In this blog post, we provide an overview of the updates to the Criminal Division’s Corporate Enforcement Policy (CEP) and discuss the impact of these changes on the corporate enforcement policies for criminal violations of sanctions and export controls, criminal violations of antitrust laws, and civil violations of the False Claim Act.

On January 17, 2023, Assistant Attorney General Kenneth A. Polite, Jr. announced changes to the Department of Justice’s (“DOJ”) Corporate Enforcement Policy (“CEP”), including applying the most recent FCPA Corporate Enforcement Policy to all corporate criminal cases handled by the DOJ’s Criminal Division. The FCPA Corporate Enforcement Policy, codified in § 9-47.120 of the Justice Manual, provides that if a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there is a presumption of declination absent certain “aggravating circumstances involving the seriousness of the offense or the nature of the offender.” The clear goal of this and other recent pronouncements from senior DOJ leadership is to tip the scales in favor of early disclosure by setting forth concrete incentives for corporations that discover potential criminal violations. 

Importantly, the CEP now explicitly states that a company presenting “aggravating circumstances,”1 while not eligible for a presumption of declination, may still obtain a declination if (1) the company had an effective compliance program and system of internal accounting controls at the time of the alleged misconduct, (2) the voluntary self-disclosure was made “immediately” upon the company becoming aware of the allegation of misconduct, and (3) the company provided “extraordinary cooperation” to DOJ investigators. For companies that do not receive a declination but do receive credit, the CEP also increases the available discounts from fines under the U.S. Sentencing Guidelines (“USSG”), both for companies that voluntarily self-disclose and those that do not.

Although the updated CEP heavily emphasizes the benefits of voluntary self-disclosure and cooperation, its implications for companies will largely depend upon the Criminal Division’s application of the policy, including through DOJ prosecutors’ interpretation of important, undefined terms such as “immediate” disclosure and “extraordinary” cooperation.

Moreover, although the CEP applies to the entire Criminal Division, it could potentially have ripple effects on the corporate enforcement policies in place in other DOJ components. For example, the CEP does not revoke or alter the DOJ National Security Division’s (“NSD”) Export Control and Sanctions Enforcement Policy for Business Organizations (the “Export Control and Sanctions Enforcement Policy”). That NSD policy is generally consistent with the CEP, but it does not spell out affirmatively, as the new Criminal Division policy does, the circumstances that a company must demonstrate to be considered for a non-prosecution agreement (“NPA”) rather than a criminal resolution in the face of aggravating factors. Similarly, the Antitrust Division and Civil Division have their own corporate enforcement policies in place, each of which has aspects uniquely tailored to those respective regimes. It therefore remains to be seen whether these other Divisions within DOJ will adjust their corporate enforcement policies to align more precisely with the CEP.  Continue Reading DOJ’s New Corporate Enforcement Policy for the Criminal Division and its Impact on Cases handled by other Divisions

On October 7, 2022, in a move that was hailed by senior U.S. government officials as a paradigm shift in U.S. export controls policy toward China, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule that amends the Export Administration Regulations (EAR) to impose new and expanded controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items. Transactions for supercomputer end-uses and transactions involving certain entities on the Entity List are now subject to additional export controls, as are certain semiconductor manufacturing items and transactions for certain IC end uses. U.S. person activities as they relate to certain semiconductor activities in China are also now restricted.

Certain aspects of the rule, specified below, including the availability of license exceptions, became effective immediately on October 7, 2022. The new restrictions on U.S. person activities under § 744.6 became effective on October 12, 2022. The remainder of the provisions with a delayed effective date are specified below and will become effective on October 21, 2022. BIS is also accepting public comments on the interim final rule through December 12, 2022.

Separately, also on October 7, 2022, BIS issued a final rule, which revised the Unverified List (UVL) and clarified the activities and criteria that may lead to the addition of an entity to the Entity List. BIS stated that a sustained lack of cooperation by the host government in a country where an end-use check is to be conducted, such as China, that effectively prevents BIS from determining compliance with the EAR, will be grounds for adding an entity to the Entity List.

