What is facilitation and why is it such a concern for US companies?
Sims: The concept of facilitation, under the various US sanctions programs, is that a US person, meaning primarily a US company or a US citizen or permanent resident, cannot help a non-US person do a transaction with a sanctioned country or with a party on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) list. In other words, you cannot help a non-US person do a transaction or provide goods or services if it would be illegal for a US person to do that same transaction or perform the same services.
The concept of facilitation is a simple one when you look at it in just that context. For example, as a US lawyer I couldn't advise a French company on entering into a contract with the government of Iran because the notion is I can't help a French company do something that a US company wouldn't be able to do. The problem is that the minute the facts get a little more complicated, it gets pretty murky as to where those lines are drawn. For a lot of US companies, US citizens who are working overseas for a non-US company, and US companies that have non-US affiliates the question about what constitutes illegal facilitation gets much trickier and has real world consequences.
How was the interpretation of facilitation changed over the last few years?
Sims: I think the trend is that both the Department of Justice (DOJ) and the Department of the Treasury have adopted a much more expansive and aggressive interpretation of the concept of facilitation, especially over the last few years. Not all of that has worked its way into specific cases yet, although you do see some references to these more aggressive positions in some of the cases that the DOJ and OFAC have done recently. I think among the lawyers who practice in this area and are representing clients in government investigations, this more aggressive posture is very clear.
At the same time, US companies and individuals are increasingly concerned about reputational harm and personal liability. Clients are concerned that even if the DOJ and OFAC haven't done a particular kind of case before, they don't want to be the first in line for prosecution.
Has the US government offered any formal guidance on this more aggressive interpretation of facilitation?
Sims: During the conference I was struck by how widely this was viewed as a difficult issue among attendees, largely because there is very little affirmative guidance from the government on these issues, and almost nothing that addresses more complex factual scenarios.
The DOJ and the Securities and Exchange Commission recently published guidance on enforcement of the Foreign Corrupt Practices Act. There is nothing really comparable in the sanctions area, and I don't expect that there is going to be any day soon.
Given this lack of formal guidance, how can companies and individuals reduce their facilitation risks?
Sims: The primary concern from a compliance perspective is to be able to anticipate problems. You need to fully assess your potential risk in this area. The more advance planning and analysis you can do, the easier it is to stay out of trouble.
For example, there was a good deal of discussion at the conference about situations where a US investor has a minority interest in a board of a non-US entity. It’s important for the investor and the individual board member to anticipate whether there is some risk that the company could do business with a sanctioned country or SDN, or whether issues about that business are likely to get to the level of the board. The investor and board member can then plan accordingly. Perhaps the director should recuse him or herself and not be involved at all with any sanctioned country or sanctioned entity business. Alternatively, the board member may be in a better position if he or she votes against whatever it is being proposed, especially if the director’s vote could kill the project. The key point is to anticipate these kinds of issues, rather than make hasty decisions.
When it comes to US parent companies with overseas subsidiaries, we're seeing more and more clients who, because the lines are so difficult to draw in terms of what is allowed versus not allowed, are adopting policies that basically treat all their affiliates and subsidiaries as if they were US entities. So, even though a company might be organized in Europe or Asia, and technically be a non-US entity, any number of our clients have adopted the position that those entities will abide by the OFAC rules. But these policies are not necessarily a perfect solution either, because blocking statutes, which are specific laws adopted in other countries that prohibit compliance with US trade embargoes, and other legal restrictions may limit the ability of non-US entities to support compliance with US sanctions laws. This is especially true with respect to Cuba.
The other key piece of advice is for companies to evaluate their historical policies and practices in this area. It is clear that the enforcement environment has changed. Prosecutors and regulators are taking this modern, much more aggressive interpretation of these statutes and regulations and then imposing that interpretation on conduct that may have occurred three, four or five years ago. In circumstances like these, companies need to look at their historical practices and procedures to make sure that they won’t have an issue with more aggressive prosecutors and regulators today.