RESPONDING TO A SANCTIONS VIOLATION Lessons Learned from Recent Enforcement Matters

Transcription

1 1 RESPONDING TO A SANCTIONS VIOLATION Lessons Learned from Recent Enforcement Matters Canadian Forum on Sanction Compliance & Enforcement October 6, 2016 Thad McBride, Bass Berry & Sims

2 2 Discovery of Violations Compliance reviews / routine audits Internal reporting (e.g., hotline) External reporting (e.g., business partners, vendors, competitors, media) Identified by regulators / enforcement authorities

3 3 Whether to Initiate Investigation Investigate all potential violations to some degree Early assessment of potential legal exposure Identification / discipline of employees involved Commitment to compliance Credibility with enforcement authorities Protection of Board of Directors and senior management

4 4 Who Should Conduct Investigation Inside vs. outside counsel considerations: Scope Experience Potential conflicts (actual and perceived) Attorney-client privilege Budget Resource / time considerations

5 5 Who (cont.) Engagement of other providers Forensic Accountants? Targeted review of books and records Helpful in matters involving circumvention of controls Common in government investigations IT Collection Professionals? Local Counsel? Retention by outside counsel to preserve privilege

6 6 Reporting Obligation(s) General counsel? Management? Audit Committee? Full Board? Outside auditors?

7 7 When to Initiate Investigation As soon as possible after being alerted to potential violations

8 8 How to Conduct Investigation Develop investigative plan Preserve, collect, and review documents Conduct interviews Analyze facts/law and report results Contemporaneous Remediation? Training Process improvements Consider privilege issues

9 9 Investigative Plan Scale investigation to scope of problem Determine staffing Set forth timeline for tasks may need to be adjusted Consider individual wrongdoing government will!

10 10 Document Preservation Retention notice to personnel who may have relevant data Tailor appropriately Cover all potentially problematic conduct Draft based on sophistication of recipients Err on side of broad distribution but can also augment later Require acknowledgement Can also halt document destruction procedures

11 11 Foreign Privacy Laws Personal data cannot always be transferred outside country without individual consent Data privacy laws may dictate location of document processing and review

12 12 Document Collection As appropriate, collect from: Shared network drives / folders Computer hard drives PDAs Thumb drives / memory sticks Physical file cabinets Remote and/or on-site collection; external or internal resources One word: !

13 13 Document Review Process and filter as needed Date restrictions Search terms Upload to review platform Document protocol Relevant/responsive documents Hot docs Privileged documents

14 14 Interviews Identify based on position and/or documents Provide Upjohn warning Memorialize interview in writing Other considerations: Location (onsite to get lay of land, offsite to promote candor) Does witness need own counsel? Third parties (e.g., vendors, customers, former employees)

15 15 Report / Disclosure Description of investigative process Why, by whom, and how What issues were addressed Detailed summary of facts Analysis of applicable law Recommendations / Corrective Action

16 16 Self-Disclosure Considerations Scope of wrongdoing Whistleblower risk Collateral actions Cooperation credit PR good or bad

17 17 Disclosure Other Considerations Negative Reputational damage Diversion of corporate resources Investigation costs / legal fees Positive Reduced penalties Positive public perception Positive internal messaging

18 18 Disclosure Timing [P]rior to or at the same time that OFAC, or any other federal, state, or local government agency or official, discovers the apparent violation or another substantially similar apparent violation. Substantially similar apparent violation Part of a series of similar apparent violations; or Related to the same pattern or practice of conduct

19 19 Disclosure Credit Self-disclosure to another government agency may be considered a voluntary self-disclosure by OFAC Filing a license application with OFAC is not a voluntary self-disclosure

20 20 Credit (cont.) Not a voluntary self-disclosure if: Third party notifies OFAC because transaction was blocked Disclosure includes false or misleading information is incomplete is not self-initiated is made without authorization of entity's senior management

21 21 Disclosure Contents In addition to notification, a voluntary self-disclosure must include, or be followed within a reasonable period of time by, a report of sufficient detail to afford a complete understanding of an apparent violation's circumstances, and should also be followed by responsiveness to any follow-up inquiries by OFAC.

22 22 Advocacy No Willfulness? Knowledge? Management involvement? Pattern of conduct / sanctions enforcement history? Harm to sanctions programs objectives? Benefit to sanctioned person/entity? Highlight (if accurate!) Cooperation Compliance program Remedial response

23 23 Potential Outcomes No action Request for additional information Cautionary letter Finding of violation Civil monetary penalty Criminal referral

24 24 Recent Enforcement September 2016 PanAmerican Seed Iran World Class Technology Corp Iran August 2016 AXA Life SDNs Humana SDNs July 2016 BBVA Compass - SDNs

25 QUESTIONS? 25

26 26 THANK YOU! Thad McBride O: C: