Justice Department warns exporters; surges investigations

A few weeks ago, the U.S. Department of Justice (DOJ) issued a stark warning to companies and individuals worldwide.  Export and sanctions enforcement efforts are on the rise.  Especially for anyone who engages with China, Russia, North Korea or Iran.

During a keynote address on October 5 in New York, associate deputy attorney general John Carlin highlighted the DOJ’s enforcement actions specific to sanctions and export controls.  Mr. Carlin told the audience that his agency currently has about 150 open investigations for possible sanctions and/or export control violations, noting “that’s a significant increase over the last couple of years.”  He said 70% of those open cases relate to one of four countries – China, Russia, North Korea and Iran.  Mr. Carlin described how these four countries are continually identified as nations that pose a threat to our security.  This is particularly true when it comes to stealing U.S. technology and “human knowledge.”

“Surging resources” for corporate enforcement

The DOJ works closely with the U.S. Department of Treasury in the sanctions area, as well as U.S. Departments of Commerce and State concerning export enforcement.  Carlin described how the United States and its allies use sanctions and export control regulations to prevent the proliferation of weapons of mass destruction.  These regulations are also used to hold “countries to account when they violate international norms on human rights or other areas.”  He touted the department’s seizure of more than one million barrels of Iranian oil destined for Venezuela, as well as its seizing of a North Korean oil tanker used to evade sanctions.

Although most U.S. companies know to avoid dealings with Iran and North Korea, the problem of compliance becomes trickier when foreign subsidiaries and/or parent companies are involved.  Also, U.S. trade with Russia just topped $24 billion and China is our third-largest trading partner.  Because of this, the United States will continue to vigorously pursue both domestic and international companies/individuals who seek to evade (or unknowingly violate) the regulations.  As Mr. Carlin said in his speech: “The U.S. dollar continues to be the currency of international trade, and so for foreign policy… sanctions will continue to be a vital instrument of American power.”  To support these efforts, Carlin said, in the days and months ahead, the DOJ is “building up to surge resources for corporate enforcement.”  This includes a new squad of FBI agents dedicated to pursuing white-collar crimes.

Mr. Carlin also discussed the DOJ National Security Division’s Voluntary Self-Disclosure (VSD) program for export controls and sanctions. The program is designed to “incentivize companies to come forward when they identify criminal violations of sanctions and export control laws so that the company and government can quickly remediate.”  In fact, German software giant SAP was the first company to enter into a non-prosecution agreement based on this VSD program.  SAP self-disclosed and placed considerable resources into their export program. The DOJ through this program also advised that there is weight being given to companies who cooperate, provide strong remediation and voluntarily disclose violations.

What’s on your mind?  DOJ wants to know

Those of us in trade compliance know that U.S. regulations control more than just physical goods.  They also control U.S. technology, technical data, IP and the “human knowledge” in our minds.  Carlin reiterated this during his speech – describing a recent case where three former intelligence officials decided to become “hackers for hire” for the United Arab Emirates.  The result?  A deferred prosecution agreement and $1.6 million in penalties.  Those individuals will also be subject to a lifetime ban on U.S. government security clearances and employment.

Crypto in the crosshairs

The growing world of cryptocurrency is another area that Carlin described as “ripe for innovation and vigorous enforcement.”  The DOJ sees more and more instances of cryptocurrency being used for a wide range of criminal activity, including ransomware attacks. Further, he described terrorist groups’ efforts to raise funds through cryptocurrency, as well as the growing use of digital coins to transact everything from drugs and firearms to child pornography and other illicit materials.

Despite this new technology, cryptocurrency is not beyond the long arm of the law.  Mr. Carlin mentioned a recent case where a U.S. citizen pled guilty for conspiring to help North Korea evade sanctions through cryptocurrency.  He also cited the department’s seizure of $2.3 million in crypto related to the ransomware payment in the Colonial Pipeline case.

These efforts underscore, more than ever, a company’s need for a comprehensive sanctions compliance and anti-money laundering (AML) program.  As always, recordkeeping is a key factor.  Equally important is understanding and providing timely responses under the DOJ’s new VSD program.

As the department’s enforcement efforts only grow, companies should expect to see increased scrutiny of their export activities and interactions with foreign parties.  Now is the time to re-evaluate your compliance and ensure that you are properly aligned for the risks.  Need help with export controls or sanctions compliance?  Schedule a no-charge consultation with one of our experts today.

 

Image by Sang Hyun Cho from Pixabay.