FinCEN, OFAC Increase Coordination of Enforcement Activities

Recent joint activity by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), including joint actions against Venezuela and North Korea, suggest that the two Treasury agencies are increasing coordination to tackle financial and other crimes.

On September 20, 2017, FinCEN issued an advisory which detailed widespread corruption in Venezuela, noting that OFAC has designated a number of Venezuelan public officials for public corruption and narcotics trafficking, including President Nicolas Maduro, Vice President Tareck El Aissami, national assembly leaders, and leaders of national energy company Petroleos de Venezuela (PdVSA).  This tracks a pattern of regular communications and actions by OFAC and FinCEN Continue Reading

Open Investment? Trump Blocks Lattice Semiconductor/Canyon Bridge Deal, Following CFIUS Recommendation

As many CFIUS-watchers were expecting, the President has just blocked the Lattice Semiconductor/Canyon Bridge deal.  CFIUS recommended that the President take this action because of national security concerns, and no President has refused to follow such a blocking recommendation by CFIUS.

In most cases, where CFIUS has made such a recommendation, the parties have abandoned the deal rather than waiting for the President to act.  This is only the fourth time that parties to a deal have forced presidential action:  at the recommendation of CFIUS, President George HW Bush ordered a divestment in 1990, President Obama ordered a divestment in 2012 and blocked a deal in 2016, and President Trump now has blocked this Lattice Semiconductor/Canyon Bridge deal.  All cases have involved Chinese companies.  (Steptoe has previously written on the 2012 and 2016 actions.) Continue Reading

Dreamers face Uncertain Future as DACA Unwinds

On September 5, 2017, President Trump released a statement confirming his decision to rescind the Deferred Action for Childhood Arrivals (DACA) immigration program. DACA was created via executive action in June 2012 under President Obama to benefit a group of undocumented foreign nationals commonly referred to as “Dreamers.” The effective date of the program rescission is March 5, 2018.

The DACA program provides temporary immigration benefits to undocumented individuals who arrived in the U.S. as minors. The program is based upon prosecutorial discretion, with eligibility determined through an application process and background screening. Under this program, approximately 800,000 individuals between the ages of 15 and 36 have been granted deferral from deportation as well as an Employment Authorization Document (EAD). Continue Reading

U.S. Cuts off Venezuela from Most Dollar-Denominated Financing

On August 25, the U.S. Government announced the publication of a new Executive Order, signed by President Trump on August 24 and effective at 12:01am on August 25, prohibiting U.S. persons from engaging in any transactions or dealings involving “new” debt of certain maturity durations of the Government of Venezuela (GoV) and Petroleos de Venezuela, S.A. (PdVSA), as well as some existing debt of the GoV and any “new” equity of entities owned by the GoV, including PdVSA, along with paying dividends or other profits back to the GoV from GoV-owned entities.  “New” debt and equity are those instruments issued on or after 12:01am on August 25, 2017.  This adds to existing sanctions targeting certain officials of the GoV, including President Maduro, and is similar to the sectoral sanctions that the U.S. has imposed on certain listed financial, energy and defense sector entities in Russia.  Continue Reading

Settlement Points to Potentially Expansive View of Importation of Iranian Services by OFAC

On August 10, 2017, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement with IPSA International Services, Inc. (“IPSA”) to resolve apparent violations of the Iranian Transactions and Sanctions Regulations (“ITSR”).   The apparent violations include importation of Iranian-origin services in violation of § 560.201 and engagement in transactions or dealings related to Iranian-origin services in violation of § 560.206 and § 560.208.  IPSA is a “risk mitigation” firm that specializes in providing regulatory-related due diligence services, among other offerings.  IPSA agreed to pay $259,200 to resolve the matter.

According to OFAC, the apparent violations stem from two contracts entered into by IPSA and one of its subsidiaries. IPSA (the US parent) entered into the first contract (“contract one”) with a third country, presumably a government agency or entity, regarding its “citizenship by investment program,” which may be a program similar to the EB-5 Immigrant Investor Visa Program in the US.  IPSA’s Canadian subsidiary entered into the second contract (“contract two”), which involved a similar immigration-related investment program, with a government-owned financial institution based in a different third country.

