Category Archives: Sanctions

Boards of Directors Lovin’ It after McDonald’s? A Fresh Look at Directors’ Duty of Oversight in the New Era of Sanctions & Export Control Corporate Enforcement

by Brent Carlson and Michael Huneke

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

In this era of heightened geopolitical tensions with a renewed focus on national security, a perfect storm of liability risk is brewing for boards of directors.

Sanctions and export controls violations can be costly and dangerous, with multi-billion-dollar fines and jail sentences imposed in 2023.

For companies engaged in international trade, these events engage directors’ fiduciary duties. Looking to bellwether Delaware corporate law, Delaware’s Chancery Court recently reiterated in the McDonald’s shareholder litigation that directors’ Caremark duty of oversight is a function of their duty of loyalty. As such, this reinforces the limits of the protections directors would otherwise have if it were instead a function of the duty of care—under both the business judgment rule and “exculpation,” i.e., the option corporations have to excuse in their certificates of incorporation directors’ liability for breaches of their duty of care (but not of loyalty).[1] Directors’ duty of oversight further requires ensuring that they receive information regarding any “central compliance risks,” not just “mission critical” risks, and that there is an appropriate response to red flags. Continue reading →

Matthew Axelrod, Assistant Secretary for Export Enforcement at the United States Department of Commerce, Bureau of Industry & Security, to Announce Enhancements to Corporate Voluntary Self-Disclosure Policies for Export Control Violations at PCCE Event on January 16, 2024

Matthew Axelrod, Assistant Secretary for Export Enforcement at the United States Department of Commerce, Bureau of Industry & Security, will announce enhancements to corporate voluntary self-disclosure policies for export control violations. After delivering his remarks, Assistant Secretary Axelrod will engage in a moderated fireside chat and will be taking questions from the audience.

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An Ounce of Prevention is Worth a Pound of Cure . . . or an Imposed Compliance Monitorship: A Fresh Look at the DOJ’s Corporate Enforcement Toolkit Applied to Sanctions and Export Controls Enforcement

by Brent Carlson and Michael Huneke

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

In our last article, we discussed the evolution of export controls penalties.[1] Beyond monetary penalties, the U.S. Department of Justice (“DOJ”) has additional items in its corporate enforcement toolkit that dramatically increase the cost of non-compliance. These include the DOJ’s new policies requiring companies to claw back or withhold executive compensation, requiring CEOs and chief compliance officers to make pre-release compliance certifications, and expanding the grounds for appointing independent compliance monitors.

Such corporate enforcement trends significantly increase the value of making front-end investments to avoid the “pound of cure.” In this post, we take a “fresh look” at these trends with an eye towards sanctions and export controls enforcement and offer practical guidance for dealing with them. Continue reading →

Former Prosecutors and Crypto Experts Comment on the Binance/Changpeng Zhao Enforcement Actions

The NYU Program on Corporate Compliance and Enforcement (PCCE) is following the recent federal enforcement actions against Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao. In this post, crypto experts, former prosecutors, and the former Superintendent of the New York Department of Financial Services offer their expert insights on these developments.

Left to right: Maria Vullo, Eugene Ingoglia, Daniel Payne, Ijeoma Okoli, and Paul Krieger (Photos courtesy of authors)

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FinCEN and BIS Issue Joint Notice Emphasizing That Financial Institutions Should Monitor for Possible Export Control Violations

by Jessica S. Carey, John P. Carlin, Roberto J. Gonzalez, Brad S. Karp, Richard S. Elliott, David Fein, David Kessler, Nathan Mitchell, and Jacobus J. Schutte

Top left to right: Jessica S. Carey, John P. Carlin, Roberto J. Gonzalez, Brad S. Karp, and Richard S. Elliott. Bottom left to right: David Fein, David Kessler, Nathan Mitchell, and Jacobus J. Schutte. (Photos courtesy of Paul, Weiss, Rifkind, Wharton & Garrison LLP)

On November 6, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) jointly issued a notice (the “Notice”) announcing a new Suspicious Activity Report (“SAR”) key term, “FIN-2023-GLOBALEXPORT,” that financial institutions should reference when reporting potential efforts by individuals or entities seeking to evade U.S. export controls.[1]

