- U.S. Deputy Attorney General Lisa Monaco recently called sanctions “the new FCPA.”
- The statement signals an increased focus for the Department of Justice (“DOJ”) on enforcement of U.S. economic sanctions at a time when the United States government increasingly is imposing and enforcing sanctions in coordination with allied governments.
- Companies should revisit their internal compliance programs, considering potential areas of sanctions-related risk and exposure.
At a New York City Bar Association event on April 27, Deputy Attorney General Lisa Monaco described economic sanctions as “the new FCPA.” Her characterization should put corporate compliance departments on notice.
Enforcement of the Foreign Corrupt Practices Act (“FCPA”) has developed over the past two decades into a major area of enforcement activity, yielding billions of dollars in penalties and incentivizing companies to dedicate significant resources to defending themselves and enhancing their compliance programs. As a result of Russia’s invasion of Ukraine, it appears that sanctions and export controls enforcement is poised to do the same.
The DOJ’s National Security Division investigates and prosecutes criminal violations of sanctions and export controls laws and regulations which typically involve willful conduct. Major criminal penalties for sanctions violations are not new; in 2014, French bank BNP Paribas paid penalties and fines totaling nearly $9 billion after pleading guilty to conspiring to violate sanctions laws by processing billions of dollars of transactions through the U.S. financial system on behalf of sanctioned entities. Many other multinational banks similarly paid large penalties for similar violations. These enforcement actions were conducted in coordination with other federal agencies (such as the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the Federal Reserve) and state agencies (such as the New York Department of Financial Services) as well as with non-U.S. sanctions and law enforcement agencies.
Monaco’s statement suggests that the DOJ will be paying even closer attention to enforcing sanctions and export control measures in the coming years. It reinforces a statement made by Principal Associate Deputy Attorney General John Carlin in October 2021 (prior to Russia’s actions against Ukraine and the attendant ramp up in sanctions activity), in which he highlighted a “surge” of resources put towards sanctions enforcement and noted that DOJ had approximately 150 open sanctions and export controls investigations in that year.
Monaco’s statement also comes shortly after the DOJ’s establishment in March 2022 of “Task Force KleptoCapture” and the enactment that same month of the UK’s Economic Crime (Transparency and Enforcement) Act (the “ECA”). Task Force KleptoCapture is designed to target so-called oligarchs alleged to be enabling the Russian regime, by ensuring that sanctions are enforced against them. This is similar to the “Combatting Kleptocracy Cell” which was set up in February 2022 by the National Crime Agency in the UK, which is designed to investigate “criminal sanctions evasion and high-end money laundering” by targeting “corrupt elites” and their key enablers. The ECA (see our prior OnPoint), among other things, introduces a strict liability test for civil monetary penalties arising from sanctions breaches. It also grants the UK authorities the power to “name and shame” individuals or entities that have breached sanctions laws but have not received fines. The UK sanctions authority (the Office of Financial Sanctions Implementation) has also been upscaling its resources to deal with the workload arising from the recent sanctions, which is unsurprising given the political pressure in the UK to take steps against Russian oligarchs.
In light of Russia’s actions against Ukraine, we have seen greater coordination in sanctions application and enforcement among the United States, UK, EU, Australia, and Canada, and we expect this coordination to continue. This is particularly the case where the EU and UK have implemented (and continue to implement) waves of wide-reaching sanctions and restrictions targeting key sectors of the Russian economy; the UK also has implemented an urgent sanctions procedure (introduced via the ECA) to allow individuals and entities sanctioned by allied countries to be copied across to the UK sanctions list. In addition, Switzerland has taken the unprecedented step of implementing the EU sanctions arising from Russia’s actions against Ukraine.
As a result of the DOJ’s heightened focus on sanctions enforcement, companies and their compliance teams should consider their potential exposure to sanctioned parties and sanctioned activities as well as what compliance measures are in place to prevent sanctions violations. The relevant areas include, but are not limited to:
- Who are your customers/clients, suppliers, and service providers?
- Who is the ultimate user of your goods/services and where/how will they use your goods/services?
- Who are your other counterparties, including financial institutions used by the company and your business partners?
- Who are your investors/shareholders?
- If you are divesting your business, who is the purchaser?
- How robust are your diligence and monitoring practices?
- Have your compliance policies and procedures been updated recently?
- How recently have you conducted a risk assessment?
- Are your employees well trained on compliance practices?
- How recently have your compliance practices been audited?
Monaco’s statement highlights the urgency for companies to refresh their compliance policies, practices, and diligence; now is the time to identify and addresses compliance risks associated with sanctions and export controls. As current White House Press Secretary Jen Psaki stated in a recent White House briefing, “[n]o one is safe from our sanctions.”
As always, Dechert is available to advise on compliance with respect to sanctions and export controls.