As geopolitical tension rises and the US continues to expand its sanctions, the national agencies are intensifying their resources and attention on the investigation of possible sanctions violations. The primary focus of these investigations covers dealings associated with Russia, China, and Iran. For this reason, companies must understand the investigative procedures undertaken by both the Treasury Department’s Office of Foreign Assets Control (OFAC) for civil/administrative matters, and the Department of Justice for criminal matters. Bloomberg Law provides a detailed outlook on this matter.
Sanctions investigations can be started by different catalysts, such as compulsory reports from the private sector, press releases and intelligence input, and even voluntary self-disclosures. Each category possesses its own characteristics and implications. Compulsory reports include Reports of Blocked Transactions and Reports of Rejected Transactions that are submitted to OFAC in addition to Suspicious Activity Reports filed with the Financial Crimes Enforcement Network.
US government agencies also review press reports and intelligence extracted from corporate dealings with sanctioned parties or embargoed territories. Even voluntary disclosures by businesses that infringed sanctions are taken into account. This approach to review is supported by OFAC enforcement guidelines and DOJ policy , which offer substantial penalty reductions for companies that voluntarily disclose sanctions violations. These benefits are provided to companies that fully cooperate in investigations and eventual remedy of the conduct that violated sanctions.
Certain potential downsides to voluntary disclosures include the risk of revealing conduct that might have otherwise remained undiscovered. That said, companies are encouraged to make disclosures to probe these cases, as substantiated by the recent “Tri-Seal Compliance Note”.
Different procedures apply to the submission of voluntary self-disclosures to the OFAC and the DOJ. It is often more challenging and time-consuming to ascertain whether potential criminal US sanctions violations have taken place than to determine if US sanctions violations are worth disclosing under OFAC’s strict liability administrative regime.
OFAC and the DOJ have the authority to issue subpoenas and informal requests for information to companies in connection with an investigation. The implications of investigations conducted by these two agencies can vary greatly. While OFAC can only impose a civil monetary penalty and require compliance commitments, the DOJ can threaten companies and their employees with criminal prosecution and potential imprisonment for US sanctions violations.
As a strategic approach, whether responding to a subpoena or questions following a voluntary self-disclosure, a company and its counsel should be cooperative with OFAC and the DOJ. This tends to lead to a favorable resolution of an enforcement case, even for non-US companies that might otherwise challenge a subpoena or information request on jurisdictional grounds.
To ensure the agencies understand and are in agreement with the approach adopted by a company, it’s imperative to address privacy and data protection issues that may affect what can be produced. Providing information to OFAC and the DOJ in an organized and well-defined manner can help secure cooperation credit as part of an investigation.
Sourced from Bloomberg Law article written by Alexandre Lamy and Terry Gilroy of Baker McKenzie’s international trade practice.