sanctions risk managementsymposiumseven deadly sanctions/export controls sins unveiled in recent...
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SanctionsRiskManagement Symposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
SaskiaRietbroekPrincipal
SanctionsAlert.com(moderator)
SevenDeadlySanctions/ExportControlsSinsUnveiledinRecentOFACandBISCases– AndTheirLessonsSeptember19,2017 4:00PM– 4:50PM
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PeterJeydelAssociateSteptoe&JohnsonLLP
KevinWolfPartnerAkinGumpStraussHauer &Feld,LLP
AndyGelinasExecutiveDirectorGlobalFinancialCrimesLegalAdvisoryGroupMorganStanley
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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KevinWolfPartnerAkinGumpStraussHauer &Feld,LLP
EntityListDevelopmentsZTECase
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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§ March2012– AllegationsofillegalconductfirstsurfaceinReuters§ ZTEUSAisservedwithanadministrativesubpoenafromBISandacriminalsubpoenafromFBI§ U.S.attorney’sofficefortheNorthernDistrictofTexasopensagrandjuryinvestigation
§ October2012– HouseIntelCommitteeReport§ TheHousePermanentSelectCommitteeonIntelligencesubmitsan“InvestigativeReportontheU.S.
NationalSecurityIssuesPosedbyChineseTelecommunicationsCompaniesHuaweiandZTE”whichallegedthatZTE:§ Failedtoanswerkeyquestionsorprovidesupportingdocumentationsupportingitsassertions§ AssertedthatansweringtheCommittee’srequestsaboutitsinternalcorporateactivitieswouldleavethe
companycriminallyliableunderChina’sstates-secretslaws§ DidnotalleviateCommitteeconcernsaboutthecontrolofChinesestate-ownedenterprisesinZTE’sbusiness
decisionsandoperations§ MaintainsaChinesePartyCommitteewithinthecompanyandhasnotclarifiedwhatrelationshipithaswiththe
largerChineseCommunistParty§ FailedtodiscloseinformationaboutitsactivitiesintheU.S.andfailedtoprovideanyanswersorevidenceabout
itscompliancewithintellectualpropertyorU.S.export-controllaws
ZTETimeline
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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TimelineCont.§ March2016– ZTEaddedtotheEntityList
§ Createdalicenserequirementtoexport,re-export,ortransfer(in-country)toZTEanyitemssubjecttotheEAR
§ ZTEfoundtohavebreachedUnitedStatessanctionsagainstIranbysellingU.S.origingoodstothecountry
§ FoundtohavemadeknowinglyfalseandmisleadingrepresentationsandstatementstoBISandotherU.S.lawenforcementagencies
§ EngagedinanelaborateschemetopreventdisclosuretoandaffirmativelymisleadtheU.S.Government
§ April2016– ZTEnamesanewChiefExecutiveandChairman,ZhaoXianming§ “ZTEacknowledgesthemistakesitmade,takesresponsibilityforthemandremainscommittedto
positivechangeinthecompany,”
§ November2016- BISextendsZTEtemporarygenerallicense§ February24th 2017- BISextendsZTEtemporarygenerallicense
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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TimelineCont.§ March7th 2017– PenaltyforExportControl&SanctionsViolationsisAnnouncedby
DOJ,OFAC,BIS:§ ZTEpledguiltytothreecriminalcounts:ConspiracytoviolatetheExportAdministrationRegulations
(EAR)andtheIranianTransactionsandSanctionsRegulations(ITSR);obstructionofjusticeandfalsestatements
§ Agreedtoacombinedcivilandcriminalpenaltyof$1.19billion§ ZTEhasagreedtopayapenaltyof$661milliontoCommerce’sBIS§ U.S.DistrictCourtfortheNorthernDistrictofTexasimposes$430,488,798incombinedcriminal
finesandforfeitureonZTEaspartofapleaagreementwiththeDepartmentofJustice§ ZTEagreestopaytheDepartmentoftheTreasury’sOfficeofForeignAssetsControl(OFAC)
$100,871,266pursuanttoasettlementagreement§ “Weareputtingtheworldonnotice:Thegamesareover,”- CommerceSecretaryWilburL.Ross
§ March22nd 2017- JudgeImposesOwnMonitorinZTEPleaDeal§ U.S.DistrictJudgeEdKinkeade fortheNorthernDistrictofTexasrewrotethepleaagreementto
namehisownindependentcorporatemonitor,formerJudgeJamesM.Stanton
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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KeyTakeAways
§ TheDepartmentofJusticeallegesthatcriminalviolationsoccurduring theinvestigationwhilethecompanyisrepresentedbyoutsidecounsel
§ Administrativemeasurestocompelcooperationandobtainevidencefromnon-U.S.companieslocatedoutsidetheU.S.
