Export Controls and Sanctions: Stealing the Enforcement Limelight?
The Justice Department always touts its FCPA, Criminal Antitrust and Health Care Fraud enforcement programs. It is very proud of its record in these areas. But quietly and methodically the Justice Department has ramped up, with little fanfare, its export control and sanctions enforcement program.
For the first half of this year, while attorneys, client alerts, and marketing pitches continue to focus on FCPA enforcement, the Justice Department’s export control and sanctions enforcement program has become the shining star in the enforcement world. The FCPA program has taken a backseat.
We have not seen any of the anticipated blockbuster FCPA settlements this year. Instead, we are seeing blockbuster settlements in the export control and sanctions area. At the same time, individuals are being prosecuted for violating export controls, especially those in sensitive technology areas involving illegal exports to China and Iran.
Aside from the GlaxoSmithKline off-label marketing settlement for $3 billion, ING Bank paid a fine of $619 million for sanctions violations. Only the Siemens case involved a larger settlement for FCPA violations. That is very significant.
This year the Justice Department and the Treasury Department have brought more civil and criminal cases against companies for violating export controls and sanctions. Defense companies have to ensure that they know who the ultimate customer for their products are and have to make sure that there is no front company which is being used to skirt the law.
A major defense company and its subsidiary recently paid a $75 million fine for the unlawful export of helicopter equipment to China, which allowed China to manufacture its first military attack helicopter.
Companies which are involved in the export of dual-use items need to pay closer attention to regulatory requirements – the Justice Department, the Commerce Department and the State Department have all increased focus on these products and the line between permissible and impermissible requirements.
In addition to this enforcement focus, criminal and vcivil enforcement has benefitted from Congress’ decision to increase the statutory penalties for criminal and civil violations of export controls and sanctions: the maximum civil penalty per violation increased from $11,000 to $250,000 or twice the value of the transactions, whichever is greater; the maximum criminal penalty increased to $1 million per transaction or five times the value of the transaction, whichever is greater. An individual faces a maximum term of imprisonment of 10 years.
Add to the mix the recent “Buy American” requirements for supplies used by American companies to produce military and law enforcement equipment, and you have a growing risk on the import side of international trade.
Immigration and Customs Enforcement agents are growing in number and they are increasing enforcement. Import enforcement in the future may look much like export enforcement. Criminal cases may be brought and risks for companies and individuals will increase.
The business community takes this very seriously. Companies need to redouble their compliance efforts in this area. Like FCPA enforcement, export control is a complex compliance area which requires careful attention to the multitude of restrictions and regulations. As sanctions get more complex, compliance becomes that much more difficult.