The New Era of Fluid Global Sanctions

Transcription

1 A Gibson Dunn International Trade and National Security Presentation: Presenters: October 21, 2015 The New Era of Fluid Global Sanctions F. Joseph Warin Aleksi Pursiainen Adam M. Smith David A. Wolber

2 TODAY S PRESENTERS F. Joseph Warin Partner Gibson, Dunn & Crutcher LLP fwarin@gibsondunn.com Adam M. Smith Of Counsel Gibson, Dunn & Crutcher LLP asmith@gibsondunn.com David Wolber Associate Gibson, Dunn & Crutcher LLP dwolber@gibsondunn.com Aleksi Pursiainen Head of Trade Compliance Nokia Corporation aleksi.pursiainen@nokia.com 2

3 Discussion Topics Global Sanctions: Where Are We and How Did We Get Here? Size, Scope, and Bite of Sanctions The Coming Inflection What is Changing? Where are the new Opportunities? Where are the New Risks? Iran: New Complexities Come from Old Complexities Russia: The New New Sanctions Cuba: What Next? How Soon and How Far? Burma: Strategic Unwinding of Sanctions U.S. and Global Compliance Challenges and Best Practices Strategies When Facing Conflicting Sanctions Obligations 3

4 Global Sanctions: Where are We and How did we Get Here? 4

5 From Nowhere to Everywhere In the mid-1990s sanctions were vilified, misunderstood, and comparatively rare. By 2015, sanctions have become the tool of choice to address a growing number and diversity of policy challenges.

6 Growth of Sanctions An ever-expanding footprint for the Office of Foreign Assets Control The United States continues to rely on economic sanctions as a primary tool of diplomacy and national security Active Sanctions Programs New programs have been instituted very quickly, blacklisted entities have been added and removed at an unprecedented pace, and the number and severity of Since 2009, the increase Annual changes to the in the number of SDN List listings and delistings. On an annual enforcement actions at both individuals and entities the federal and state level on the Specially- basis the average rate of have increased remarkably. change has almost doubled 6 Designated Nationals (SDN) black-list Since 2000, the growth in US active sanctions programs Most recent program launched in April 2015 Cyber Crime since 2007

7 Sanctions Overview Distribution of parties sanctioned by the United States 7

8 Total OFAC Settlements ($ M) OFAC s Active Enforcement Docket U.S. Treasury Sanctions Enforcement Assessed Civil Penalties Average OFAC Settlements ($ M) OFAC Civil Enforcement Quick Facts: Since 2008, OFAC has opened more than 5,000 enforcement investigations against entities alleged to have violated U.S. sanctions OFAC has assessed nearly $4 billion in fines over that period averaging more than 30 penalties a year Since 2012, the average penalty has been nearly $45 million These fines are in addition to penalties and forfeitures assessed by other federal and state authorities including the Department of Justice, the Federal Reserve, the Office of the Comptroller of the Currency, the NY Department of Financial Services and the District Attorney of NY. These agencies often follow OFAC findings, but have regularly exceeded the amount and scope of penalties assessed by OFAC. Penalized firms have included major financial institutions from Europe and Asia, and energy, technology, manufacturing and services companies from throughout the world. 8 Q

9 Recent Actions OFAC Enforcement Cases 2015 (to date) A Diversity of Industries Major European financial institutions settled allegations of violating Iran, Sudan, Myanmar, Cuba, Terrorism, and/or Weapons Proliferation sanctions fined $258 m, $1.7 m, and $330 m respectively Largest online payment processer settled accusations of violating Iran, Cuba, Sudan, Terrorism, and Weapons Proliferation sanctions fined $7.6 m Manufacturer settled allegations that it violated Weapons Proliferations sanctions fined $390,000 Large Non-Governmental Organization settled accusations of violating Iraq sanctions fined $780,000 9

10 EU and U.S. Sanctions An Increasing(ly Similar) Reach 37 sanctions programs; 6,500+ entities listed from 156 jurisdictions United Nations Even United Nations sanctions have expanded substantially. The UN now has 13 sanctions programs and more than 1,000 entities and individuals listed. 31 sanctions programs; 2,500+ entities listed from 88 jurisdictions 10