§ Increasinguseofmonitorsinmulti-agencysanctionsinvestigationsandlongerperiodsofmonitorship
§ DualusegoodsinvolvingIranandNorthKorea§ NoallegationsrelatingtoinvolvementofU.S.subsidiaryofZTE- conductandevidenceoccurredoutsidetheUnitedStates
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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TrendstoWatchinEnforcementCases§ InstitutionoftheDepartmentofJustice’svoluntaryself-disclosureprogramforexportcontroland
sanctionviolation(October2016)§ DOJstatesthattheintentionoftheguidanceisto“deterindividualsandcompaniesfromviolatingexportcontrols
andsanctionslawsandtoprovidegreatertransparencyaboutwhatisrequiredfromcompaniesseekingcreditforself-reporting”
§ ContinuingeffectoftheYatesMemo(September2015)onsanctionsandexportcontrolinvestigations§ Theguidanceoutlinestherequirementthataself-reportingcompanyseekingcooperationcreditmustmakeafull
disclosuretotheDOJ
§ Growingintersectionofcybersecurityandexportcontrolandsanctionsviolations§ Severeconsequencesofmismanaginganinternalinvestigationandinteractionswithout
governmentagencies§ TalkofenforcementdecreasingunderthenewAdministrationdoesnotmatchrealityatthispoint
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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AndyGelinasExecutiveDirectorGlobalFinancialCrimesLegalAdvisoryGroupMorganStanley
HalliburtonCase
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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Halliburton:JustPlainLazy???
§ InDec.2016,Halliburtonagreedtopay$304,706tosettlepotentialcivilliabilityforapparentviolationsof§ 515.201(b)oftheCubanAssetsControlRegulations(CACR)
§ OFACallegedthat2non-U.S.subsidiariesofU.S.companyHalliburtonEnergyServices,Inc.violatedCubasanctionsbyexportinggoods,servicesinsupportofoilandgasproductionconsortiumoperatinginAngola,inwhichGovernmentofCuba hadaninterest
§ CubaPetroleo (akaCupet),astate-ownedCubancompany,held5%interestinconsortium§ OFACdeterminedthatHalliburton“actedwithrecklessdisregardforU.S.sanctions”becauseitfailedtoconductreasonableduediligencetodeterminewhobelongedtotheconsortium
§ Halliburton’ssanctionscomplianceprogramwasinadequatebecauseitdidnotincludeaproceduretoscreenallconsortiummembers
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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Halliburton:KeyTakeAways:
§ Readfineprint:Halliburton“shouldhaveknownthataCubanentitybelongedtotheconsortiumbecausetheconsortiumoperatorprovided[]documentsthatshowedthatCupet wasamember”
§ Gotheextramile:“[o]ther contemporaneousdocumentsthatstatedCupet heldaninterestintheConsortium,includinganewsarticleandanoticeinanAngolangovernmentregistry”
§ Knownuances: givenCupet’s mere5%interest,OFACobviouslydidnotapplythe“50%Rule”indeterminingwhetherprovidinggoods,servicestoconsortiumviolatedCubasanctions.Instead,OFACdeterminedthatHalliburtonviolated§ 515.201(b)CACRbydealinginpropertyinwhichCubaoraCubannationalhadaninterest§ § 515.201(b)prohibitsU.S.personsfromengagingintransactionsthatinvolvepropertyinwhichCuba,
oranynationalthereof,hasatanytimeonorsincetheeffectivedateof[that]sectionhadanyinterestofanynaturewhatsoever,directorindirect
§ Higherstandard:asithasdoneinmanyFIenforcementactions,OFACnotedthat“Halliburtonanditsaffiliatedcompaniesaresophisticatedentitiesthatregularlydealinoilfieldgoodsandservicesaroundtheworld”
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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PeterJeydelAssociateSteptoe&JohnsonLLP
B-WhaleCase
TheBWhaleCaseandtheHiddenRisksofOFACJurisdiction
• Taiwanesecompany• NobusinessintheUnitedStates
• NosubstantialpresenceintheUnitedStates
HowdidOFACassertjurisdiction?
