The American Bar Association (ABA) hosted the 39^th Annual National Institute on White Collar Crime March 6-8, 2024. U.S. Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco delivered keynote addresses, and attendees heard from numerous other leaders, including the Attorney General of Switzerland, the Director of France’s National Financial Prosecution Office, and the Directors of Enforcement for the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Sanctions and Export Control Enforcement: 2024 Update

The overarching theme of the Sanctions and Export Control Enforcement panel was that corporate compliance increasingly intersects with national security interests. The panel included officials and agents from the Department of Commerce’s Bureau of Industry and Security (BIS), the Department of Justice’s (DOJ) National Security Division, the Treasury Department’s Office of Foreign Assets Control (OFAC), and the Department of Homeland Security.

Panelists emphasized the following points:

• National security threats from state actors, such as Russia and Iran, have remained the same over the past year. What has changed, however, are re-emerging threats from non-state actors, such as Hamas and the Houthis, and the new ways in which U.S. adversaries are collaborating. For example, Assistant Attorney General Matthew Olsen of the National Security Division explained that Iranian-made drones are being used by Russia against Ukraine. Officials from Ukraine have recovered Iranian-made weapons from the battlefield, as well as weapons with U.S. components. It is critical that the government and corporations stop the flow of U.S. components into weapons for Russia to use against Ukraine.
• Sanctions and export controls are equally important against both state and non-state actors. To advance these enforcement efforts, there has been increased collaboration between these federal agencies, as well as between the U.S. and its allies. Since the Disruptive Technology Strike Force was formed a year ago between the Departments of Justice, Commerce, and Homeland Security, there have been 15 cases brought involving alleged sanctions and export control violations, smuggling conspiracies, and other offenses related to the unlawful transfer of sensitive information, goods, and military-grade technology to Russia, China, or Iran. Indeed, Attorney General Garland announced the fifteenth case on the first day of the institute — that very morning, a Google employee was charged with allegedly stealing trade secrets related to the “supercomputing” data centers and sharing these with two technology companies affiliated with the Chinese government.
• There will be increased efforts at transparency, cohesive guidance, and the allocation of resources to the highest priority cases. During the institute, the BIS, OFAC, and the DOJ released the Tri-Seal Compliance Note on the obligations of foreign-based persons to comply with U.S. sanctions and export control laws and the risk of exposure for non-compliance. The guidance emphasizes the importance of an effective and robust compliance program to mitigate any risks of non-compliance.

The panelists concluded by discussing their voluntary self-disclosure policies. The agencies want to incentivize companies to do the right thing and are looking to resolve certain cases through non-prosecution agreements where a company voluntarily discloses misconduct, cooperates with the investigation, and remediates. The BIS updated and clarified its voluntary self-disclosure (VSD) policy twice in 2023. One panelist highlighted two key differences in BIS’s VSD policy from DOJ and other agencies:

(1) If a company decides not to voluntarily disclose misconduct, BIS will consider that as an aggravating factor, while on the other hand, if a company discloses misconduct that leads to an enforcement action, BIS considers that as a mitigating factor; and

(2) In an effort to make it easier for companies to self-disclose misconduct, BIS has implemented an abbreviated, “fast-track” resolution policy for VSDs that involve only minor or technical infractions. VSDs that involve a minor or technical violation will receive a warning or no-action letter within 60 days of final submission. More information on the Department of Commerce’s Bureau of Industry and Security Voluntary Self-Disclosure Policy can be found here.

It’s important for companies to ensure their compliance programs are agile by having the right tools, internal controls, and decision-makers in place. Compliance programs should also be adequately global to cover various international jurisdictions.

Money Laundering and Asset Forfeiture

The “Money Laundering and Asset Forfeiture” panel discussion was of particular importance this year, in light of Binance’s record-breaking $4.3 billion plea agreement and the recent Alabama District Court decision declaring the Corporate Transparency Act unconstitutional.

Acting Chief Molly Moeser of the DOJ’s Money Laundering and Asset Recovery Section explained that the lesson of Binance is clear. If you serve U.S. customers, you are a U.S. financial institution subject to U.S. anti-money laundering and sanctions laws. The definition of a financial institution is broad, as evidenced by the recent guilty plea of the former president of the MGM Grand casino for failing to file reports of suspicious transactions his casino was required to make. Acting Chief Moeser emphasized that federal investigators will be looking closely at institutional leaders, such as the former president of MGM Grand casino, who thwart the ability of the institution to comply with anti-money laundering laws.

Another priority of the Money Laundering and Asset Recovery Section has been and will continue to be holding accountable those institutions and individuals who violate U.S. sanctions against Russia. Over the last two years, Acting Chief Moeser announced that Task Force KlepoCapture has successfully forfeited nearly $700 million in assets from Russian enablers and charged more than 70 individuals for violating sanctions and export controls against Russia.

The panel discussion was also dominated by the recent court decision out of the Northern District of Alabama, concluding the Corporate Transparency Act is unconstitutional because it “exceeds the Constitution’s limits on Congress’ power.” The decision, however, only bars the Treasury Department from enforcing the Corporate Transparency Act against the named plaintiffs, which includes the National Small Business Association and its 65,000 members. Panelists estimated that the Corporate Transparency Act could apply to over 30 million organizations in the U.S. The future of the Corporate Transparency Act is dependent on the expected appeal of this decision to the Eleventh Circuit Court of Appeals, as well as the potential for other parties to challenge the constitutionality of the act using this decision as a roadmap.

Advances in False Claims Act and Whistleblower Practice

The panel discussed the effect of last year’s Supreme Court rulings on the False Claims Act landscape, along with the U.S. Attorney’s Office for the Southern District of New York’s recently announced Whistleblower Pilot Program.

In United States v. SuperValu Inc., the Supreme Court held that intent under the False Claims Act turns on the defendant’s “subjective beliefs – not [on] what an objectively reasonable person may have known or believed.” Then in United States ex rel. Polansky v. Executive Health Resources, Inc., the Supreme Court held the federal government could still proceed with a motion to dismiss a False Claims Act suit brought by a relator, so long as the government intervened before moving to dismiss.

There is still uncertainty as to how these two decisions will impact both corporate compliance with the False Claims Act, and also how federal investigators and courts will evaluate the subjective intent of a corporation. Michael Granston, the Deputy Assistant Attorney General for the DOJ’s Commercial Litigation Branch, indicated that the central intent inquiry is whether the corporation acted in good faith. However, whose opinion matters for a corporation’s intent — that is, employees versus executives — remains a case-specific inquiry. In response, the defense practitioners on the panel encouraged close coordination between corporations and their legal counsel.

Contact the authors or a member of Taft’s Compliance, Investigations, and White Collar Defense practice with questions regarding these takeaways.