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African Trade Compliance
Amcham Regional Trade Forum | 11 February 2016
Darryl Bernstein (Partner, Johannesburg)
Prepared with the assistance of Kerry Contini (Senior Associate, Washington, DC)
Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss
Verein with member law firms around the world. In accordance with the common
terminology used in professional service organisations, reference to a "partner" means a
person who is a partner, or equivalent, in such a law firm. Similarly, reference to an
"office" means an office of any such law firm.
© 2015 Baker & McKenzie LLP
Sanctions
© 2015 Baker & McKenzie LLP
EU and U.S. Sanctions Targets
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Afghanistan
Lebanon
Burma
DR Congo
Egypt
Tunisia
Libya
Eritrea
Somalia
Guinea and
Guinea-Bissau
Sudan and
South Sudan
Iraq
Ivory Coast
Iran
Liberia
Belarus
North Korea
Syria
Burundi
China
SFRY Armenia and
Azerbaijan
Cuba
USA (EU/Cuba
Blocking
Measures)
Cyprus
Fiji
Haiti
Sri Lanka
Venezuela Vietnam
EU and U.S.
EU only
U.S. only
U.S. Anti-
Boycott only
Saudi Arabia
Central African
Republic
Russia
Ukraine
UAE
Kuwait
Yemen
Crimea
and Sevastopol
Zimbabwe
© 2015 Baker & McKenzie LLP
Embargo
• Sudan
Other Significant Sanctions
• Burundi (EU and US)
• Central African Republic (EU and US)
• DR Congo (EU and US)
• Egypt (EU)
• Eritrea (EU)
• Guinea (EU)
• Guinea-Bissau (EU)
• Ivory Coast/Cote d’Ivoire (EU and US)
• Liberia (EU)
• Libya (EU and US)
• Somalia (EU and US)
• South Sudan (EU and US)
• Sudan (EU and US)
• Tunisia (EU)
• Zimbabwe (EU and US)
Libya
Sudan
Somalia
Zimbabwe
Democratic
Republic of
Congo
Central African
Republic
South
Sudan
Burundi
Ivory
Coast
Liberia
Egypt
Guinea -
Bissau
Guinea
Eritrea
Tunisia
Sanctions Programs in Africa
© 2015 Baker & McKenzie LLP
US Sanctions Target Groupings
Comprehensively
Sanctioned
Territories
Significantly
Sanctioned
Territories
Limited Sanctions
(SDNs)
Restricted Persons
(SDNs)
• Cuba, Iran, Sudan, Syria, Crimea region
• Burma/Myanmar, North Korea, Russia
• W. Balkans, Belarus, Burundi, Central African Republic, Côte
d’Ivoire, DR Congo, Iraq, Lebanon, Libya, Somalia, South
Sudan, Ukraine, Venezuela, Yemen, Zimbabwe
• Specially Designated Nationals (SDNs)
• Terrorists, WMD proliferators, human rights violators, transnational
criminal organizations, narcotics traffickers, malicious cyber-related
activities, rough diamonds, foreign sanctions evaders, etc.
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Broad Jurisdictional Scope of US Sanctions
US Persons
Anyone
dealing in
US Origin/
Content
Items
Non-US
Persons
engaged in
sanctionable
activity
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© 2015 Baker & McKenzie LLP
US Sanctions - Penalties
• Criminal: up to $1 million and/or 20 years imprisonment
• Civil: up to the greater of $250,000 or twice
the value of the transaction per violation
• Strict liability regime
• Other consequences
• Collateral designation as SDN (Specially Designated Nationals)
• Inclusion on Entity List
• Revocation of export or OFAC licenses
• Denial of export privileges
• Negative publicity, loss of reputation
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Largest Fines in US Sanctions/Export Controls
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Company Industry Fine Year
1 BNP Paribas S.A. Financial Services $8.96 Billion 2014
2 HSBC Bank Financial Services $2.29 Billion 2012
3 Commerzbank AG Financial Services $1.45 Billion 2015
4 Standard Chartered Bank Financial Services $967 Million 2012/2014
5 Credit Agricole Corporate and Investment Bank Financial Services $787 Million 2015
6 Bank of Tokyo - Mitsubishi UFJ Financial Services $574 Million 2013/2014
7 ING Bank N.V. Financial Services $619 Million 2012
8 Credit Suisse AG Financial Services $536 Million 2009
9 Royal Bank of Scotland
(formerly ABN Amro Bank, N.V.)
