On May 19, 2023, in conjunction with the G7, Australia, and other international partners, the US government announced a range of new export controls and sanctions and added 71 entities to the Entity list, primarily for supporting Russia’s military and defense sectors.  The new export controls – and new sanctions, which are the subject of a separate blog post – reflect the continued efforts of the US (in coordination with international allies) to target those attempting to circumvent or evade sanctions or export controls against Russia and Belarus.  The new measures are intended to further undermine the Russian and Belarusian industrial bases and counteract their ability to continue to support the war in Ukraine and to further limit Russia’s energy revenue and future extractive capabilities.  

Also on May 19, 2023, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a Joint Supplemental Alert entitled “FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security Urge Continued Vigilance for Potential Russian Export Control Evasion Attempts” (the “Supplemental Alert”), which is intended to assist financial institutions in the risk-based screening of export-related financial transactions in order to determine whether customers and transactions may be connected to export controls evasion.Continue Reading BIS Expands Export Controls on Russia and Belarus and Issues New Joint Alert with FinCEN

On May 19, 2023, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the US Department of State announced a new round of multifaceted sanctions against Russia.  These sanctions actions were announced alongside additional export controls imposed by the US Commerce Department’s Bureau of Industry and Security (“BIS”) and the publication of a new joint alert by BIS and the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), which are the subject of a separate blog post.

The new sanctions include expanded secondary sanctions authorities targeting additional sectors of the Russian economy; designations of more individuals and entities on the List of Specially Designated Nationals and Blocked Persons (“SDN List”); the inclusion of additional services among those that are prohibited for export to Russia; and new reporting requirements for US holders of property in which Russia’s Central Bank, Finance Ministry, or National Wealth Fund have an interest.

US persons, and others doing business that involves US jurisdiction, should continue to be vigilant against transacting with SDNs or entities that are owned by 50% or more by SDNs.  US and non-US persons alike should also carefully consider whether any of their business could constitute operations in one of the newly sanctioned sectors of Russia’s economy.Continue Reading OFAC and State Department Significantly Expand Russia-Related Sanctions

On April 18, 2023, Matthew Axelrod, Assistant Secretary for Export Enforcement at the Department of Commerce’s Bureau of Industry and Security (BIS), issued a memorandum outlining two important changes to BIS’s settlement guidelines when significant potential violations of the Export Administration Regulations (EAR) are identified. Specifically, BIS announced that (1) the deliberate non-disclosure of a significant potential violation will now be treated as an aggravating factor in civil enforcement cases, and (2) whistleblowing of significant potential violations by another party that ultimately results in a BIS enforcement action will be considered a mitigating factor in any future enforcement action involving the whistleblower, even for unrelated conduct. The policy changes are intended to incentivize the submission of disclosures to BIS when industry or academia uncovers significant EAR violations (i.e., those reflecting possible national security harm, as opposed to minor, technical violations).

BIS’s new policy of treating non-disclosure of significant potential violations of the EAR as an aggravating factor marks a potential sea change in the voluntary self-disclosure (VSD) risk calculus for exporters and reexporters. By reorienting the purpose of the VSD to serve as both carrot and stick, BIS has now interjected more complexity into the voluntary disclosure decision making process. Companies that may have been inclined, previously, to remediate significant potential violations but not disclose may now face a more difficult choice. While it may take years for the civil penalty data to demonstrate the concrete costs of non-disclosure of significant potential violations of the EAR, consideration of that factor is likely to weigh heavily in any future BIS VSD decisions.Continue Reading A Carrot and a Stick: BIS Clarifies Policy on Self-Disclosures and Whistleblowing

On February 24, 2023, the US government announced a range of new export controls, sanctions, and tariffs to coincide with the first anniversary of Russia’s ongoing war against Ukraine. These actions by the US Department of Commerce, Bureau of Industry and Security (BIS), the US Department of the Treasury, Office of Foreign Assets Control (OFAC), the US Department of State, and the White House reflect the continued efforts of the US – in coordination with its allies – to impose costs on Russia for the war.

