Managing Global Compliance in the Biden Administration
Gregory Husisian
Chair, Foley & Lardner Int’l Trade & Nat’l Security Practice
October 2021
The Top Issues Danish Companies that Sell or Operate Abroad Need to Know to Minimize International Regulatory Risk
International Regulatory and International TradeFocus Areas for the Biden Administration
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
International Regulatory and International TradeFocus Areas for the Biden Administration
International Trade War: Part II
Biden administration puts trade war on auto-pilot– No change in Section 301 duties
on China– Continuing aggressive use of
antidumping and countervailing duty actions
– Continuing aggressive use of CFIUS scrutiny of cross-border mergers
International Regulatory Enforcement Increased Priority
Although full regulatory team is not yet appointed, contours are clear:– Experienced SEC head Gary Gensler expected to
emphasize enforcement– DOJ team, including AG Merrick Garland and AAG
Lisa Monaco, have strong white-collar backgrounds and expected to emphasize enforcement
– Strong push to emphasize enforcement at agency level (where most enforcement takes place)
– AML, economic sanctions, anticorruption, Customs, and supply chain tagged for special scrutiny
Continuing emphasis on individuals Continuing emphasis on non-US companies
International Regulatory and International TradeKey International Regulations
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
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No. 8: CFIUS & Int’l Investment Review of foreign investment into US
– Strong use of CFIUS by both Trump and Biden administrations, resulting in record number of filings
– Reflects bipartisan commitment to strengthen oversight of investments into US companies
– Many filings now mandatory for “TID” businesses Critical Technology Critical Infrastructure Sensitive Personal Data
– Also increased scrutiny of sensitive real estate transactions
– Essential to analyze CFIUS requirements at start of all deals with US targets
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No. 8: Int’l Investment & Due Diligence
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Increasing emphasis on international due diligence– Increasing enforcement
increases risks of purchasing liability
Where are we seeing increasing risks?– CFIUS and importance of early
identification of potential TID issues– Customs enforcement of own and
other agency regulations– OFAC/economic sanctions– Supply chain– FCPA/anticorruption
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
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No. : Extraterritoriality Biden enforcement actions show
continuing aggressive use of extra-territorial principles– Use of US financial system– Dollar-related transactions– Involvement of US persons– Backroom operations– Use of a US server– Routing of an email through the
United States?– Jurisdiction follows the goods
Aggressive use of agency theories
Secondary sanctions
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Extraterritoriality – Hot Topics Sales through third parties
– Subs, affiliates, and joint ventures – Distributors
Dealings with banks– Expectations of KYC/KYS– No such thing as an innocent mistake– Cut off quickly, re-engage slowly– Proof of compliance
Extraterritoriality – Hot Topics How does your company manage
compliance abroad? Does your company use compliance
liaisons? How does your company communicate
the reach and importance of US law? Does your company monitor US dollar
transactions abroad? How does your company manage third
parties?
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. 6: Anti-Money Laundering Biden administration committed to using AML laws aggressively
because of link to underlying crimes and finance of terrorism– Financial Crimes Enforcement Network (FinCen) announcement links AML
with: Corruption Cybercrime Terrorism financing Transnational criminal activity Drug trafficking Proliferation financing/sanctions
National Defense Authorization Act for Fiscal Year 2021/Anti-Money Laundering Act of 2020 substantially enhances Bank Secrecy Act and AML laws– Provides additional investigation tools– New regulations coming to reflect new law– Additional powers to subpoena bank records held outside US– Authorizes whistleblower reward program– Increased penalties
Charges often reflect other violations (e.g., anticorruption, export controls, economic sanctions)
Bitcoin issues are at forefront of administration’s concerns
Anti-Money Laundering – Hot Topics Not just for financial institutions
– Coordination with OFAC screening– KYC and CDD expectations– Alertness for suspect transactions
Compliance measures– Integration into customer intake– Coordination with OFAC screening– Red Flag alertness Suspicious activities Any attempts to hide payment trail Be aware of stripping requests
Dealing with heightened bank alertness
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. : Slavery and Human Trafficking Biden administration emphasizing supply chain issues Link to human trafficking, economic sanctions enforcement Xinjiang economic sanctions example of implementing foreign policy
through supply chain restrictions US law prohibits use of forced labor in global supply chains
– Customs regulations ban the import of products made with forced labor –slave labor, prison labor, or child labor
– Customs maintains reporting portal for suspected use of forced labor (https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations)
