Category Archives: Sanctions

Board Priorities in a Geopolitical Landscape: Risk, Compliance, and Supply Chain Resilience

This post comes from a webinar with Bets Lillo, Edward Knight, Will A. Clarke, and Jana del-Cerro delivered on May 22, 2025. They offered a clear-eyed view of how boards and executive management must adapt to effectively lead amid a world where national security, economic policy, and supply chain resilience are deeply intertwined. Five key takeaways from their discussion are outlined below, alongside practical implications for boardroom oversight and planning.

From left to right: Bets Lillo, Edward Knight, Will A. Clarke, and Jana del-Cerro (photos courtesy of authors).

As the impact of global interdependencies becomes increasingly complex, boards and executive management are guiding and governing their companies in an unpredictable environment. That was the central theme of the recent May 2025 webinar, Geopolitical Issues Impacting Global Supply Chains and National Security, hosted by the Nasdaq Center for Board Excellence and the Program on Corporate Compliance and Enforcement at NYU School of Law.

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Continuity and Change at the Intersection of National Security and Corporate Crime

by Marshall L. Miller

Photo courtesy of the author

Much recent attention has centered on shifts in approach at the Department of Justice in the new Administration, but one area where we should expect as much continuity as change is at the intersection of corporate crime and national security.

During two separate leadership stints at the Department of Justice, I oversaw corporate criminal enforcement—from 2014 to 2015 and again from 2022 to 2024. The difference was night and day. Where national security prosecutions were corporate crime outliers in the mid-2010s, by 2022 they represented a majority of DOJ’s major corporate criminal resolutions. And then the number doubled from 2022 to 2023. Early signals indicate that national security will be a continued area of white-collar focus in 2025 and beyond.

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Fifth Circuit Holds that OFAC May Not Maintain Sanctions on Cryptocurrency Mixer Tornado Cash

by Sharon Cohen Levin, James M. McDonald, Eric J. Kadel Jr., Anthony J. Lewis, Judson O. Littleton, Adam J. Szubin, Shari D. Leventhal, and Berke B. Gursoy

Top left to right: Sharon Cohen Levin, James M. McDonald, Eric J. Kadel Jr., and Anthony J. Lewis. Bottom left to right: Judson O. Littleton, Adam J. Szubin, Shari D. Leventhal, and Berke B. Gursoy (photos courtesy of Sullivan & Cromwell)

Court Concludes that Immutable Smart Contracts Are Not “Property” Under Relevant Sanctions Legislation

SUMMARY

In a significant decision issued on November 26, 2024, the U.S. Court of Appeals for the Fifth Circuit held in Van Loon et al. v. Department of the Treasury that the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) exceeded its statutory authority under the International Emergency Economic Powers Act (“IEEPA”) by sanctioning Tornado Cash, a cryptocurrency mixing service that enables users to conduct anonymized cryptocurrency transactions through the use of immutable smart contracts. The case centered on whether these immutable smart contracts could be considered “property,” as required to be sanctionable under IEEPA. Relying on the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which overruled the longstanding doctrine of Chevron deference to agency interpretations of statutory text, the Fifth Circuit concluded that immutable smart contracts did not constitute property and were therefore not subject to OFAC’s designation authority under IEEPA.

This ruling has potentially significant implications for OFAC’s efforts to sanction parties involved in decentralized finance (DeFi) and could alter the future enforcement landscape for parties and platforms that provide anonymity-enhancing services to cryptocurrency users.

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The CFIUS Colossus: CFIUS’s Expanding Authority Changes the Risk Calculus for M&A Transactions

by Stephenie Gosnell Handler, Michelle Weinbaum, Mason Gauch, and Chris Mullen

Left to right: Stephenie Gosnell Handler, Mason Gauch, and Chris Mullen. (Photos courtesy of Gibson Dunn & Crutcher LLP)

A new final rule from the U.S. Department of the Treasury will expand CFIUS’s authority to request information from parties related to a transaction, increases potential penalty amounts, and expedites mitigation agreement negotiations in certain situations. With the exception of modifying the time frame within which parties are required to respond to mitigation agreement proposals, CFIUS largely adopted the language of its April 2024 proposed rule.

On November 18, 2024, the U.S. Department of the Treasury (“Treasury”), as Chair of the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”) issued a final rule largely codifying a rule proposed in April 2024, with only a handful of small, yet meaningful, changes. As noted in the accompanying press release, the final rule: Continue reading →

Long-Awaited U.S. Outbound Investment Regime Published, Will Become Effective January 2, 2025

by Chase Kaniecki, Samuel H. Chang, B.J. Altvater, and Ryan Brown

Left to right: Chase Kaniecki, Samuel H. Chang, B.J. Altvater, and Ryan Brown (Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)

On October 28, 2024, the U.S. Department of the Treasury (“Treasury”) issued a long-awaited Final Rule (the “Final Rule”) implementing the U.S. Outbound Investment Security Program (the “Program”).[1] Under the Program, effective January 2, 2025, U.S. persons will be prohibited from engaging in, or required to notify Treasury regarding, a broad range of transactions involving entities engaged in certain activities relating to semiconductors and microelectronics, quantum information technologies, and artificial intelligence (“AI”) systems in “countries of concern” (presently limited to China, Hong Kong, and Macau).

