Click Here to Receive the Latest Updates from the Blog

Wendy Wysong

Subscribe to Wendy Wysong's Posts
Contact:Read more about Wendy Wysong

Once multiple agencies are engaged in a US export control or sanctions enforcement action, or you’ve determined they should be, counsel should consider how to communicate with these agencies, both individually and together. Not only will such discussions provide valuable insight to guide the conduct of the internal investigation, it could provide information about the government investigation, and could also facilitate a global resolution. Part 4 of our series on parallel proceedings discusses why counsel might seek the role of communication coordinator amongst the agencies, and how and when to do so.

Which agencies might be involved in this communication were identified in Part 1 of our series on parallel proceedings. We discussed how the involvement of multiple agencies might impact the investigation in Part 2, and we provided guidance on voluntary self-disclosures (VSDs) to those agencies in Part 3. There are opportunities to engage with the relevant agencies at various points in the investigation, all of which should be considered and carefully structured.Continue Reading US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 4, Managing Interagency Communication)

The FBI, in a leaked intelligence bulletin, has made a high-confidence assessment on the likely use of Private Investment Funds (PIFs) by “threat actors” for money laundering. Threat actors are defined in the FBI report as financially motivated criminals and foreign adversaries, and PIFs are defined to include hedge funds and private equity funds.

Of note, the FBI “assumes AML programs are not adequately designed to monitor and detect threat actors’ use of private investment funds to launder money.” The FBI’s assumption is based on open source reporting from DOJ, as well as intelligence from corroborated human and financial sources. The FBI also lists examples which highlight threat actors’ use of shell companies to launder money, and the failure of the PIFs’ standardized due diligence, if any, in establishing the source of funds. In one case, the FBI noted the involvement of a “former partner of a major US law firm” who “assisted others in laundering more than $400 million . . . through a series of purported private equity funds holding accounts at financial institutions . . . to conceal and disguise the nature, location, source, ownership, and control of the proceeds.”

While traditional US broker-dealer funds are required to have an anti-money laundering (AML) program, make Bank Secrecy Act filings, and perform customer due diligence, the FBI noted that these requirements are not mandated for PIFs, which are largely exempt from regulatory oversight by the Securities Exchange Commission and other federal financial regulatory authorities. As a result, even where PIFs had in place AML measures, the FBI assessed that money launderers could circumvent traditional AML programs.Continue Reading FBI Assessment Notes AML Risk to Private Investment Funds from use of Standardized Due Diligence

This third post in our parallel proceedings series discusses how to reconcile the conflicting requirements of making voluntary self-disclosures (VSDs) to multiple agencies. We listed the relevant agencies in our first post, all of whom may be interested in a VSD, depending on the potential violations. In our second post, we discussed how to structure an investigation that involves those agencies. While none of these agencies imposes an absolute requirement to voluntarily disclose a violation (with limited exceptions where disclosure is required), they all offer significant benefits for doing so.

Where more than one agency is involved, disclosure of violations to each of the relevant agencies should be done simultaneously, including the Department of Justice (DOJ) if there is or appears to be potential willfulness or intent. When making the decision to disclose, the company should also consider any potential violations in related subject areas (i.e., anti-money laundering, customs, or anti-bribery and corruption laws).Continue Reading US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 3, Voluntary Disclosures)

On July 3, the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) issued the second edition of the Resource Guide to the US Foreign Corrupt Practices Act (the 2020 Guide), the first full-scope overhaul of the Resource Guide since its issuance in 2012. As with the original edition, the 2020 Guide…

In our first post in this series, we described the different agencies that could be involved in an investigation of export controls and sanctions violations, noting that the agencies have overlapping jurisdiction but different enforcement priorities, authority, requirements, and penalties.

In this post, we focus on how the potential involvement of multiple agencies in an investigation of export controls and/or economic sanctions will impact the way the investigation proceeds, its scope, and its underlying strategy. Ultimately, the goal should be a unified internal investigation that is appropriately scoped and undertaken to satisfy all the interested agencies, i.e., one and done.Continue Reading US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 2: Investigation Strategy)

Facing an enforcement action arising from potential violations of US export controls and economic sanctions may mean a battle on two, if not three or four, fronts. Multiple agencies within the US government are responsible for oversight and enforcement of laws and regulations, with overlapping jurisdiction, but distinct requirements, potential penalties, and consequences for non-compliance. These agencies also have different authority, priorities, and powers.

Accordingly, a company should anticipate the real possibility that an investigation of these complex laws and regulations will involve more than one US government agency and develop a coordinated strategy to protect against collateral consequences of parallel proceedings.

In this series of blogs, we will set forth the following top five things you need to know about the possibility of multiple agency involvement in an investigation of export controls and/or sanctions:

  • The relevant agencies and regulations.
  • How the involvement of multiple agencies will impact the investigation.
  • Different agencies’ considerations of voluntary disclosures.
  • How to manage interagency communication.
  • How to manage global settlements and what can go wrong.

Continue Reading US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 1 of 5)

In December 2019, the US Department of Justice (DOJ) announced a revised policy regarding voluntary self-disclosure of export control and sanctions violations by business organizations (VSD Policy).

The VSD Policy, issued by DOJ’s National Security Division (NSD), sets forth the criteria that DOJ, through NSD’s Counterintelligence and Export Control Section (CES) and in partnership with the US Attorneys’ Offices, will now use to determine an appropriate resolution for an organization that makes a voluntary self-disclosure in export controls and/or sanctions matters. Specifically, the VSD Policy encourages business organizations – which now include financial institutions – to self-disclose to NSD “all potentially willful violations of the statutes implementing the US government’s primary export control and sanctions regime.”

The VSD Policy increases incentives for self-disclosure, as the revised policy “signals the [DOJ’s] continued emphasis on corporate voluntary self-disclosure, rewarding cooperating companies with a presumption in favor of a non-prosecution agreement and significant reductions in penalties,” according to a DOJ press release.

The requirements to receive the benefits of the voluntary self-disclosure are set forth in the revised VSD Policy and discussed in further detail below. Importantly, the VSD Policy does not affect the process for businesses to make voluntary self-disclosures to regulatory agencies, such as the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) or the US Department of Commerce’s Bureau of Industry and Security (BIS). Companies that are aware of having committed a potential US sanctions or export controls violation will need to consider the VSD Policy in the context of their interactions with other US agencies. However, given the DOJ’s requirement to disclose willful violations of US economic sanctions and export controls “[p]rior to imminent threat of disclosure or government investigation” and “[w]ithin a reasonably prompt time after becoming aware of the offense,” any company considering disclosure of regulatory violations to either OFAC or BIS will also need to decide, early in the investigation, as to whether to also disclose to the DOJ. A “wait and see” approach may no longer be advisable given the timing consideration and may, in fact, necessitate an early assessment of willful conduct by the company or its employees.

The VSD Policy was designed to more closely align the NSD guidance with recent guidance issued throughout DOJ, thereby providing increasing clarity of the factors that a company should consider in determining whether to voluntarily self-disclose. The VSD Policy supersedes DOJ’s 2016 policy titled “Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations” (the 2016 Guidance).Continue Reading DOJ Adds Incentives for Disclosure in Updated Export Control and Sanctions Enforcement Policy