11 Recent Actions EU and European Enforcement Cases United Kingdom 2014: Firm fined 225, m. confiscated; Director pled guilty 30 month jail following Iran sanctions violations 2014: Following review of 21 institutions regarding sanctions risk, FCA commenced investigation against two banks. 2015: FCA promises crackdown on sanctions Spain 2014: Firm fined as much as 6 m. for Iran sanctions violations 2014: Several individuals arrested in relation to attempted violation of Iran sanctions 2015: Spain remains a very active EU state in enforcement matters Italy 2014: Seized 30 m. of property from a person listed under Russia sanctions Austria 2014: Froze land of a company connected with a person listed under Ukraine sanctions 2014: Investigated major bank for potential Russia sanctions violations Switzerland 2014: Following actions taken in the U.S. found that the Swiss branch of a major financial institution had assisted in breaching U.S. sanctions and failed to assure proper business conduct and risk management. 2015: Investigations continue into board, management and employees involved. 11

12 What is Changing? Flux throughout Sanctions World Personalities, Processes, Policies Changing Sanctions Regulations Existing Programs Multilateral Divergence: Iran Russia Cuba New Programs: Cyber Sanctions, Human Rights? New Faces and a Wider Range of Enforcement Authorities: U.S. (federal and state) new leadership at OFAC and DFS; widely-reported regulator brain drain UK Office of Financial Sanctions Implementation Set to launch April 2016 The (UK Government) will establish an Office of Financial Sanctions Implementation to help ensure that financial sanctions are properly enforced. Statement accompanying UK Summer Budget Others? 12

13 What is Changing? Flux throughout Sanctions World Personalities, Processes, Policies Litigation Challenges: Added to these changes is the increasingly forceful role of the courts especially in the EU on sanctions issues. The continued success of judicial challenges to sanctions across the Union has contributed to sanctions weariness and wariness in many Member States. Increasingly Overlapping Regulatory Exposure: Authorities are scrutinizing sanctions violations alongside corruption, money laundering, and other regulatory violations. Scrutinizing direct and indirect violations Penalizing outcomes and systems & controls shortcomings Increasingly looking to assign personal civil and criminal liability for senior officers at implicated firms Growing Power of Pressure Groups to Shape Debate: Well-placed non-governmental groups are increasingly adept at both: Pressuring governments to act (e.g. to divest from specific companies or organizations); and Exacting reputational damages on entities that do not comply with their view of sanctions. 13

14 Three Primary Sanctions Risks Companies are Facing Increasing Legal and Reputational Risks The growth of sanctions programs adds to the number and type of sanctionable conduct and increases the potential of being listed. The large number of enforcement agencies involved and the evergrowing number of black-listed entities increases the likelihood of engaging with sanctioned parties. The rising risks of being blacklisted and of being penalized combined with reputational harm means that no firms are too big to de-risked. Black-Listing Governments can list a bank or a company for engaging in sanctioned conduct and bar them from access to their jurisdiction. The consequences of being listed are severe: assets are frozen and access to markets retail, investment, insurance, reinsurance, and correspondent banking prohibited. 1 Penalties A company that even accidently engages with black-listed parties can face reputational, civil, and criminal liability for itself and its officers and directors. Authorities have assessed billions of dollars of fines, required divestment of state funds from companies, mandated post-settlement monitoring, and suspended operating licenses. 2 De-Risking A bank or a company can face sanctions-related consequences if its business partners are concerned that its compliance is unsatisfactory. Dozens of major firms have derisked cutting off customers, licensees, bankers, investors, and even whole lines of business due to perceived direct or indirect sanctions risks. 3 14

15 Sanctions on Iran: New Complexities Come From Old Complexities 15

16 U.S. Sanctions The Iran Baseline Most comprehensive U.S. sanctions regime: black-lists hundreds of organizations, entities and individuals, as well as targets the jurisdiction of Iran generally and specific sectors of Iran s economy especially the energy sector Innovations in the Iran program include the advent of secondary sanctions and the extension of compliance obligations to foreign-incorporated U.S. subsidiaries Timeline of Iran-Related U.S. Sanctions Legislation Exec. Orders - Executive Orders can be additive and augmented by Congressional legislation. - The result, in the case of Iran, is a dense web of sanctions. 16