– Exception for goods not available in United States now repealed Heavy reliance on Customs to enforce underlying restrictions on goods California Supply Chain Transparency Act requires due diligence into the
use of forced labor UK Modern Slavery Act imposes similar diligence and compliance
requirements Errors/oversights can lead to fines, supply disruptions, and reputational
damage
Forced Labor – Compliance Compliance Program
– Anti-trafficking and forced labor compliance policy– Training– State Department’s Office to Monitor and Combat
Trafficking in Persons Resources (https://www.state.gov/j/tip/) and the US Government’s Global Human Trafficking Hotline (1.844.888.FREE and [email protected])
Third-party management– Update vendor code of conduct– Review existing T&Cs with vendors to reflect new
requirements– Certifications– Vendor compliance audits– Red Flag awareness
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. : Antitrust and Fair Competition Widespread view of Biden administration is
enforcement lagged in Trump administration – and this must be reversed
New Executive Order calls for greater scrutiny of mergers, with focus on technology and healthcare
Although initial focus on high-tech companies (Facebook, Google, Amazon, and Apple), concerns go beyond these four companies
Largest penalties for collaborative conduct– Collusion– Customer and market division– Price fixing
Antitrust/Fair Competition – Hot Topics Antitrust violations often
accompany bribery, corruption, and fraud allegations
Compliance measures– Compliance policy– Trade association guidelines– Training
Key Risk Points– Foreign operations– Collaborations with competitors– Joint ventures– Standard settings– Bid and procurement
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. : OFAC/Economic Sanctions Biden administration already shows aggressive
use of sanctions, often in new ways (Xinjiang, supply chain)
Prohibit commercial or financial transactions with designated countries, entities, or individuals– US sanctions often cover foreign companies, even if
local laws are less strict (Cuba, North Korea, Iran)– Sanctions can be country-based, government-based,
list-based, or sector-based– Sanctions cover any entity at least 50% owned or
controlled by sanctioned parties (or 33% for Russia)– Penalties can be into the billions of dollars, most often
against European companies
Sanctions – Hot Topics Iran
– Much more aggressive than EU sanctions– Although initial indications were that Iranian sanctions would
be relaxed, so far, no progress from Biden administration– Secondary sanctions always an additional worry
Russia– Rusal, Rosneft, and other significant company designations– Sanctions creep– Biden administration more likely to increase sanctions due to
suspicions regarding Russian interference in election– Limiting “Oligarch Risk”
Increasingly strict Venezuelan sanctions Syria remains problematic, but not increasingly so Compliance expectations of US government
– KYC, KYS, and CDD/SDD expectations– Focus on 50% rule
Dealings with skittish banks
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Economic Sanctions Risk Management General
– Compliance program?– Written and consistently followed screening
protocols?– KYC and KYS procedures?– End-Use/End-User controls?– Red Flag awareness?
Iran– How does your company deal with differing rules and
the EU blocking statute?
Syria and Venezuela– Does your company deal with Syria and Venezuela?
If so, how does it handle KYC and KYS obligations? Russia
– Screening? – Fifty-percent rule?– Oligarch risk?
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IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. 2: Supply Chain Management A New Compliance Front for
the US Government– New Xinjiang sanctions– Increased Customs enforcement– Specific compliance warnings
regarding supply chain– Three-agency warning regarding
supply chain liability– e.l.f. Cosmetics – a million-dollar
message
No. 2: Supply Chain Management (cont.) Best Practices for Compliance
– Risk-based approach– Vendor code of conduct– Certifications/reps and warranties– “Full spectrum supply chain due diligence”– Supply chain audits of suppliers– Country-of-origin verification– Verification of payment information at
suppliers– Mandatory OFAC training for suppliers– Sub-supplier risks
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
No. 1: Anticorruption/FCPA Specifically announced as a Biden administration
enforcement priority While perception is anticorruption enforcement lagged
under Trump, reality is mixed: fewer actions, but larger penalties
The Foreign Corrupt Practices Act (FCPA) and other laws target bribery and corrupt conduct– Covers paying, promising, or offering anything of value to
secure an improper advantage– Covers the employees of State-Owned Enterprises (“SOEs”)
in addition to foreign government officials Similar legislation applies in all major countries
– Key differences No exception for facilitating payments Covers commercial bribery But stricter US enforcement
Anticorruption – Hot Topics Common Risk Points
– Lack of internal controls– Dealings in high-risk countries– Dealings with government
officials/SOES– Agents and third-party liability– Joint ventures– Gift card requests– Commercial bribery
Anticorruption – Compliance Dealing with Risk Points
– Conducting a risk assessment Revenue? Country reputation? Type of dealings with government officials/SOEs? Business profile/corporate form? Use of third parties?
