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Jack Hayes has extensive experience providing clients with advice and assistance under ITAR and EAR, as well as US economic sanctions and anti-boycott regulations. Jack frequently handles complex export control matters, including voluntary disclosures, internal investigations of apparent export control violations, pre-closing and post-closing acquisition export compliance due diligence, export control audits, and assessments of compliance obligations and risks in accordance with relevant international trade regulations. He also provides guidance on brokering requirements and reporting obligations for certain fees, commissions, and political contributions related to sales of defense articles and defense services, prepares export and reexport license and agreement applications for submission, undertakes commodity jurisdiction and export classification analyses of items and services under the ITAR and EAR, drafts registration material change notifications, and develops compliance policies, programs, and training materials.

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On February 23, 2024, the United States issued a broad set of new Russia-related sanctions and export controls in response to the second anniversary of Russia’s invasion of Ukraine and the February 16, 2024, death of opposition leader, Aleksey Navalny, in Russian custody.

The Treasury Department’s Office of Foreign Assets Control (OFAC), the Commerce Department’s Bureau of Industry and Security (BIS), and the State Department all issued new designations.  The agencies also issued an inter-agency advisory warning non-Russian companies from doing business in or with Russia.Continue Reading US Government Imposes New Russia Sanctions, Designating Over 500 Parties and Issuing Interagency Russia Business Advisory

On February 8, 2024, the U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rulemaking (2024 NPRM) about Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regulations concerning persons involved in residential real estate closings and settlements. To promote U.S. AML/CFT objectives, the NPRM proposes a system of streamlined Suspicious Activity Reports (SARs) for certain U.S. real estate transactions. The NPRM does yet not have the force and effect of law, and FinCEN has requested public comments to be submitted until on or about April 16, 2024. A brief summary of the background and substantive provisions for the NPRM follows.Continue Reading Potential new SAR-like Reporting Requirements for Certain U.S. Real Estate Transactions

In a recent proposed rule, the Department of Commerce has taken additional steps toward imposing significant regulations on infrastructure as a service (IaaS) providers, including providers engaged in training certain large AI models. The notice of proposed rulemaking (NPRM) is published by Commerce’s Bureau of Industry and Security (BIS) and, in particular, its newly-created Office of Information and Communications Technology and Services (OICTS). The NPRM does not impose any immediate obligations on industry. Rather it requests comments on the proposed rules, which Commerce will consider before issuing a final rule. Comments are due by April 29, 2024.

The NPRM is OICTS’s first step toward implementing the Biden Administration’s executive order on AI (discussed in Steptoe’s alert here) and further implements a prior executive order on IaaS providers (discussed in Steptoe’s alert here).

The NPRM would require providers of IaaS products to implement customer identification programs (CIPs) to verify the identity of foreign customers. The CIP requirement is similar, in many respects, to the CIPs that certain US financial institutions must implement as part of their anti-money laundering (AML) compliance programs. The NPRM also delineates the ability of Commerce to identify foreign jurisdictions and persons posing a heightened threat to US national security and to prohibit or require conditions on the provision of IaaS products to such jurisdictions or persons. IaaS providers would be obligated to identify and report to Commerce when a foreign person uses their products to train a large AI model with potential capabilities that could be used in malicious cyber-enabled activity. Furthermore, IaaS providers would be required to ensure their resellers comply with the same set of rules.Continue Reading Commerce Proposes Significant New Regulations on AI Training and IaaS Providers

On January 16, 2024, the Assistant Secretary for Export Enforcement at the Department of Commerce’s Bureau of Industry and Security (BIS) issued a memorandum, announcing that:

  1. parties disclosing minor or technical violations that occurred close in time can submit a single Voluntary Self-Disclosure (VSD) on a quarterly basis, which may include an abbreviated narrative account of the suspected violations; and
  2. parties sending formal requests to BIS’s Office of Exporter Services to engage in otherwise prohibited activities with respect to items involved in violations of the Export Administration Regulations (EAR) should also send courtesy copies to the Office of Export Enforcement (OEE), which will help expedite BIS’s processing of such requests.

