International Trade, Enforcement & Compliance Recent Developments Update (May 10, 2023)

Recent developments include the U.S. government using novel legal theories to expand jurisdiction over banking activities outside the United States, the imposition of hundreds of millions of dollars of penalties on companies that dealt with sanctioned parties and countries (including the largest administrative export controls penalty of all time), and a court sanctioning a large multinational company for failing to preserve evidence.

Anti-Money Laundering and OFAC

In imposing a penalty of more than $2 billion against Danske Bank A/S, the Department of Justice used a new theory to support the extra-territorial application of U.S. law, finding that providing false statements to a financial institution to evade its compliance efforts can be prosecuted as bank fraud even if the financial institution did not lose any money. (See DOJ press release.) The U.S. Government is imposing record anti-money laundering and OFAC penalties and expects multinational organizations to implement effective compliance across borders. Does your organization conduct economic sanctions screening not only when it acquires new customers and ships its goods but also when it conducts financial transactions?

Export Controls and OFAC

Microsoft entered into a settlement agreement to pay more than $3.3 million in export controls and economic sanctions penalties, premised on Microsoft’s foreign subsidiaries selling software licensing agreements to companies on the BIS Entity List and to Specially Designated Nationals as well as to private individuals ordinarily resident in comprehensively sanctioned jurisdictions. (See Dept. of Treasury press release and OFAC press release.) Does your organization extend its export controls and economic sanctions compliance and internal controls to non-U.S. subsidiaries and provide training to its overseas subsidiaries on the far reach of U.S. export controls and economic sanctions regulations?

Export Controls

BIS imposed the “largest standalone administrative resolution” of an enforcement action by imposing a $300 million civil penalty against Seagate Technology LLC, for engaging in transactions with a company on the BIS Entity List (Huawei). In its announcement, BIS stated that it “is committed to robust and stringent enforcement of U.S. export controls in every corner of the world.” (See Bureau of Industry and Security press release.) Does your organization perform worldwide screening of all its suppliers, distributors, and customers to ensure it is not dealing with embargoed parties?

Customs & Border Protection

The amount of goods blocked at the border by CBP for potential violations of U.S. prohibition on forced labor goods has risen from $55 million in 2020 to $816.5 million in 2022, including 1,592 entries valued at nearly $500 million blocked for potential violations of the Uyghur Forced Labor Protection Act. (See Forced Labor FAQs and CBP press release.) Does your organization maintain an up-to-date Customs compliance program and maintain comprehensive supplier integrity policies that reflect the latest U.S. and worldwide expectations for supply chain management?

Internal Investigations

Google was sanctioned for failing to prevent the deletion of chat-based evidence in multidistrict litigation. (See complaint.) Does your organization have procedures for ensuring it preserves all evidence relating to potential lawsuits and enforcement actions, including evidence located overseas?

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