GLOBAL TRENDS IN COMPLIANCE ENFORCEMENT

Transcription

1 GLOBAL TRENDS IN COMPLIANCE ENFORCEMENT Sara Hicks, Regional Compliance Counsel, Middle East, Halliburton Kwesi Baiden, Chief Compliance Officer, Ensco Victor Owusu, Vice President - Head of Legal and Compliance, Regional Compliance Officer, DHL T. James Min, Vice President, International Trade Law & Head of Global Legal Practice Group, DHL Sean Germann, Customer Solutions & Innovation 1

2 Agenda Enforcement Against Individuals Prosecution of Non-Cash Bribery Failure of Compliance Programs Export Compliance Enforcement 2

3 Enforcement Against Individuals A Top Priority Prosecuting individuals, including corporate executives, for their criminal wrongdoing is a top priority for the Criminal Division. Leslie Caldwell, Assistant Attorney General (April 2015 NYU Law, Program on Corporate Compliance and Enforcement) Pointing to recent cases against individuals, Ceresney commented that the public would see more cases against individuals in the coming year. Andrew Ceresney, SEC Director of Enforcement (Nov 2014 ACI Conference) 3

4 Individual Prosecutions 35 DOJ FCPA Enforcement Actions: Individual vs. Corporate DOJ - Individual DOJ - Corporate SEC FCPA Enforcement Actions: Individual vs. Corporate SEC - Individual SEC - Corporate 4

5 FAILED Individual Prosecutions Africa Sting Cases (2010): DOJ brought 22 indictments, none of which ultimately resulted in convictions. After two hung juries, two acquittals, one successful Rule 29 motion, the court s dismissal of all conspiracy counts, DOJ dismissed all remaining counts and vacated three guilty pleas. United States v. Patel: court dismissed cases pursuant to Rule 29 motion upon finding that US jurisdiction did not reach the foreign defendant s conduct. United States v. O Shea (2012): the court granted defendant s motion for acquittal, finding that the government could not tie the defendants conduct to the alleged crimes. United States v. Lindsey (2012): the court dismissed criminal charges against two executives and their company after finding flagrant government misconduct. SEC v. Steffen (2013): the court dismissed the case, finding that it did not have jurisdiction over the foreign defendant. 5

6 RECENT Individual Prosecutions Stephen Timms and Yasser Ramahi (2014): The SEC sanctioned two former employees of FLIR, U.S.-based defense contractor for violating FCPA by taking government officials in Saudi Arabia on a world tour to help secure business for the company. The employees were fined $50,000 and $20,000 respectively. Vincente Garcia (2015): Executive of SAP was charged with paying bribes to Panamanian government officials through an intermediary in order to procure software sales. SEC fined him $92,635 and DOJ has commenced criminal action. Walid Hatoum (2015): PBSJ employee was charged with violating FCPA by organizing and authorizing payments to foreign officials to secure Qatari government contracts. Hatoum was fined $50,000 for his involvement. 6

7 Agenda Enforcement Against Individuals Prosecution of Non-Cash Bribery Failure of Compliance Programs Export Compliance Enforcement 7

8 Cash isn t always king [B]ribes come in many shapes and sizes whether it is cash, gifts, travel, entertainment, or employment of the family and friends of foreign officials. We should and will continue to pursue a broad interpretation of the FCPA that precludes bribery in all forms. DOJ and SEC continues to investigate several banks for hiring relatives of foreign government officials allegedly to assist in getting deals. Andrew Ceresney, Nov 2014 ACI Conference 8

9 Cash isn t always king BHP BILLITON (2015): Company invited 176 government officials/employees to attend Beijing Olympics paid for by BHP. Eventually paid for 60 guests, including spouses and provided hospitality packages. Packages were estimated to be between $12,000 - $16,000 and many of the invitees had BHP business pending before them. NO ACTUAL BRIBERY ALLEGED! $25Million Fine by SEC. 9

10 Cash isn t always king BNY MELLON (2015): BNY alleged to have violated FCPA by providing 3 student internships to family members of foreign government officials. Family members were hired outside of the traditional hiring process and were hired in order to corruptly influence the foreign government officials. BNY was fined $14.8M. 10

11 Cash isn t always king FLIR SYSTEMS (2015): The SEC charged Oregon-based FLIR Systems Inc. with violating the FCPA by financing a world tour of personal travel for government officials in the Middle East who played key roles in decisions to purchase FLIR products. FLIR was fined more than $9.5M to settle charges. 11

12 Cash isn t always king HITACHI (2015): The SEC alleges that Hitachi sold a 25-percent stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC) political party. Hitachi was awarded two contracts to build power stations in South Africa and paid the ANC s front company approximately $5M in dividends and $1M in success fees. Hitachi has agreed to pay $19 million to settle the SEC charges 12

13 Agenda Enforcement Against Individuals Prosecution of Non-Cash Bribery Failure of Compliance Programs Export Compliance Enforcement 13

14 Lessons Learned From BHP Billiton Compliance Program Needs to Be Tailored to Specific Risks For Olympics Event, BHP Identified the Risk and Created the following: Global Ethics Panel Subcommittee Olympic Sponsorship Steering Committee Hospitality Applications Applications Reviewed by Ethics Panel STILL NOT ENOUGH! 14

15 What Went Wrong With BHP Billiton Steering Committee did not alert BUs of specific risks with inviting government officials. Ethics Panel reviewed only ten hospitality applications (Over 100 Invitations) Forms completed improperly and never fixed Review of Applications did not include legal or compliance departments 15

16 What makes a good compliance program? Why Did Their Compliance Program Fail? Program Not Sufficiently Tailored to the Specific Risks Program Not Sufficiently Implemented Business Was Allowed to Police Themselves Program Not Well Monitored The Legal/Compliance Teams Were Not Integrated 16

17 Key Takeaways from BHP BILLITON Remember, SEC did not find ANY BRIBERY No Quid Pro Quo, contract, new business, revenue, etc. BHP Punished for WEAK COMPLIANCE CONTROLS Failure to Implement Sufficient Controls to Address MERE THREAT of Bribery, enough for FCPA violation 17

18 Agenda Enforcement Against Individuals Prosecution of Non-Cash Bribery Failure of Compliance Programs Export Compliance Enforcement 18

19 DP DHL Trade law and compliance structure General Counsel & Chief Compliance Officer Trade Law Practice Group Global Compliance Office Business Unit Compliance Officers Corporate Customs & Export Control Office Express DGF Business Unit Customs Depts Solutions ecommerce 19

20 Background / Primer on economic sanctions Sanctions have been a tool of statecraft for thousands of years. Pericles, a statesman in Athens in the 5th century B.C. imposed trade sanctions on Megra, an ally of Sparta. Definition of Economic Sanctions Three main motives of Sanctions Mirror Theories of Criminal Law Punishment Deterrence Rehabilitation Purposes Foreign Policy Objectives Public Statement (e.g. South African Apartheid) Appease domestic constituency (Cuba) Theoretical Framework Less costly than war, but more than mere diplomatic signals 20

21 Current US sanctions of significance & roots Cuba Cold War and the only one remaining under the TWEA, but being quickly lifted. North Korea (DPRK) Cold War, but graduated from TWEA in Now under IEEPA and the UNPA but not under TWEA. Iran Foreign Policy and Terrorism (since 1979 under IEEPA) and WMD (under UNPA). But changes coming. Syria Anti-Terrorism and WMD (since 1994 under IEEPA) Sudan Human Rights and Terrorism (under IEEPA since 1997) 21

22 Recent sanctions changes Russia [DHL since 1984] Dual use goods require licenses, with a presumption of denial Designation of many Russian banks, oil companies and individuals who are restricted from certain credit, investments, goods and technology if related to deep water oil exploration and production, arctic oil exploration or production and shale oil projects in Russia. This includes document shipments via DHL. Multi-jurisdictional issues with shipments to Russia. Cuba [DHL since 1990] Many changes, but not that materially impact the energy sector. 22

23 Recent sanctions developments IRAN [DHL since 1976] There is no immediate change to US, EU or UN sanctions against Iran. The JCPOA sanctions relief does not authorize transactions that involve US Persons, US owned/controlled entities, the US financial system, or US-origin goods, unless authorized under a general or specific license. The current status quo, as implemented under the Joint Plan of Action ("JPOA") remains in effect until 14 January 2016 and all specific licenses are extended to that date. The JCPOA sanctions relief will be in stages and not all sanctions will be lifted. The JCPOA does not authorize transactions with the Office of Foreign Assets Control ("OFAC") Specially Designated Nationals ("SDNs") unless specifically licensed. The JCPOA sanctions relief does not impact the US primary or secondary sanctions targeting human rights abuses and terrorism or EU sanctions targeting the same. There are "snapback" provisions in place in case of Iran's non-compliance with certain conditions. Contracts entered into following JCPOA implementation may not be grandfathered if sanctions are "snapped back." Iran is a sizable market (almost 78 million people): DHL has been operating there since

24 Recent sanctions developments: Iran JCPOA Date Milestone Finalization Day 20 July 2015 Adoption Day ("AD") Implementation Day 20 Oct (Est.), by mutual consent of parties. Late 2016 (Est.) 6-12 months after Adoption Day ("AAD") depending on Iran's cooperation with the IAEA. Variables / Steps to be Taken UNSC passed a resolution to implement JCPOA provisions, EU endorsed UNSCR. Each government to take necessary legal and regulatory measures required for JCPOA to take effect on Implementation Day. 60-day review by US Congress (in progress). IAEA verification of Iran's implementation of nuclear-related measures. None None. Sanctions Relief EU, UN to suspend nuclear-related sanctions; US to suspend nuclear-related extraterritorial sanctions (secondary sanctions) ; US persons eligible for some licenses (e.g. in respect of supply to Iran of civil aircraft and parts, and purchase from Iran of carpets and foodstuffs); U.S. to license non-u.s. subsidiaries of U.S. companies; EU, US to "de-list" certain individuals and entities from the SDN and Iran sanctions lists. 24