17 U.S. Sanctions Iran Sanctions Innovations in Force Today Secondary Sanctions Extension of Sanctions to Foreign Subsidiaries U.S. Parents Non-U.S. / Non-Iranian Entities Subject to U.S. Sanctions United States Iran Foreign Subsidiaries France India Australia If a non-u.s. / Non-Iranian company, organization, or entity engages in nearly any sort of transactions: with specified Iran-linked entities (e.g. certain sanctioned banks), or or in support of specified Iran-linked activities (e.g. nuclear development) That non-u.s. / Non-Iranian entity could lose their access to the U.S. market or face even more severe consequences. China In nearly every other sanctions program, foreign subsidiaries operating without U.S. persons and incorporated in third countries are NOT subject to U.S. sanctions. Legislation passed in 2013 makes these entities in the case of Iran sanctions subject to the same U.S. sanctions as their parents. 17

18 Iran Nuclear Deal Sanctions Relief Adoption Day is Here Implementation Day is Coming UN and EU Endorsement July 20, 2015 Finalization Day July 14, 2015 Majlis Endorses Deal October 13, 2015 Congressional Review Concludes September 17, 2015 Adoption Day October 18, 2015 Prep for Sanctions Relief * Primarily affecting Non-U.S. Persons only see next slide Implementation Day ~ Q U.S.: Substantial sanctions relief 100s of entities removed from sanctions list; many sanctions waived; licenses issued * UN: Termination of UN Sanctions EU: Termination / Suspension of first (and largest) set of EU sanctions Transition Day (2023) Termination Day (2025)

19 Iran Nuclear Deal Sanctions Relief Comparison of U.S. and EU Relief Granted on Implementation Day United States Principal relief will be on sanctions with extraterritorial reach the innovations. Iran sanctions still largely in effect for U.S. persons: U.S. citizens, U.S. companies and any individual or entity within the U.S. For non-u.s. persons: parts of several sanctions laws will be waived and hundreds of entities will be removed from the sanctions list. engaging with many Iranian entities no longer endangers U.S. market access. Some U.S. persons will benefit: Civil aviation companies may export to Iran Imports of Iranian foodstuffs and carpets authorized Foreign subsidiaries of U.S. companies will be able to resume work in Iran Potential for new licenses depending upon commercial/political atmosphere European Union No secondary sanctions exist - principal focus will be on removing primary sanctions: A broad spectrum of European firms will be able to enter (or re-enter) the Iranian market. Hundreds of Iran-linked entities will be removed from the EU sanctions lists. Primary sanctions regulations will be suspended, terminated, or eased including measures concerning: Finance, banking, and insurance Oil, gas, and petrochemical Shipping and transport Gold and banknotes Metals Software 19

20 Iran Challenges and Best Practices on Implementation Day Core U.S. Sanctions Relief Secondary Sanctions Description of Relief The United States shall cease the application of secondary sanctions for transactions with individuals and entities that the U.S. had sanctioned for nuclearrelated reasons. JCPOA, Annex II, para 7.9 Opportunities Non-U.S. firms can again engage with many of Iran s largest banks, corporations, and organizations without risking their U.S. market access. U.S. parties that are allowed to engage with Iran will find more willing and potential counterparties for Iran transactions. Challenges Secondary sanctions will remain for entities sanctioned due to terrorism, human rights and connections with the Islamic Revolutionary Guard Corps (IRGC). How can a company find comfort that its counterparties will not subject it to secondary sanctions risk? Best Practices Enhanced and continual due diligence combining corruption, AML, and sanctions Review of both 50 percent-owned entities and non-official OFAC lists e.g. pressure group lists of additional IRGC entities Pro-active compliance outreach to business partners to share information and gain comfort Broader contract provisions e.g. enhanced reps and warranties, foreign law provisions 20