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Sanctions Risk ManagementSymposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
Questions?
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BonusSlidesProvidedby
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BISEnforcementGuidelines
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§ GuidanceonChargingandPenaltyDeterminationsinSettlementofAdministrativeEnforcementCases
§ RevisedJune22,2016§ Promotesgreatertransparencyandpredictabilitytotheadministrative
enforcementprocess.§ AlignsproceduresofDOC’OfficeofExportEnforcementwiththoseofOFAC,
bothofwhichadministerbulkofprogramsunderInternationalEmergencyEconomicPowersAct.
§ https://www.bis.doc.gov/index.php/documents/pdfs/1567-administrative-enforcement-guidelines/file
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
SecondarySanctions
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§ Alsocalled“extraterritorial”sanctions;§ ExtendpowerofU.S.lawindirectly,tonon-U.S.firms;§ MaydirectlyprohibitforeignsubsidiariesofU.S.companiesfromengagingincertaintypesofactivity;
§ Mayindirectlytargetnon-U.S.firmsbytryingtorestricttheiraccesstotheU.S.market;
§ Createriskareasfornon-U.S.companies.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFACEnforcementActionAgainstExxonMobil
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§ July20,2017§ $2Mpenalty§ FirstOFACcaseinvolvingviolationsofRussia/Ukrainesanctions§ Dealtinservicesofindividualwhosepropertywasblocked§ SignedlegaldocumentsrelatedtooilandgasprojectsinRussiawithIgorSechin,PresidentofRosneft,andanindividualidentifiedonOFAC'sSDNlist
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
SectoralSanctionsIdentifications(SSI)List
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§ EntitiesonSSIListdonotfaceassetfreezes,andU.S.personsarenot strictlyprohibitedfromdealingwiththem.
§ Theyaresubjecttorestrictionsregardingaccesstocertaintypesoffinancingand,insomecases,accesstoU.S.exports.
§ Entitiesofwhich50%ormoreisownedbyaSSIlistedentityarealsosubjectto“sectoral”sanctionspursuanttoOFAC’s50%rule.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFAC’s50%Rule
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§ Anyentityowned intheaggregate,directlyorindirectly,50%ormorebyoneormoreblockedpersons,isitselfconsideredtobeablockedperson.
§ Rulespeaksonlytoownershipandnottocontrol.§ AU.S.personmaynotengageinanytransactionswithsuchanentity,unlessauthorizedbyOFAC.
§ RuleappliestoentitiesonboththeSDNListand SSIList.
VSD=VoluntarySelfDisclosure
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BasePenaltyMatrixfromOFAC
EnforcementGuidelines
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Sourcedata:OFACwebsite
CompilationandAnalysisbySanctionsAlert.com
SettlementsAssessment
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFACEnforcementActionsAgainstBanks(2003– September5,2017) Sourcedata:OFAC
website
CompilationandAnalysisbySanctionsAlert.com
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Sourcedata:OFACwebsite
CompilationandAnalysisbySanctionsAlert.com
OFACEnforcementActionsAgainstInsurers(2003– September5,2017)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Sourcedata:OFACwebsite
CompilationandAnalysisbySanctionsAlert.com
OFACEnforcementActionsAgainstIT/Telecom(2003– September5,2017)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
SevenSins
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Pride
Envy
Gluttony
LustAnger
Greed
Sloth
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Sourcedata:OFACwebsite
CompilationandAnalysisbySanctionsAlert.com
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFACenforcementactions– BytheNumbers
Sourcedata:OFACwebsite
CompilationandAnalysisbySanctionsAlert.com
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