and sanctions developments, as well as the Commerce Department\u2019s announcements on U.S. export control developments.<\/p>\r\n\r\n

Responding to a question of whether the DOJ plans to issue sanctions guidance as it has done with FCPA guidance, DAG Monaco responded, \u201cIt\u2019s probably something that we could be developing more guidance on.\u201d<\/p>\r\n\r\n

\u201cWe\u2019re kind of in the process of building the airplane as we\u2019re flying it,\u201d she added. \u201cNew sanctions are coming out almost on weekly basis, so we do owe it to companies, and those who advise them, to be as transparent as we can be in terms of what we\u2019re expecting.\u201d<\/p>\r\n\r\n

ACI will be holding a pre-conference<\/span> workshop, \u201cAn Updated Guide to Operationalizing FCPA & Economic Sanctions Compliance: The Newest Lessons for Managing the Overlapping Web of Compliance, Screening and Due Diligence Obligations,\u201d at its \u201c39th<\/sup> International Conference on the FCPA,\u201d taking place Nov. 30-Dec. 1, 2022, at the Gaylord National Resort and Convention Center in Washington D.C.<\/em> | www.FCPAconference.com<\/a><\/p>\r\n\r\n

For questions, concerns or more information about ACI Insights, please contact:<\/strong>
Chris Corbin
Associate Director of Marketing
American Conference Institute |<\/span> The Canadian Institute |<\/span> C5
E: c.corbin@americanconference.com<\/a><\/p>","protected":false},"excerpt":{"rendered":"By Jaclyn Jaeger Friday, June 10, 2022 In line with the Biden administration\u2019s declaration last year that anticorruption is a \u201ccore United States national security interest,\u201d sanctions evasion enforcement rapidly has become a core priority for the Department of Justice (DOJ). 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