Financial Services $500 Million 2010
10 BAE Systems PLC Defense $400 Million 2010
11 Barclays Bank PLC Financial Services $298 Million 2010
12 Deutsche Bank Financial Services $258 Million 2015
Includes civil penalties paid by banks to NY regulators (e.g., NYDFS, DANY)
© 2015 Baker & McKenzie LLP
Key US Compliance Issues
• US Persons prohibited from dealing, directly or indirectly, with SDNs
(Specially Designated Nationals)
• Causing, conspiring, aiding or abetting US sanctions violations by others
• Property or property interests received by any U.S. Person or in the United
States must be blocked and reported to OFAC
• Includes funds, contracts, L/Cs, shares, guarantees, etc.
• Initial and annual reports
• Collateral risk of designation for providing “material support” to SDNs
• SDNs can be located anywhere!
• SDNs are Listed | 50% owned | Controlled
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US Embargo Updates
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Libya: Potential Re-Intensification
‒ OFAC and BIS rules published in February 2015
‒ Authorize export or reexport to Sudan of certain software, hardware, and services incidental to
personal communications
Even fee-based (previously only no-cost)
Hand carries from the United States to Sudan
‒ Case-by-case licensing policies for certain similar items not eligible for the general license
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Sudan: Personal Communications
‒ EU | US sanctions lifted 2011
‒ February - March 2015 – European Council reaffirmed willingness to strenghten Libyan
sanctions and to designate individuals threatening the peace, stability or security of Libya
pursuant to UNSCR 2174
Zimbabwe: EU & US Sanctions ‒ EU: 26 October 2015 Council Regulation (EU) 2015/1919 suspended targeted sanctions in
Zimbabwe against all but President Robert Mugabe, his wife Grace, and Zimbabwe Defence
Industries
‒ US: SDNs under EOs 13288, 13391 and 13469
‒ Sanctions block the property and interests in property of listed individuals and entities
© 2015 Baker & McKenzie LLP
CAR, South Sudan and Burundi: First
Designations
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‒ Central African
Republic
‒ U.S.
• 12 May 2014 - EO 13667
authorized designation of
SDNs; first 5 SDNs
designated
• 7 July 2014 - Central
African Republic Sanctions
Regulations issued
• 21 8 2015 – 5 SDNs
‒ EU
• EU arms embargo from 23
December 2013
• 10 March 2014 - EU
implements UN travel ban
and asset freeze regime
• 24 June 2014 - first 3 DPs
‒ Burundi
‒ U.S.
• 23 November 2015 – EO
authorises designation of
SDNs; first 4 SDNs
designated
• 18 December 2015 –
Additonal designations
• 4 February 2016 – One
SDN removed
‒ EU
• 02 October 2015 – EU
implements travel ban
and asset Freeze regime,
first 4 DPs
‒ South Sudan
‒ U.S.
• 3 April 2014 - EO 13664
authorizes designation of
SDNs
• 1 July 2014 - South Sudan
Sanctions Regulations
issued
• 6 May and 18 Sep 2014 -
first 4 SDNs
• 2 July 2015: 2 SDNs
‒ EU
• 24 Nov 2011 - EU extends
arms embargo against
Sudan to South Sudan
• 11 July 2014 - first 2 DPs
© 2015 Baker & McKenzie LLP
Liberia | EU, US and UN Sanctions
‒ Removal of all sanctions: EU 6/11/2015 | US 12/11/2015 | UN 2/09/2015
DR Congo | EU and US Sanctions
‒ EU: DR Congo remains subject to EU Sanctions imposing asset freezes and travel restrictions
on persons violating the UN arms embargo of 2003 and various political and military leaders
and those supporting such persons
‒ US: DR Congo remains subject to US Sanctions – July 2014, issued EO expanding sanctions
criteria to allow for more US flexibility in targeting persons contributing to the conflict in the
DRC, including entities complicit in the “illicit trade in natural resources”, as well as to conform
more closely to the criteria established in relevant United Nations Security Council Resolutions
© 2015 Baker & McKenzie LLP
Sanctions and The African Union
© 2015 Baker & McKenzie LLP
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The African Union ‒ Charged with promoting Peace, Security and Stability on the continent.