The U.S. policy goals behind the new rules are ambitious and seek to degrade China’s advanced computing capabilities in an unprecedented manner. As summarized recently by National Security Advisor Jake Sullivan: “On export controls, we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies.  We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead. That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

The broad implications of these new rules, along with their efficacy from a policy standpoint, may take some time to come fully in to focus. For now, it is clear that any U.S. or non-U.S. individuals or entities that play any role in the global semiconductor supply chain—whether as manufacturers, producers, consumers, or otherwise—need to carefully review the new rules to determine what is required to comply and, if necessary, seek guidance or a license from BIS.Continue Reading BIS Issues Expansive New Rules Targeting China

On August 1, Robinhood Crypto, LLC (RHC) entered a consent order with the New York State Department of Financial Services (DFS) requiring RHC to pay a $30 million fine for violating (1) New York’s virtual currency regulatory regime known as the BitLicense, (2) a Supervisory Agreement entered with DFS as a condition of its BitLicense, (3) anti-money laundering (AML) requirements applicable to money transmitters, and (4) other requirements related to transaction monitoring, filtering, and cybersecurity.  The consent order, which is DFS’s first enforcement action under the BitLicense regime or against a digital currency business, offers several important takeaways for blockchain companies operating or seeking to operate in the state, including (1) the importance of scaling up compliance processes commensurate with business growth, (2) the risks of relying on compliance programs of affiliated entities, (3) the importance of well-developed reporting lines in compliance programs, and (4) the consequences of filing “improper” certifications under DFS’s transaction monitoring and cybersecurity rules.
Continue Reading DFS’s First Enforcement Action Against a Blockchain Company: Lessons Learned

On August 2, 2022, the Committee on Foreign Investment in the United States (“CFIUS” or “Committee”) released its statutorily required Annual Report to Congress for Calendar Year 2021.  CFIUS is the inter-agency body charged with conducting national security reviews for certain foreign investments in the United States.  While the CFIUS process is generally confidential, the annual report provides aggregate data on certain CFIUS activities and offers industry a window into current Committee trends.
Continue Reading Key Takeaways from the 2021 CFIUS Annual Report

On July 19, 2022, the State Department’s Directorate of Defense Trade Controls (DDTC) published Open General License (OGL) No. 1 and OGL No. 2, which authorize reexports to or retransfers within the U.K., Canada, and Australia of certain types of defense articles, services and technical data controlled under the International Traffic in Arms Regulations (ITAR).  In good news for industry, these groundbreaking ITAR provisions are relatively simple and easy to use. Both OGLs are valid for one year, effective August 1, 2022, through July 31, 2023.
Continue Reading New ITAR Rules Facilitate Defense Trade with the U.K., Canada and Australia

The Department of Commerce’s Bureau of Industry and Security (BIS) has announced policy changes designed to strengthen its administrative enforcement of U.S. export controls. In a memorandum released on June 30, Matthew Axelrod, Assistant Secretary for Export Enforcement at BIS, outlined four new policy changes including (1) significantly higher penalties for egregious violations, (2) elimination of no admit/no deny settlements, (3) offering non-monetary settlement agreements in cases where the violations “do not reflect serious national security harm” but are more serious than cases that receive warnings or no-action letters, and (4) implementation of a dual-track processing system for Voluntary Self Disclosures (VSDs) involving minor or technical infractions and those involving potentially more serious violations. These changes have the potential to significantly increase export enforcement risks for U.S. and non-U.S. companies, and suggest it is time for exporters and reexporters to conduct internal audits, assessments, and monitoring for potential compliance gaps. It may be necessary for some exporters to consider tailoring and enhancing internal export compliance programs, processes, and resources to avoid costly penalties, investigations, business disruptions, and brand damage.
Continue Reading Revamping BIS’s Administrative Enforcement Authorities: Time to Consider More Investment in Internal Corporate Compliance

Between April 18 and May 2, 2022, the US government continued to ratchet up economic sanctions, export controls, and other restrictive trade measures targeting Russia.  Most significantly, on April 21, President Biden issued a Proclamation prohibiting “Russian-affiliated vessels” from entering US ports.  Otherwise, the US government has focused on utilizing its existing authorities to impose further costs on Russia.