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OFAC Extends Recordkeeping Requirements

by Satish M. Kini, Robert T. Dura, Aseel M. Rabie, Jonathan R. Wong, and Yair Strachman

Left to right: Satish M. Kini, Robert T. Dura, Aseel M. Rabie, Jonathan R. Wong, and Yair Strachman (Photos courtesy of Debevoise & Plimpton LLP)

Earlier this month, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued an Interim Final Rule (“IFR”) to extend OFAC’s current recordkeeping requirements from five to 10 years. The IFR was published in the Federal Register on September 13, 2024, with public comments due by October 15, 2024. The new recordkeeping requirements are set to take effect on March 12, 2025.

The IFR follows amendments to the statute of limitations in the International Emergency Economic Powers Act (“IEEPA”) and the Trading with the Enemy Act (“TWEA”), two statutes that authorize many of OFAC’s sanctions programs. The new 10-year statute of limitations—codified at 50 U.S.C. §§ 1705(d) and 4315(d)—became effective on April 24, 2024, and was discussed in our Debevoise Client Update available here. In July 2024, OFAC issued guidance on how it interpreted the new statute of limitations and signaled that it also would extend its recordkeeping requirements, as we noted here.

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It May Not Be Worth the Paper (or Pixel) It’s Written On (Part 1): A Fresh Look at Letters of Assurance Used to Bolster Sanctions and Export Controls Compliance

by Brent Carlson and Michael Huneke

Left to right: Brent Carlson and Michael Huneke (Photos courtesy of the authors)

“The world has changed. And we must change with it.” So stated Assistant Secretary of Commerce for Export Enforcement Matt Axelrod at a recent summit in California.[1] This simple statement reflects the increasingly complex challenges companies now face in navigating export controls and sanctions in a world driven by new geopolitical realities.

These challenges call into questions past assumptions about compliance programs. The foundation of a robust compliance program starts with the reliability of the inputs relied upon to make informed, risk-based decisions. In the halcyon days of the post-Cold War era, export controls took on an administrative character. In that environment, certifications from counterparties—themselves the targets of the due diligence—were taken largely at face value. Yet today passive reliance, without more, carries profound risks because export controls and sanctions enforcement has already become more of a white-collar corporate enforcement environment driven by Russia’s continued ability to secure U.S.-brand microelectronics (both legacy and new production). Certifications alone accordingly may not be worth the paper they are written on—or the pixels of which they are made—especially when other data includes “red flags” that cast doubt on certifications’ veracity.

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Biden Administration Releases Proposed Rule on Outbound Investments in China

by Paul D. Marquardt and Kendall Howell

From left to right: Paul D. Marquardt and Kendall Howell (Photos courtesy of Davis Polk & Wardwell LLP)

The Biden administration released its proposed rule that would establish a regulatory framework for outbound investments in China, following its advanced notice of proposed rulemaking released last August.

On June 21, 2024, the U.S. Department of the Treasury (Treasury) released its long-awaited notice of proposed rulemaking that would impose controls on outbound investments in China (the Proposed Rule). The Proposed Rule follows Treasury’s advanced notice of proposed rulemaking (the ANPRM) released in August 2023 (discussed in this client update) and implements the Biden administration’s Executive Order 14105 (the Executive Order), which proposed a high-level framework to mitigate the risks to U.S. national security interests stemming from U.S. outbound investments in “countries of concern” (currently only China). Like the Executive Order and ANPRM, the Proposed Rule reflects an effort by the Biden administration to adopt a “narrow and targeted” program and is in large part directed at the “intangible benefits” of U.S. investment (e.g., management expertise, prestige, and know-how), rather than capital alone.[1]

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DOJ National Security Division Issues First-Ever Declination Under Enforcement Policy

by Satish M. Kini, David A. O’Neil, Jane Shvets, Rick Sofield, Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley

Top left to right: Satish M. Kini, David A. O’Neil, Jane Shvets, and Rick Sofield. Bottom left to right: Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley. (Photos courtesy of Debevoise & Plimpton LLP)

Key Takeaways

Even in criminal national security matters, early self-reporting, remediation and cooperation can enable companies to avoid prosecution and penalties.
Federal enforcement agencies are continuing to collaborate in investigating and prosecuting criminal cases at the intersection of national security and corporate crime.
Multinational corporations and academic institutions should be aware of the risk of outsiders fraudulently affiliating themselves with legitimate institutions to skirt export control laws.

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BIS Primes the Corporate Enforcement Engine: A Fresh Look at What Recent BIS Actions & Statements Mean and a Proposed Framework for How U.S. Companies Can Best Prepare

by Brent Carlson and Michael Huneke

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

The risk of corporate criminal enforcement actions for export controls evasion or diversion is significantly increasing. Recent actions and statements by the Department of Commerce’s Bureau of Industry & Security (“BIS”) suggest that, beyond saber-rattling, BIS is deliberately priming the corporate enforcement engine with the fuel for an enforcement wave that will follow the Foreign Corrupt Practices Act (“FCPA”) “playbook” that the U.S. Department of Justice (“DOJ”) has successfully deployed for the last two decades.

The fuel comes in the form of official, multiagency guidance documents and other actions that describe circumstances indicating a “high probability” of misconduct, which as we have previously written is a freestanding basis for enforcement actions under both the FCPA and the Export Administration Regulations (“EAR”).[1] Such agency actions by BIS notably include the issuance to U.S. companies of lists of counterparties under cover of what BIS officials describe as “red flag” letters. Since our prior analysis,[2] BIS has reemphasized the significance of such letters and underscored the importance of how U.S. companies respond.

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