– Procedures for high-risk countries– Dealings with government officials– Effective anticorruption and GME&T
controls– Regular and effective training– Anticorruption audits
Anticorruption – Compliance Oversight of third parties
– JV Partners Initial agreements Transparency in books and records Training Anticorruption audits Withdrawal rights
– Agents, consultants, and distributors Due diligence Benchmarking Reps and certifications Training Audit rights Withdrawal rights
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
IntroductionNumber 8: Managing CFIUS & International Investment OversightNumber 7: Extraterritorial Enforcement of US LawsNumber 6: Managing New AML RegulationsNumber 5: Managing Slavery & Forced Labor ComplianceNumber 4: Managing Antitrust & Fair Competition RisksNumber 3: Managing Economic Sanctions RisksNumber 2: Managing Supply Chain RisksNumber 1: Managing Renewed Focus on AnticorruptionRegulatory Risk Management
International Regulatory and International TradeManaging Regulatory Risk
Managing RiskTwelve Steps to Compliance Step 1: Buy-in at the Top Step 2: Perform a Risk Assessment Step 3: Survey Current Controls Step 4: Assess Local Oversight Step 5: Identify Resources Step 6: Create Compliance Program Step 7: Create Internal Controls Step 8: Training, Training, Training Step 9: Integrate Outsiders Step 10: Auditing and Checkups Step 11: Monitor Red Flags Step 12: Communicate with Senior
Management/Board
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Key International Policies Use risk assessment as guide to
managing risk Best policies are integrated across
organization Best practice is to tailor to
international business and risk profile Key international policies at most
companies– Economic Sanctions/Export Controls– Anticorruption/FCPA– Antitrust/Fair Competition– Supply Chain Management/Forced
Labor/Sanctions– Customs (if importer of record)– Cybersecurity
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Core Policies at Most Corporations
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Anti-retaliation Anti-harassment Anti-boycott Anticorruption/FCPA Antitrust/Fair Competition Conflict of Interest Copyright/Trademark Distracted Driving Investigation/Litigation Holds Economic Sanctions/Export Controls Equal Employment/Antidiscrimination Family and Medical Leave/Disability
Core Policies at Most Corporations (cont.)
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Import/Customs Insider Trading Internal Investigation/Dealing with
Government Investigators (Dawn Raids)
Labeling/Truth in Advertising Requirements
Misuse of Company Assets Political Contributions and Lobbying Record Retention/Record Information
Management Social Media
Policies To Consider at Most Corporations Accuracy in Accounting
Records Books and Records Integrity Environmental Reporting Intellectual Property Privacy Protections Product Safety Recall Procedures Recordkeeping
Policies To Consider at Most Corporations (cont.) Shipping of Toxic Substances
(HAZMAT) Substance Abuse/Drug Testing Theft/Misuse of Proprietary
Information Wages and Hours Weapons in the Workplace Workplace Safety and Health
Available Resources
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International Regulatory Compliance– A Twelve-Step Program for
International Compliance– A Risk-Assessment
Toolkit/Questionnaire– Best Practices for
Conducting International Investigations
Any Questions?
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ATTORNEY ADVERTISEMENT. The contents of this document, current at the date of publication, are for reference purposes only and do not constitute legal advice. Where previous cases are included, prior results do not guarantee a similar outcome. Images of people may not be Foley personnel. © 2021 Foley & Lardner LLP
Gregory HusisianFoley & Lardner LLP3000 K Street, NW, Suite 600Washington, DC 20007-5109Telephone: (202) 945-6149Email: [email protected]