‒ The AU's Peace and Security Council (PSC), whose descisions are binding on member states,
is empowered to impose sanctions in cases of:
unconstitutional change of government; and
potential or actual conflicts.
‒ Since its first meeting (2004) the PSC has been active in relation to the crises in Darfur,
Comoros, Somalia, Democratic Republic of Congo, Burundi, Côte d'Ivoire and other
countries.
‒ It has adopted resolutions creating the AU peacekeeping operations in Somalia and Darfur,
and imposing sanctions against persons undermining peace and security (such as travel bans
and asset freezes against the leaders of the rebellion in Comoros).
‒ Most recently it suspended Burkina Faso and slapped sanctions on the leaders of its military
coup, imposing a travel ban and asset freeze on the junta's leaders.
South African Export
Controls
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Export of Military Items
‒ The Non-Proliferation of Weapons of Mass
Destruction Act No. 87 of 1993 ("NPWMD")
weapons of mass destruction
‒ The National Conventional Arms Control Act No. 41
of 2002 ("NCAC")
conventional weapons
© 2015 Baker & McKenzie LLP
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The Non-Proliferation of Weapons of Mass
Destruction Act No. 87 of 1993 (NPWMD)
‒ Governs the control, possession, export, import, manufacturing and transport of
non-conventional weapons intended for mass destruction - chemical, biological,
missile and nuclear weaponry.
‒ Controlled goods will generally require:
registration with the South African Council for the Non-Proliferation of Weapons of Mass
Destruction ("the Council");
a permit in the prescribed format obtained from the Council along with the required fees;
a declaration to the Council in accordance with the provisions of an international
convention, treaty or agreement with regard to the manufacture, procurement in any
manner, use, operation, stockpiling, maintenance, transport, import, export, transit or re-
export of such goods; and
potentially the submission of samples of the "controlled goods" upon registration or
upon application for a permit.
© 2015 Baker & McKenzie LLP
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The National Conventional Arms Control Act No.
41 of 2002 (NCAC)
‒ Governs the control, possession, export, import, manufacturing and transport of
weapons/military goods. Excludes conventional firearms and ammunition (e.g. for the police
or private persons), as well as conventional explosives (e.g. for mining applications).
‒ Controlled Items are those listed by the 2010 Wassenaar Control List (Version
10.1 - dated 22/12/2010). This is not the most recent version of the international
Wassenaar List used by other states. South Africa simply uses an older version.
‒ Controlled goods will generally require:
an export permit from the National Conventional Arms Control Committee ("NCACC");
registration by any person involved, with the NCACC;
possession requires a registration certificate from the NCACC; and
any export must be confirmed by an end-user certificate from the authorised agent in
the receiving country.
‒ Exception for ‘insignificant' items or those used solely in commercial and/or
banking applications
Anti-bribery & Anti-corruption
© 2015 Baker & McKenzie LLP
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FCPA Provisions ‒ Antibribery Offense
Prohibits U.S. persons and, in some cases, foreign persons from corruptly offering, authorizing, or making payments, or giving anything of value, to any foreign official or political parties for the purpose of obtaining or retaining business
‒ Books and Records Issuers are required to make and keep detailed books, records, and accounts that fairly and accurately reflect transactions and
dispositions of assets
‒ Internal Accounting Controls
Issuers must devise and maintain internal accounting controls to ensure that:
financial records and accounts are accurate for external reporting,
access to assets is permitted only in accordance with management instructions, and
the books are audited at reasonable intervals.