21 Iran Challenges and Best Practices on Implementation Day Core U.S. Sanctions Relief Sanctions on Foreign Subs of U.S. Companies Description of Relief The United States shall license non-u.s. entities that are owned or controlled by a U.S. person to engage in activities within Iran that are consistent with the JCPOA. JCPOA, Annex II, para Opportunities Foreign-domiciled subsidiaries of U.S. companies will be able to operate in Iran as they were prior to the 2013 legislation. Non-U.S. companies will be able to partner with these subsidiaries to engage in Iranian business. Challenges Consistent with the JCPOA means that transactions with SDNs shall remain prohibited finding comfort with the identity of Iranian counterparties could be difficult. U.S. companies will need to build a sufficient firewall between domestic and foreign operations to limit facilitation risk. Best Practices Building a Firewall Enhanced and continual due diligence sanctions, corruption, AML, and export control Review of recusal policies for U.S. persons and sanctions opt-out contractual clauses Exercise caution regarding U.S.-nexus hidden backend processes (e.g. approvals, corporate services [including and software] and expertise). Perform periodic internal and third-party audits 21

22 Iran The Way Ahead Near Term Considerations 1 Preparation How Far Can you Go Now? Informational exchange; not contractual 2 Timing of Relief Not yet; likely Q before Implementation Day Roadmap - Considerations Compliance Diplomacy Engagement with partners to ensure mutual comfort Legal and Reputational Risk Assess full scope of risks regarding dealings 5 Plan for U.S. EU Differences Consider blocking statutes and firewalls 6 Practical Lag Post-Implementation Banks and others may not re-engage immediately Licenses / Snap Back 7 Prepare for new opportunities and sanctions return 22

23 Sanctions on Russia The New New Sanctions 23

24 Russia Sanctions A New Sanctions and Economic Challenge Two principles guiding U.S. response to President Putin s incursion into Ukraine: Maximize impact on Russia while minimizing pain on allies and broader economy As far as possible, move in lock step with closest allies and partners Difficult because the Russian economy is more globally linked and significantly larger than any country the U.S. has ever sanctioned. Size of Russian economy: $3.6 trillion Combined size of all other economies U.S. have sanctioned: $2.6 trillion Several core allies rely on Russia for energy and trade Imports of National Gas from Russia (% total domestic supply, av ) 24

25 U.S. Sanctions on Russia A Three-pronged Approach Implemented through a series of four Executive Orders Executive Order 13,660 (Mar. 6, 2014) Executive Order 13,661 (Mar. 17, 2014) List-Based Sanctions 120+ individuals, companies and organizations are blocked, e.g.: Traditional List-Based Sanctions Traditional List-Based Sanctions Region-Based Sanctions Crimea is essentially off-limits to U.S. persons Investments Executive Order 13,685 (Dec. 19, 2014) Traditional Region-Based Sanctions United States Exports Imports Facilitation Crimea 25

26 U.S. Sanctions on Russia A Three-pronged Approach (cont.) Executive Order 13,662 (Mar. 20, 2014) Sectoral Sanctions Targets core drivers of the Russian economy in the finance, energy, and defense sectors - Rather than blocking/freezing companies, the sanctions seek to prevent growth in certain sectors. Innovative, targeted approach. Implemented through a series of Directives targeting specific entities in specific sectors. Creation of the Sectoral Sanctions Identifications ( SSI ) List 50% Rule applies. Finance Sector Unable to raise capital via new long-term debt or equity Energy Sector Unable to raise capital via new long-term debt or acquire U.S. technology for key projects Defense Sector Unable to raise capital via new long-term debt 26

27 U.S. Sanctions on Russia Closer Look at U.S. Sectoral Sanctions Directive 1, 2 and 3 Prohibits U.S. persons from transacting in, providing financing for, or otherwise dealing in: new debt with >30 days maturity or new equity of SSI-listed entities in the Russian financial services sector new debt with >90 days maturity for SSI-listed entities in the Russian energy sector new debt with >90 days maturity for SSI-listed entities in the Russian defense sector Scope -- the definition of of matters. The prohibition is intended to limit the ability of targeted financial institutions to grow, not conduct business. Only those transactions that involve capital raising for the targeted institution itself are covered. Directive 4 Oil Production Prohibits the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation or its maritime area and when involving SSI-listed entities designated pursuant to this Directive. Some terms defined but many ambiguities remain. 27

