Howard Sklar's Convergence: Export Controls and the FCPA
Last year, the U.S. government imposed record penalties of nearly $2 billion in the FCPA and $1 billion in various penalties for U.S. sanctions and export controls. In some cases, these violations “converged” – meaning they arose from similar deficiencies in a company’s compliance program.
For those companies that engage in international business, they need to focus on the FCPA’s prohibitions on the payment of bribes; the Department of Commerce’s restrictions regarding the export of “dual-use” (largely commercial) goods, information, software and technology; the Office of Foreign Assets Controls (OFAC) economic sanctions and restrictions on the activities of U.S. persons and companies operating abroad in their dealings with banned countries or persons; and, for companies operating in the Middle East or with Middle Eastern countries, the Department of Commerce and the Internal Revenue Service’s restrictions on providing information in support of the boycott of Israel.
There is no doubt that companies face a complicated set of regulations which expose exporters to potentially large fines, loss of export privileges and even criminal penalties. The trends are unmistakable and likely to continue: the government is likely to increase scrutiny and enforcement of laws that apply to international transactions, which can include individuals involved, increased willingness to seek criminal penalties, increased criminal fines, use of more FBI agents with specialized knowledge in identifying violations, and improved coordination among agencies and internationally.
More cases involve exposure to multiple sets of regulations, raising real risks for multinational companies, including sanctions and export controls, FCPA, anti-boycott, and export controls. It is not far-fetched to think of multiple violations occurring out of a single act or failure to act.
Simple negligence, such as the failure of a company to check out an underlying transaction adequately before guaranteeing a letter of credit, or failure of an exporter to check lists of specially designated nationals before shipping, can cause violations of U.S. regulations governing exports and international conduct.
This is where Howard Sklar steps in – with the government looking at the laws regulating international conduct of U.S. persons as a common mosaic, companies at risk need an integrated approach.
It is critical for a company to weave the most common U.S. regulations of exports and international conduct into a common compliance mosaic – focusing on the key requirements of regulations, including the FCPA, the export-control and sanctions laws and the anti-boycott laws.
It is too often true that companies fail to see the business case for compliance and the need for an integrated approach to compliance, both across the corporation and among the various laws regulating international conduct. The solution is obvious but in many companies thee will to address this convergence is missing. These companies run the risk of seeing their failures to act outlined in the news reports rather than concise reports to an Audit and/or Compliance Committee.