The memorandum builds upon previous changes to BIS’s administrative enforcement program, which were announced in memoranda dated June 30, 2022 and April 18, 2023.  These changes are intended to help OEE fast-track its review of “minor” or “technical” VSDs and to encourage additional disclosures of potentially significant violations of the EAR, but do not apply to VSDs relating to Part 760 of the EAR (antiboycott and restrictive trade practices).  For a detailed analysis of the previous memoranda, see our blog posts from July 6, 2022 and April 26, 2023.  Continue Reading BIS Makes Further Changes to Administrative Enforcement, But Questions Remain

On September 14, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the Department of State, and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced new sanctions designations and export control guidance related to Russia.  These developments are the latest updates in the U.S. government’s ever-evolving response to Russia’s war in Ukraine through economic sanctions and export controls.Continue Reading U.S. Government Issues New Russia-related Sanctions Designations and Export Controls Guidance

After months of anticipation, a federal judge has finally ruled in the closely watched case of Joseph Van Loon, et al. v. Department of Treasury, et al.  This important case addressed challenges to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) decision to impose sanctions on Tornado Cash as a Specially Designated National and Blocked Person (SDN).  The judge granted summary judgement in favor of OFAC, finding it had sufficient legal authority to designate Tornado Cash, and denied summary judgement on the plaintiffs’ claims.  Shortly after that ruling, OFAC announced the SDN designation of Roman Semenov, one of three alleged co-founders of Tornado Cash, and the Department of Justice (DOJ) charged Semenov and Roman Storm, another Tornado Cash founder, with multiple alleged criminal violations related to anti-money laundering (AML) and economic sanctions laws. 

All three actions are critical developments that contain key insights on how the US government views the AML and sanctions obligations of decentralized protocols and individuals associated with those protocols.  The developments make clear that, at least in certain scenarios, individuals involved in the creation of a DeFi platform can be held responsible for the activities conducted on that platform where such conduct violates US economic sanctions or AML laws, or constitutes sanctionable activity under applicable executive orders. Continue Reading Critical Tornado Cash Developments Have Significant Implications for DeFi AML and Sanctions Compliance

Effective August 18, 2023, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued amendments to the Commerce Control List (CCL) (15 CFR Part 774) of the Export Administration Regulations (EAR) to formalize changes based on Nuclear Supplier Group (NSG) commitments to prevent nuclear proliferation and the development of nuclear-related weapons of mass destruction.Continue Reading BIS Promulgates CCL Changes Based on Nuclear Supplier Group Commitments

On August 10, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), in coordination in the United Kingdom and Canada, designated the former governor of Lebanon’s central bank, Riad Salameh (“Salameh”) and four close associates, pursuant to Executive Order (“E.O.”) 13441.  According to OFAC’s press release, Salameh was designated for alleged “corrupt and unlawful actions [that] have contributed to the breakdown of the rule of law in Lebanon” and his close associates were designated for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Salameh.”  The designations are noteworthy in that they were undertaken pursuant to OFAC’s determinations under sections 1(a)(i)(A) and (B) of E.O. 13441 – which provide authority for OFAC designations in response to actions “contribut[ing] to the deliberate breakdown in the rule of law in Lebanon”, among other sanctionable activities – rather than E.O. 13818 (the “Global Magnitsky Act E.O.”), which authorizes the imposition of sanctions against individuals and entities involved in serious human rights abuses, corruption, or other malign activities, including any person determined to “degrade the rule of law,” on a worldwide basis. Continue Reading OFAC Sanctions Former Governor of Lebanon Central Bank and Associates

On August 11, 2023, the U.S. Nuclear Regulatory Commission (“NRC”) and the U.S. Department of Commerce, Bureau of Industry & Security (“BIS”) announced amendments to their existing regulations concerning exports of nuclear materials and related equipment destined for China and Macau. (BIS extends its export controls policies and regulations applicable to China to the territory of Hong Kong.) Although the notice from the NRC provided little explanation, the notice issued by BIS explained that the change in the Export Administration Regulations (15 CFR Parts 730-774 or EAR) is based on an increased concern with China’s military-civil fusion policy and efforts to expand its military nuclear capability. The changes implemented by the NRC are effective as of August 8, 2023, and the changes implemented by BIS are effective as of August 11, 2023. Continue Reading U.S. Government Revises Export Controls Regarding Commercial Nuclear Commerce with China

Overview

On August 9, 2023, the White House issued a long-awaited Executive Order, entitled Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern (“EO 14105”). The EO establishes a new national security regulatory regime, implemented principally by the US Department of the Treasury (“Treasury”), in consultation with other federal agencies including the US Department of Commerce, that will require the notification of, as well as prohibit, certain investment activity by US persons in named “countries of concern,” currently China.

EO 14105 does not restrict all US person investment activity regarding China, and is tailored to focus on specific products, technologies, and capabilities involving: (1) semiconductors and microelectronics (including advanced integrated circuits and supercomputers); (2) quantum information technologies (e.g., computers, sensors, networking, and systems); and (3) certain artificial intelligence systems (e.g., with certain military, intelligence, or surveillance end uses).Continue Reading Biden Administration Announces New Outbound Investment Regime Targeting China