Over the last two weeks of April, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated over 40 individuals and entities including Transkapitalbank (TKB), re-issued an expanded set of Ukraine- / Russia- Sanctions Regulations (URSR), and issued several new or revised general licenses, including one relating to the provision of assistance by nongovernmental organizations, and 8 Frequently Asked Questions (FAQs).

Separately, the Commerce Department’s Bureau of Industry and Security (BIS) continues to be focused on restricting the Russian aviation sector, issuing a temporary denial order (TDO) on the Russian cargo aircraft carrier, Aviastar, for operating aircraft on flights into and out of Russia without the BIS authorization required under the Export Administration Regulations (EAR), and providing weekly updates to its list of commercial and private aircraft operated in potential violation of the EAR.Continue Reading April 18 – May 2, 2022 Russian Sanctions Update

Between April 5 and April 17, 2022, the US government took several steps to ratchet up economic sanctions, export controls, and other restrictive trade measures targeting Russia and Belarus.

President Biden issued a new Executive Order prohibiting US persons from engaging in new investment in Russia, and also establishing a framework through which US persons could in the future be prohibited from providing certain services to any person in Russia.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) designated a darknet market and cryptocurrency exchange, several Russian banks and their subsidiaries, and a number of companies allegedly assisting the Russian military by adding them to the Specially Designated Nationals and Blocked Persons (SDN) List pursuant to Executive Orders (EOs) 14024 and 13694. OFAC also published seven new and amended general licenses, including authorizations related to the recent designations of Public Joint Stock Company Sberbank of Russia (Sberbank), Joint Stock Company Alfa-Bank (Alfa-Bank), and Public Joint Stock Company Alrosa (Alrosa).

Separately, the US Commerce Department’s Bureau of Industry and Security (BIS) announced new, stringent export controls so that all items subject to the US Export Administration Regulations, except items designated “EAR99,” require a license for export, reexport, or transfer (in country) to or in the Russian Federation and Belarus.Continue Reading US Sanctions on Russia Continue to Grow

Between March 24 and April 1, 2022, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated over 400 Russian elites, Duma members, and defense companies as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO). 14024. OFAC also published four new, limited General Licenses regarding certain humanitarian, import-related, diplomatic, and journalistic activities, added one new FAQ, and published a determination for EO 14024. Separately, the White House has indicated that the United States is seriously considering imposing secondary sanctions against companies engaged in evasive activities with Russia or in business that otherwise undermines sanctions.

Additionally, on April 1, the Commerce Department’s Bureau of Industry and Security (BIS) added 120 entities in Russia and Belarus to the Entity List.

For a summary of prior US sanctions and export controls related to Russia adopted since February 21, 2022, please see our Steptoe blog posts from March 21, March 8, and February 27.Continue Reading A Summary of The Latest US Sanctions on Russia

As of March 20, 2022, a new Executive Order (EO) prohibited certain imports, exports, the transfer of US dollar banknotes to Russia, and new investments involving certain sectors of the Russian economy.  The US Office of Foreign Assets Control (OFAC) also issued new General Licenses and Frequently Asked Question (FAQ) guidance. Additionally, the US Department of Commerce’s Bureau of Industry & Security (BIS) announced new regulations to control the export, reexport, and transfer (in country) of certain luxury goods to or within Russia and Belarus. BIS also identified numerous aircraft subject to US export controls jurisdiction that had flown to Russia without a license, and issued a reminder regarding the restrictions under General Prohibition 10 under the Export Administration Regulations (EAR) of servicing such aircraft.

Key points of these US sanctions developments and export controls are summarized below.

For a summary of US sanctions and export controls adopted between February 21 and March 8, 2022, see this Steptoe blog post.Continue Reading Update: New US Sanctions on Russia Target Certain Imports, Exports, Dollar Banknotes, and Investments