© 2015 Baker & McKenzie LLP
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Elements of an Anti-Bribery Offense
1. Covered Persons
2. Payment
3. Corrupt Intent
4. Knowledge
5. Business Purpose
6. Foreign Official/Political Parties
7. Jurisdictional Nexus
© 2015 Baker & McKenzie LLP
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U.S. Prosecutorial Tools for Use Against
Non-U.S. Companies
‒ “Act in furtherance” in the U.S.
Use of U.S. mails
‒ “Issuer” in U.S. by accessing U.S. public
capital markets
‒ “Agent” of U.S. entity
‒ Acts of a U.S. subsidiary
‒ “Intimidation” of U.S. customers
‒ Conspiracy involving U.S. entity/individual
© 2015 Baker & McKenzie LLP
Top 20 FCPA Settlements (Millions)
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Siemens $800
Alstom $772
KBR/Halliburton $579
BAE $400
Total S.A. $398
Alcoa $384
ENI S.p.A. $365
Technip $338
JGC Corporation $219
Daimler $185
Weatherford $152
Alcatel-Lucent $137
Avon $135
Hewlett-Packard $108
Deutsch / Magyar Telekom $95
Marubeni Corporation $88
Panalpina $82
Johnson & Johnson $70
Pfizer / Wyeth $60
ABB $58
2008
2009
2010 2013
2011
2012
2014
© 2015 Baker & McKenzie LLP
Top 20 FCPA Settlements (Millions) Siemens $800 2008
Alstom $772 2014
KBR/Halliburton $579 2009
BAE $400 2010
Total S.A. $398 2013
Alcoa $384 2014
ENI S.p.A. $365 2010
Technip $338 2010
JGC Corporation $219 2011
Daimler $185 2010
Weatherford $152 2013
Alcatel-Lucent $137 2010
Avon $135 2014
Hewlett-Packard $108 2014
Deutsch / Magyar Telekom $95 2011
Marubeni Corporation $88 2014
Panalpina $82 2010
Johnson & Johnson $70 2011
Pfizer / Wyeth $60 2012
ABB $58 2010
© 2015 Baker & McKenzie LLP
Core risk areas to be aware of
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1. Contributing to Communities and CSR Payments
2. Managing Security Issues and Protection
Payments
3. Working in Cash Economies
4. Dealing with Inadequate Information Sources
and Uncertain Legal Regimes
5. Flagging Political Party Connections
6. Knowing and Navigating Local Content Laws
7. Overseeing Customs and Immigration Matters
8. Negotiating Fines and Penalties
© 2015 Baker & McKenzie LLP
Summary of our 8 Tips for Anti-bribery
Success
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1. Recognize the value and importance of contributing to local communities and be
attentive to ultimate beneficiaries.
2. Implement a narrow personal safety payments policy and stick to it.
3. Internal controls are more important than ever when working in
a cash economy – insist on appropriate backup documentation.
4. Recognize uncertainty and seek out trustworthy sources of
information.
5. Embrace the value in appropriately managed government
relationships.
6. Know your local partners and monitor diligently.
7. Be vigilant and never accept “it’s just the way it is” as an excuse.
8. Think outside of the box but within the law.
© 2015 Baker & McKenzie LLP
Top Trends in Global Compliance 1. Increasing exposure and risk
2. Greater extra-territoriality and conflicting requirements
3. Don’t ignore High Growth Markets
4. Personal liability for individuals
5. Greater strict liability offences
6. Liability for misconduct of third parties
7. M&A risks and successor liability
8. Value of a robust compliance programme
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© 2015 Baker & McKenzie LLP
5 Essential Elements of Compliance
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1. Leadership
2. Risk Assessment
3. Standards & Controls
4. Training and Communication
5. Monitoring, Auditing & Response
Questions?
Thank You! 30
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Additional Resources
Follow ongoing developments in global
compliance and anti-corruption via:
http://globalcompliancenews.com/