Wave of DOJ Enforcement Actions on National Security Concerns Looming, Experts Warn

In the wake of recent global geopolitical events, including Russia's conflict in Ukraine and Israel's tensions with Hamas, experts are sounding the alarm about an imminent wave of enforcement actions from the Department of Justice (DOJ) related to national security concerns. The United States, the United Kingdom, the European Union, and other countries have been ramping up sanctions against various entities, resulting in new sanctions nearly every month. This has put significant pressure on companies to update their sanctions screening compliance programs.

Christian Nauvel, Deputy Chief Counsel for Corporate Enforcement in the DOJ's National Security Division, emphasized the agency's intensified focus on national security. He noted that this year has already seen double the number of cases related to national security compared to the previous year, with expectations of this number continuing to rise. To handle the increased workload, the National Security Division has added 25 new full-time employees.

According to Carlton Greene, a partner at law firm Crowell & Moring, while the U.S. government has just begun enforcing actions against U.S. firms for sanctions violations related to Russia and Russian oligarchs, a significant wave of enforcement cases is on the horizon. The long-term implications of such sanctions violations are expected to persist.

During a panel discussion at the New York City Bar Association's Compliance Institute, compliance professionals from multinational firms were asked to identify the biggest compliance risk among sanctions, anti-money laundering (AML), and anti-bribery. Sanctions emerged as the top concern, with 59% of respondents highlighting it, while anti-bribery and AML lagged behind at 22% and 19%, respectively.

The scrutiny of sanctions compliance has substantially increased since Russia's invasion of Ukraine in February 2022. Common issues in this year's enforcement cases include lapses in customer due diligence, sanctions evasion schemes, challenges in mergers and acquisitions, and failure to identify end users. To combat these issues, three federal offices, including the DOJ, the Department of Commerce's Bureau of Industry and Security, and the Treasury Department's Office of Foreign Assets Control (OFAC), issued a joint compliance note in March. This note aims to educate on common methods used to evade sanctions and export controls on Russia.

OFAC, in particular, has been vigilant in scanning data provided by banks and financial institutions in suspicious activity reports to identify potential sanctions evasion attempts. They employ sophisticated tools to trace the flow of money into the U.S. financial system and locate hidden assets. Companies involved in mergers and acquisitions are urged to use all available tools to detect potential sanctions violations by their acquisition targets.

The emphasis on national security in compliance efforts has led to increased visibility within organizations and has helped break down silos that previously hindered firms from recognizing larger threats. Jennifer Downing, Managing Director and Senior Counsel at BNP Paribas, suggests that this shift has made compliance professionals more integrated into business decisions, which has been a welcome change.

Notably, FinCEN's whistleblower program has been updated to include reporting of sanctions violations as a core violation. Additionally, export control violations can be reported as a corollary violation to a sanctions violation, making whistleblowers eligible for payouts in the event of a successful enforcement action.

As the panel discussion concluded, some participants raised the question of whether sanctions have become the new Foreign Corrupt Practices Act (FCPA). The audience's opinion on this matter was divided, with 30% agreeing, 13% strongly agreeing, 20% disagreeing, and 37% neither agreeing nor disagreeing. Despite this split, the discussion highlights the growing importance of sanctions in the realm of compliance and enforcement.

In conclusion, the increasing wave of enforcement actions related to national security concerns, especially sanctions violations, is a clear indication of the government's commitment to prioritizing national security. Companies are urged to remain vigilant in their compliance efforts, as the repercussions of non-compliance can have far-reaching consequences in the current geopolitical landscape.

By fLEXI tEAM