Some of the applicants to both of these programs were Iranian nationals whose personal information could not be appropriately vetted by sources outside Iran. In an effort to verify information about these applicants, IPSA’s Canadian subsidiary and IPSA’s subsidiary in the UAE hired subcontractors to conduct due diligence, and those subcontractors then hired third parties to obtain and validate information within Iran.  Continue Reading

U.S. Visa Operations across Russia Temporarily Suspended

On August 21, 2017, the U.S. Department of State (DOS) announced the suspension of all U.S. nonimmigrant (temporary) visa (“NIV”) operations across Russia, effective August 23, 2017. Visa interviews will resume on a limited basis on September 1, 2017. This action arises from the Russian government’s cap on personnel at the U.S. Mission to Russia.

Starting September 1, 2017, nonimmigrant visa interviews will be conducted only at the U.S. Embassy in Moscow.  Scheduled visa interviews at the U.S. consulates in St. Petersburg, Yekaterinburg, and Vladivostok have been cancelled with instructions to reschedule at the U.S. Embassy in Moscow. This situation will continue for the duration of the staffing level reduction.

Extended Appointment Waiting Periods

The visa appointment wait times in Russia as of this writing are as much as 85 days. This backlog is a recent development. These time frames far exceed standard appointment availability wait times, which are often just a few days, elsewhere in the world. With the suspension and limited interview capacity, the backlog is likely to continue to increase. Continue Reading

Towards a German CFIUS copycat? More scrutiny on foreign investments in German companies

Germany has recently boosted its control over undesired foreign investments by introducing an amendment to its Foreign Trade and Payments Ordinance, which complements the Foreign Trade and Payments Act. Under the new rules, the acquisition by foreign investors of significant shareholdings in German companies will be subject to an enhanced government control from a public policy and security viewpoint. The Ordinance increases the power of the German Ministry for Economic Affairs and Energy (BMWi) to review investments that result in the acquisition of a direct or indirect participation corresponding to 25 percent or more of the voting rights in a German company.

Under German law, two different procedures exist for investment review, depending on the industry at stake. On the one hand, special rules apply to the acquisition of companies operating in sensitive security areas. The Ordinance brings clarification in this regard and defines new categories of transactions that are subject to a reporting obligation. Such categories include acquisitions of German operators of critical IT infrastructure, developers of software for the operation of critical infrastructure in certain specific industry such as the energy and water, telecommunications and data storage, transport, health, food, as well as financial services. The new Ordinance also expands on the transactions in the defence industry and related industries that are subject to a reporting obligation. Continue Reading

Why Employers Should Care about Form I-9 Changes

If they don’t already, U.S. employers must view Form I-9, Employment Eligibility Verification, as more than just a form. Changes to the form reflect changes in law, regulation, policy and technology. Employers must monitor Form I-9 developments and learn to read between the lines. After several years without changes, the United States Citizenship and Immigration Services (USCIS) has rolled out two new versions of Form I-9 since November 14, 2016, with the most recent version taking effect on September 18, 2017.

The recent releases of the Form I-9 coincide with an increase in a focus on employer enforcement activity and policies. The Form I-9 and the associated fines for violations and non-compliance were static since 2013. Thus, while many of the Form I-9 changes can be correctly characterized as technical and non-substantive, employers should not minimize the implications of frequent changes and governmental investments in technology enhancements.

With the introduction of a revised Form I-9 in November 2016, USCIS launched a “smart” and online fillable version billed as “user friendly.” USCIS views these enhancements as creating a readily accessible form, with an accompanying online guidance handbook, M-274. This, in turn, raises the compliance expectations for all U.S. employers. Continue Reading

WorldECR Publishes Article on EAR License Exceptions

Steptoe’s Ed Krauland and Anthony Rapa authored an article on Export Administration Regulations (EAR) license exceptions published in WorldECR’s July 2017 issue. The article discusses the pros and cons of license exceptions, which can offer exporters a host of cost, time, and efficiency benefits. They argue that, when mastered, these license exceptions can be a useful tool for a company’s compliance department.

More information is available here.

A Detailed Look at the Countering America’s Adversaries Through Sanctions Act

President Trump signed the Countering America’s Adversaries Through Sanctions Act into law on August 2, 2017, targeting Russia, North Korea, and Iran.  The law serves as a forceful, bipartisan statement that the US Congress continues to view robust economic sanctions as a foundation of US foreign policy, in which Congress will play a leading role in restricting trade, at times in conflict with the president’s authority to conduct diplomacy.  The Russia portion of the law significantly expands the scope of the US sanctions regime and requires careful review by both US and non-US companies.  The North Korea and Iran sections do not materially affect most US companies, which already face broad restrictions in those countries, but the North Korea section specifically includes additional secondary sanctions that create new risk areas for non-US companies.

For more information, please see our advisory.