Economic Sanctions:
Enforcement Roundtable
Discussion December 2013
Christina Dugger Polly Greenberg
Chief Assistant U.S. Attorney Chief, Economic Crimes Bureau
U.S. Attorney’s Office – ED of NY N.Y. County District Attorney’s
Office
Sean O’Malley Steven Pelak
V.P. – Deputy Chief Investigator Holland & Hart LLP
for Enforcement Washington, D.C.
Federal Reserve Bank of N.Y.
Thank You
3
Criminal Law & Economic
Sanctions Compliance: Axiom #1
The #1 and most important Axiom of the
criminal law and economic sanctions
compliance work,
Do Not Be in the Wrong Place at
the Wrong Time . . . . . .
4
5
Criminal Law & Economic
Sanctions Compliance: Axiom #2
The #2 and second most important axiom
of the criminal law and economic
sanctions compliance work,
HOPE that your Client or Counterparty is
not in the Wrong Place at the Wrong Time . . .
. . .
6
Outline of Topics for Roundtable Discussion
I. Common Questions for the Enforcement Agencies Who, What, How, and Why
II. A Few Observations to Consider in Communicating with Enforcement Agencies
III. Where is Enforcement Headed in 2014?
IV. Open Questions – Ask at Will Throughout
7
1. How is your Office Involved in Economic
Sanctions Enforcement?
How is your agency or Office involved in the investigations
and administrative enforcement actions or criminal
prosecution of economic sanctions violations?
2. How is your Office Organized to Handle?
How is your office organized to handle such investigations
or enforcement actions?
How many personnel in your office are involved or have
been involved in such matters?
Common Questions
8
3. Past Investigations & Enforcement Actions In the recent past, what have been a few examples of matters which your
office has handled in this arena?
How -- How did the matter arise?
What -- What was the final result or resolution?
Why -- If there was (were) any particular factor(s) which led you to the
enforcement action, what was it or what were they?
Mitigation -- If there were any particular factors which led you to reduce
or lower the penalty initially sought, what were they?
No Action -- If your Office has handled or considered an alleged
violation which did not result in a public enforcement action, what
factors led your Office to take No Action?
Did the matter nonetheless obtain or achieve any deterrent value or greater
compliance with any sanctions program? How?
Insert Case Examples???
9
U.S. v. Richard
Phillips
Iranian Embargo Case
USAO-E.D. New York Prosecution
Carbon Fiber – “Dual Use” Goods or Technology
Potential End Use: Missiles
Potential Use: Centrifuges for Uranium Enrichment
13
The Sting
Phillips: As long as you -- can swear
on your wife’s life that you’re not
setting me up for a fall with the
Federal Government, I will take you
at your word.
Undercover Agent: Oh God, no.
Phillips: All right.
Defendant Reveals his Plans to the
Undercover Agent
Phillips: By December I plan on having an office
in the Philippines.
UC Agent: Okay.
Phillips: So - at that point in time the Feds can’t
even say anything because I’m no longer in this
country, you’re selling it to an individual in the
Philippines, and you don’t give a f*** what they do
with it.
UC Agent: Got it.
2014 Enforcement Priorities?
4. What Next? – Where are the
Enforcement Agencies headed with
economic sanctions enforcement
investigations and actions in 2014???
For 2014, what priority or focus do you anticipate
for your office in this arena?
Do the reported negotiations concerning the
Iranian nuclear program and possible lessening
of international sanctions influence your
approach or focus in this arena?
16
Corporate Compliance Programs
5. Observations or Recommendations? -- What
Examples of Compliance Measures have been
impressive?
Recommendations for Corporate Compliance?
Which internal compliance practices or actions have
you found most impressive or beneficial in terms of
demonstrating to you that the company had an
effective compliance program, was intent upon
complying with the law, and was worthy of avoiding or
a reduction in liability? 17
6. Presentations & Disclosures Recommendations?
What general & specific recommendations for In-
House or Outside Counsel might you offer if counsel
is making a presentation to your Office in support of a
declination or a reduced penalty?
What form, style, type, or characteristics of
disclosures or defense presentations have you found
most helpful or persuasive?
Which form, style or type have you found of lesser
value to your consideration whether to prosecute or to
take an enforcement action or whether to accept a
mitigated or reduced penalty?
18
6. Voluntary Disclosures to Enforcement
Agencies How are Voluntary Disclosures by companies which
discover sanctions violations committed by their
employees treated or considered in this arena by the
enforcement agencies?
Is there a policy to provide a “pass” or declination if a
company makes a self-initiated, truthful, complete, and
voluntary disclosure?
May there be a Mandatory Duty to report a sanctions
related violation to an administrative enforcement
agency?
See U.S. v. UTC/Pratt & Whitney Canada
20 20
Among other reasons: See the Summary of Cases, IED
Cases, U.S. v. Khaki, etc.
Iran, Syria, Sudan, Hezbollah, . . .
October 23, 1983, June 25, 1996, . . .
Judicial Findings of Facts regarding Iranian initiation,
funding, planning, and direction of the murder, torture, and
hostage taking of U.S. citizens:
264 F.Supp.2d 46; 238 F.Supp.2d 1; 184 F.Supp.2d 13;
172 F.Supp.2d 128; 124 F.Supp.2d 97.
Nasir bin Hamd al-Fahd – May 2003: Legal/Religious
Justification for use of a nuclear weapon
Why important?
21 21
Among other reasons:
Increased Federal Law Enforcement Activity – FBI Foreign
Counterintelligence efforts
A Picture is worth a 1,000 words.
Why important to U.S. and You?
22
FBI Windbreakers
23
Additional Questions for the
Enforcement Agencies?
Questions???
24
25
When to communicate or visit with
a Prosecutor?
1. Never, if possible.
2. Decide to Visit.
The biggest decision
Do not visit just to see what happens or to
obtain information – Curiosity did kill the Cat.
Know the Facts – Do not Guess or Assume
that the facts show no criminal wrongdoing,
i.e., no willful conduct.
26
27
When to Visit a Prosecutor?
3. If Never is not an option: Do Not
Delay.
28
29
How Best to Communicate with an
Enforcement Agency or a Prosecutor?
1. Not a Law School Exam
Not a Spot the Issue Project
Focus upon the primary issue: Willful
Conduct?
2. Internal Investigations – Acknowledge
Limitations and Errors
Do not oversell
Human nature – The FBI’s own Experience
30
31
How Best to Communicate with an
Enforcement Agency or a Prosecutor?
3. Provide Actual Proof of an Effective
Compliance Program and Internal Controls
Who was/is in charge? -- The retired
salesman syndrome.
Was the Compliance Office and Officer
provided real authority and responsibility?
Or was the Compliance Officer selected as
Larry was selected . . . . ?
Not the Method to Select a Compliance Officer
33
How Best to Communicate with an
Enforcement Agency or Prosecutor?
3. Provide Actual Proof of an Effective
Compliance Program and Internal Controls
Have employees been disciplined for past
violations? – Including managerial officials?
Has the Company pursued prior hotline tips of
violations?
Has the company rewarded the honest
employee in the past?
Examples saved?
34
Questions for Compliance Officers
How are you Saving, Collecting and Organizing prior examples of your effective and real compliance program: Prior examples of violations of policy or law in which
employees been disciplined, including managerial officials (e.g., even letters to file)?
Prior examples of internal investigations, including internal investigations arising from internal hotline tips?
Prior examples of instances in which the company rewarded the honest employee in the past?
Save Prior Examples -- ???
35
How Best to Communicate with an
Enforcement Agency or Prosecutor?
4. Do not be afraid of saying: “We
don’t know the answer.”