Each successive round of US export controls and sanctions presents new compliance challenges, against the backdrop of heightened enforcement risk resulting from aggressive, well-coordinated US government actions. US and non-US entities and individuals who engage in transactions related to Russia or Belarus should pay close attention to this complex and evolving regulatory framework. Additionally, entities and individuals exporting to Iran should take note of the expanded scope of the US Export Administration Regulations (EAR) under a new Iran Foreign Direct Product (FDP) Rule.Continue Reading US Imposes Additional Export Controls, Sanctions, and Tariffs targeting Russia, Belarus, and Iran On First Anniversary of Russia’s War Against Ukraine

In this blog post, we update our earlier post regarding OFAC’s determination and guidance on implementing the price cap policy for Russian crude oil (see link), by incorporating the recently released determinations regarding the price cap policy for Russian petroleum products and the updated guidance on implementing the price cap policy for Russian-origin crude oil and petroleum products.

On November 22, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a determination targeting Russian-origin crude oil pursuant to section 1(a)(ii) of Executive Order 14071 (EO 14071), and guidance on the implementation of the price cap policy for Russian-origin crude oil. These followed OFAC’s preliminary guidance released on September 9 (see Steptoe’s earlier blog post here).

Further, on February 3, 2023, OFAC published a determination targeting Russian-origin petroleum products pursuant to section 1(a)(ii) of EO 14071, and updated guidance on the implementation of the price cap policy for Russian-origin crude oil and petroleum products (the Updated Guidance).

The two determinations (the Determinations) set forth the categories of services relating to the maritime transport of Russian-origin crude oil and petroleum products (Covered Services) that US persons are prohibited from providing directly or indirectly to a person located in Russia, unless these items are purchased at or below relevant price cap. The Updated Guidance addresses issues relating to the implementation of the price cap policy for Russian-origin crude oil and petroleum products.Continue Reading [UPDATED] OFAC Publishes Determinations and Guidance on Implementing the Price Cap Policy for Russian Crude Oil and Petroleum Products

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 January 17, 2023, the US Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule (the “January 17 rule”), expanding its recent China-focused export controls, related to advanced computing and semiconductors, to Macau.  These controls, initially imposed on China (including Hong Kong), were announced in an interim final rule on October 7, 2022 (the “October 7 rule”). Continue Reading BIS Extends Advanced Computing and Semiconductor Rules to Macau

The Department of Justice (DOJ) “KleptoCapture” Task Force (the “Task Force”), launched shortly after Russia’s invasion of Ukraine earlier this year, is characterized by DOJ as a key part of the current Administration’s broader anti-corruption initiative. The role of the Task Force is to support the enforcement of sanctions and export control restrictions imposed against Russia in response to the conflict. Earlier this month, Andrew Adams, the Task Force’s director, discussed its work to date, expected future developments, and implications for private sector companies.[1] Highlights of his remarks are summarized below, along with our comments on key points addressed.Continue Reading Department of Justice KleptoCapture Task Force – Director Andrew Adams Shares Observations on Current Efforts and Expected Developments

On December 2, 2022, the G7, EU, and Australia (Price Cap Coalition) jointly agreed upon a cap on the price of seaborne Russian-origin crude oil at USD 60 per barrel as of December 5, 2022. The cap is subject to change based on the Coalition’s objectives and market fundamentals.

Upon reaching this consensus, the Treasury Department released a fact sheet on the same day providing additional details on the price cap policy, including its goals, how it works, and the compliance framework for the policy (the Fact Sheet). Most information has been previously discussed in the guidance released on November 22 (see our prior blog post at link). On December 5, the Treasury Department issued a Determination (the December Determination) pursuant to Executive Order 14071 and the prior Determination dated November 22 (the November Determination), to set the cap at USD 60 per barrel formally and to implement the policy.Continue Reading Price Cap Coalition Selects Level for Cap on Price of Seaborne Russian-Origin Crude Oil

On November 22, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a determination pursuant to Executive Order 14071 (EO 14071) (the Determination) and a guidance on the implementation of the price cap policy for Russian-origin crude oil (the Guidance). These followed OFAC’s preliminary guidance released on September 9 (see Steptoe’s earlier blog post here). The Determination sets forth the categories of services relating to the maritime transport of Russian-origin crude oil (Covered Services) that US persons are prohibited from providing directly or indirectly to a person located in Russia, unless the Russian crude oil is purchased at or below the price cap. The Guidance addresses issues relating to the implementation of the price cap policy for Russian-origin crude oil.Continue Reading OFAC Publishes Determination and Guidance on Implementing the Price Cap Policy for Russian Crude Oil