25 Recent sanctions developments: Iran JCPOA Milestone Date Variables / Steps to be Taken Sanctions Relief UN Arms Restriction Relief 20 Oct (Est.) 5 years AAD UNSC lifts conventional arms sanctions. Transition Day 20 Oct (Est.) 8 years AAD or sooner, should the IAEA reach the "Broader Conclusion" that all nuclear material in Iran remains in peaceful activities. IAEA verification and UNSC confirmation that Iran's nuclear material is in peaceful use EU to lift restrictions on dual use items, certain nuclear technology, ballistic missiles, financial messaging services; US will terminate all "suspended" extraterritorial sanctions Further delisting Termination Day 20 Oct (Est.), Up to 10 years after AAD. All remaining EU sanctions terminated (provided that provisions of previous resolutions have not been snapped back). 25

26 Recent sanctions developments: Iran Sector US Secondary Sanctions i.e. for Non-US persons and companies (to be removed or suspended) EU Sanctions (to be removed or suspended) Oil, gas, and petrochemical sectors Shipping, shipbuilding, and transport sectors Automotive Sector Suspends efforts to reduce Iran's crude oil exports (Japan, China, India, South Korea, Turkey, and Taiwan). Providing refined petroleum and petrochemical products to Iran. Investing in and transacting with Iranian energy sector, including participation in joint ventures, providing goods, services, information technology, technical expertise, and support Transacting with shipping and shipbuilding sectors and port operators (including Islamic Republic of Iran Shipping Lines ("IRISL"). Selling, supplying or transferring goods or services to Iran's automotive sector Selling, supplying, transferring or exporting to Iran equipment or technology used in the oil, gas, and petrochemical industries Financial loans, credits, and JVs with any Iranian Person in this sector Selling, supply, transferring or exporting naval equipment and technology for shipbuilding, maintenance or refit Designing and constructing cargo vessels and oil tankers Providing flagging and classification services Providing access for Iranian cargo flights at EU airports Providing bunkering or ship supply or other services Providing fuel, engineering, maintenance services to Iranian cargo aircraft unless carrying prohibited items Not Applicable (the EU did not have any sanctions specifically targeting the Iranian automotive sector). 26

27 DHL Sanctions policies Letter of Warranty & Indemnity Required EU law and UN restrictions apply globally and then local applicable laws From the U.S., prior approval may be required Certain services may be limited Denied party screening for shipments Shipments subject to inspection and referrals to law enforcement Licensing determination is the shipper s responsibility 27

28 Tips for shipping to embargoed countries Letter of Warranty and Indemnity is not an option and its terms are not negotiable. DHL s denied party screening is for its own compliance and not for the shipper. DHL will rely only on information provided by the shipper. Shipper must notify DHL if any licenses apply and must provide such licenses. You can t outsource compliance to DHL. It is not a joint liability, it is rather parallel liability. Remember that DHL entities outside the U.S. may not be subject to U.S. law. Your shipment may touch EU or other territory where local laws may apply in addition to U.S. sanctions restrictions. 28

29 Summary of DHL USA s STC Risk Management Data Capture & Screening High risk destination country procedures End user/entity screening Licensed Export Processing & Procedures for STC goods Customer account set up/pre-approval process for STC goods and to UN embargoed countries 29

30 Exporter/Service provider responsibilities Exporters Are Still Responsible for these tasks: Must determine licensing requirements Must obtain any required license or other authorization Recordkeeping May hire forwarding agents to facilitate exporting, but delegation does not necessarily relieve the exporter of compliance responsibilities can t totally outsource compliance Complete export clearance documents or appoint an agent to do so (EEI) Due diligence of consignee/purchasers/end users But Transport Service Providers Can Also Be Held Liable for: Aiding and abetting in export control/sanctions violations Causing exports of unlicensed or prohibited commodities Transacting with restricted parties Recordkeeping violations Export declaration omissions or tardiness 30

31 Contract tips for export compliance Know which mode of service and product you are contracting Know which legal entity you are contracting with Can t totally outsource your compliance requirements to an agent. Parallel responsibilities for exporter and service provider. Remember that DHL is a German owned company. So we are in U.S. sanctioned countries. So a provision saying no business in OFAC sanctioned countries will not go anywhere. Requiring all of DHL to comply with U.S. laws also not practical. We screen against restricted parties, but remember that restricted parties lists vary and differ with different legal jurisdictions (e.g. EU vs. US). 31

32 Q&A 32