US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 1 of 5)

Facing an enforcement action arising from potential violations of US export controls and economic sanctions may mean a battle on two, if not three or four, fronts. Multiple agencies within the US government are responsible for oversight and enforcement of laws and regulations, with overlapping jurisdiction, but distinct requirements, potential penalties, and consequences for non-compliance. These agencies also have different authority, priorities, and powers. Accordingly, a company should anticipate the real possibility that an investigation of these complex laws and regulations will involve more than one US government agency and develop a coordinated strategy to protect against collateral consequences of parallel proceedings. In this series of blogs, we will set forth the following top five things you need to know about the possibility of multiple agency involvement in an investigation of export controls and/or sanctions:

• The relevant agencies and regulations.
• How the involvement of multiple agencies will impact the investigation.
• Different agencies’ considerations of voluntary disclosures.
• How to manage interagency communication.
• How to manage global settlements and what can go wrong.

Throughout, we will provide case examples and a practical approach for companies. Relevant Agencies and Regulations The primary agencies within the US government that are responsible for the regulation and enforcement of economic sanctions, export controls, and related regulations include:

• The Office of Foreign Assets Control (OFAC) of the Department of the Treasury administers and civilly enforces economic sanctions programs targeting sanctioned countries, entities, and individuals pursuant to various legislation, executive orders, and other legal authorities. OFAC regulations are available at 31 F.R. Chapter V.
• The Bureau of Industry and Security (BIS) of the Department of Commerce administers and civilly enforces the Export Administration Regulations (EAR), which controls “dual-use” items and sensitive technologies that may have both civil and military end uses pursuant, to the Export Control Reform Act of 2018 (ECRA).
• The Directorate of Defense Trade Controls (DDTC) of the Department of State administers and civilly enforces the International Traffic in Arms Regulations (ITAR), which controls military items, pursuant to the Arms Export Control Act (AECA).
• The Department of Justice (DOJ) through its National Security Division, in coordination with the Federal Bureau of Investigation (FBI) and the US Attorneys’ offices around the country, are charged with criminal enforcement, where there is willful or intentional violations of the above laws and regulations.
• With respect to potential violations by financial institutions, other bank regulators may also be involved, such as the US Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury, and various state-level banking regulators, such as the New York Department of Financial Services (DFS) for those active in New York State.
• The Department of Homeland Security, through US Customs and Border Protection (CBP) and US Immigration and Customs Enforcement (ICE) are also sometimes involved in investigations related to economic sanctions and export controls.

Rather than considering these agencies as acting parallel to each other when they investigate and enforce their respective regulations, it may be more accurate and useful to consider them as acting perpendicular. This is because they will often—but not always—cooperate and consider each other’s views in forming their theories of prosecution, sharing information, and coordinating a global settlement. In doing so, there will be intersections at times which must be anticipated and handled deftly. Often, external counsel will serve as the liaison between the agencies which we will discuss in later posts. When a company discovers a potential violation, the company should consider and address all of the agencies that may have jurisdiction. A company must be careful to ensure that violations of each regulatory regime are uncovered and, where appropriate, disclosed to and resolved with all of the relevant agencies. Overlooking an agency and having to face additional penalties and collateral consequences later can be disastrous. In our next post, we will discuss how an investigation can be impacted when multiple agencies are involved.