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From Peanuts to Prison Time – A Fresh Look at the Evolution of Export Controls Penalties

by Brent Carlson and Michael Huneke

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

New export controls rules recently issued by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) have set the corporate compliance world abuzz, as export controls continue to increase everywhere amid accelerating economic and geopolitical competition. Multinational companies are placed in an increasingly precarious position, caught between superpowers in a “disordered,” multipolar world. The consequences of failing to navigate successfully through myriad export controls regimes are only going to grow more severe, with the U.S. government signaling that a wave of increasing enforcement activity is on the way.

In this installment of our Fresh Looks series, we examine the evolution of export controls penalties, from where they are today to where they are heading tomorrow. The U.S. Department of Justice (“DOJ”) has called export controls and economic sanctions the “new FCPA” and included both among America’s national security enforcement priorities. This provides an important—and unambiguous—signal of the directional trends underway for export controls enforcement. Continue reading →

SEC’s Focus on Off-Channel Communications Continues

by Tami Stark, Claudette Druehl, and Robert DeNault

From left to right: Tami Stark, Claudette Druehl, and Robert DeNault. (Photos courtesy of White & Case LLP)

On September 29, the U.S. Securities and Exchange Commission (“SEC”) brought its latest wave of enforcement actions related to “off-channel communications,” charging 10 additional firms with failing to maintain employee communications on personal devices that related to the firms’ business. Over the past few years, the SEC has charged over 40 registrants in a sweep of off-channel communications actions and has levied over $1.5 billion in penalties.[1]

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Slow is Smooth, Smooth is Fast: A Fresh Look at Planning and Executing Internal Investigations into Allegations of Sanctions or Export Controls Evasion

by Brent Carlson and Michael Huneke

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

“Slow is Smooth, Smooth is Fast.” U.S. Navy SEALs and Aikido martial arts masters have valued this mantra as a reminder that deliberate, thoughtful action is—unexpectedly—the quickest way to accomplish your objectives in the face of chaotic circumstances.

Next in our “fresh look” series on economic sanctions and export controls compliance—and the convergence of both with anti-corruption compliance following the declaration by the DOJ that sanctions are the “new FCPA”—we apply this principle to responding to allegations of sanctions or export controls evasion. Continue reading →

Know Your Customer, But Also Yourself: A Fresh Look at Sanctions & Export Controls Risk Assessments in the Era of the “New FCPA”

by Brent Carlson and Michael Huneke

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

We have written recently about liability pitfalls caused by misperceived “loopholes” in sanctions and export controls regimes.[1] We have also written about the meaning and practical implications of the U.S. government’s emphasis on sanctions enforcement as the “new FCPA,” discussing how to identify and respond to circumstances posing a high probability of sanctions or export controls evasion.[2]

Having identified these new priority issues, what is the first step towards a solution? Risk assessments are the starting point.[3] Assess your own risk, but do so in an updated—and more effective—manner that reflects the evolving economic sanctions and export controls enforcement environment. Here are some suggestions to help with the assessment.

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Federal Reserve Imposes $186 Million in Civil Money Penalties Against Deutsche Bank for Violations of OFAC and AML Orders and Danske Bank-Related Failures

by Jonathan J. Rusch

Photo courtesy of the author

Within the past year, federal law enforcement and regulatory agencies have repeatedly signaled that recidivist violations of law by corporate entities are likely to result in substantial penalties. Those signals include recidivism-specific policy statements, such as the Justice Department’s revision of its Corporate Enforcement Policy[1] to reflect its “more holistic approach to corporate recidivism”[2] and the Office of the Comptroller of the Currency’s (OCC’s) recent revisions of its Policies and Procedures Manual to address banks’ failure to correct persistent weaknesses.[3]

But those signals also include specific enforcement actions that carried substantial financial penalties, such as the Justice Department’s $315 million criminal penalty against ABB[4] and $206.7 million criminal penalty against Ericsson[5], and the Consumer Financial Protection Bureau/OCC $250 million enforcement actions against Bank of America for illegal activity in its consumer business.[6]

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