Unprecedented changes are imminent in sanctions and export control enforcement, as the U.S. government amplifies its focus on national security and corporate compliance. On this episode of Corruption, Crime and Compliance, Michael Volkov discusses the potential consequences of these developments. He dissects the “new FCPA”, the Department of Justice’s (DOJ) strategic approach, the critical role of sanctions and export control enforcement, and the intricacies of voluntary disclosure programs.

You’ll hear Michael talk about:

• A significant shift is occurring in the DOJ's enforcement focus, with 75% of criminal cases against corporations now related to national security matters, including sanctions enforcement, money laundering, and terrorism.
• The DOJ will collaborate with OFAC and BIS in a similar manner to the relationship between the DOJ and the SEC during FCPA enforcement.
• Corporate resolutions are set to increase drastically, with steep penalties, deferred prosecution agreements, guilty pleas, and a surge in individual prosecutions. Heightened compliance expectations around export controls and sanctions compliance will necessitate a ramp-up of relevant compliance programs.
• The enforcement actions will serve as guidance, similar to the initial stages of FCPA enforcement, providing cues about the DOJ's view on compliance and their expectations from compliance programs.
• The DOJ plans to ramp up enforcement against global banks, investing heavily in the Bank Integrity Unit which is part of the anti money laundering operations for global banks, and sanctions enforcement.
• The DOJ has forewarned corporations about the enforcement emphasis on sanctions and export controls. DOJ has ongoing investigations in various sectors including transportation, fintech, banking, defense, and agriculture.
• Voluntary disclosure programs, such as those from OFAC and the National Security Division, play a significant role in mitigating enforcement actions. However, choosing between OFAC and DOJ disclosure can present a nuanced dilemma for corporations, hinging on whether a violation is willful. The number of voluntary disclosures involving both is expected to increase as corporate enforcement actions rise.
• The case against British American Tobacco by DOJ and OFAC for illegal sales of cigarettes to North Korea, resulted in a combined penalty of $629M. This is a significant instance of enforcement action against a non-financial institution.
• The Bureau of Industry and Security (BIS) and the Department of Commerce brought a case against Seagate Technology, resulting in a $300 million settlement. The DOJ seems to be investigating this matter further due to Seagate's blatant violations.
• A case against Murad, a cosmetics company, was brought by OFAC for Iran sanctions violations worth approximately $11 million. Murad ended up paying a $3.3M fine. Murad's actions highlight the importance of sanctions compliance guidance and the significance of due diligence, especially during acquisition processes.
• OFAC's enforcement action against Murad also emphasized the importance of having a local compliance structure when a foreign parent company is involved. 
• OFAC also stressed on the importance of pre- and post- acquisition due diligence and audits when acquiring companies. The failure to perform such activities may lead to unidentified sanctions issues, as illustrated in the Murad-Unilever case.
• We may see larger fines against non-financial institutions in the near future, surpassing the current record of $508 million, indicating an uptick in enforcement actions.

KEY QUOTE:

"OFAC announced a separate civil settlement for $508M, which is the largest fine against a non-financial institution in OFAC's history. And that's what we're going to be seeing. Largest fines against the non-financial institution will eclipse $508M probably in the next couple of years." - Michael Volkov

Resources:

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group