28 EU Sanctions on Russia An Ally Working in Tandem Four distinct EU sanctions regimes in place for Russia/Ukraine/Crimea Ukraine Misappropriation Freezing assets of former Ukrainian government officials Ukraine Sovereignty and Territorial Integrity Mostly targeted asset freezes of Ukrainian separatists ~ to U.S. Executive Orders and Russian sectoral sanctions Focused on state-owned entities, and the oil and gas sector Restricting access to EU capital markets, imports and technology Executive Order Crimea Sectoral and Trade Sanctions Broad ranging sectoral, economic and trade sanctions on Crimea and Sevastopol Executive Order

29 U.S. Sanctions Russia What s next? Last U.S. action was in July 2015 Deemed a maintenance action to maintain pressure No new authorities on the horizon Ukraine Freedom Support Act, with secondary sanctions available, but unlikely to be used EU sanctions must be renewed by January 31 Pressure not to renew from some countries, supported by continued judicial challenges Russia s Syria incursions may have made it more likely that EU sanctions will remain If diverge U.S. and EU would be on different pages with respect to Russia (and Iran) 29

30 Sanctions on Cuba: What s Next? How Soon and How Far? 30

31 Cuba How Far? How Fast? December 17, 2014: President Obama announces "the most significant changes in [U.S. Cuba] policy in more than fifty years." Since then: Cuba removed from State Sponsor of Terrorism List. Diplomatic relations restored. Two rounds of sanctions relief (Jan. and Sept. 2015). Country Designation Date Iran January 19, 1984 Sudan August 12, 1993 Syria December 29, 1979 Cuba March 1, 1982 How much farther can it go? Many sanctions frozen in place by Congress (e.g., Cuban Democracy Act; Helms-Burton) Nearly all of the recent Cuban sanctions relief has been granted by general license pursuant to Executive s power. Can the President effectively end the embargo through general license authority? When does Congress push back? 31

32 Cuba Summary of Key Sanctions Relief to Date Travel 12 available categories for U.S. travelers. No straight tourism. Travel and carrier services authorized A host of activities related or incident to authorized travel Financial Services Opening of U.S. correspondent accounts in Cuba Bank accounts Cuba, U.S. and abroad Credit and debit card use in Cuba Expansion of allowable remittances and remittance services Exports and Imports Imports of select Cuban goods/services from Cuban entrepreneurs Support for small business growth and humanitarian projects Transactions involving newly authorized exports U.S. Operations Abroad Persons subject to U.S. jurisdiction can provide goods and services to Cuban nationals in third countries as long as it does not involve an export/import to or from Cuba Establishing a Business in Cuba Establishment of physical commercial presence in Cuba for authorized activities e.g., provision and establishment of telecommunications and Internet-based services and facilities. Miscellaneous Payment for certain legal services Additional education-related activities Supporting diplomatic relations transactions ordinarily incident to 32

33 Cuba Navigating the Waters A Few Examples Can a U.S. Person Yes, because Can a U.S. Person No, because Pay for a hotel room in Cuba with a U.S.-issued credit card? Meet with Cuban business leaders in the automotive sector in Cuba? Build a retail outlet in Cuba to sell telecommunications equipment and services? Offer a checking account from a bank s subsidiary in Spain to a Cuban national in Spain? Process a remittance to a friend in Cuba for $10,000? Import a Cuban cigar? Card use is incident to valid travel. U.S. institutions are authorized to enroll merchants and process valid payments. Travel for professional meetings/research is authorized. Physical presence allowed for authorized goods/ services Goods and services can be provided by U.S. foreign subs to Cubans in third countries. No limit on donative remittances. Limited tobacco imports under $100 authorized. Use a credit card for a deposit on the rental of luxury sailboat in Havana. Sign an agreement to explore trade development options once the embargo is lifted? Build a hotel? Provide accounting services to a Cuban national in Spain for a business in Cuba. Process a $50 remittance to a friend in the Cuban government to buy Castroera memorabilia Import a crate of Cuban cigars from a municipalowned distributor. Likely involves unauthorized recreational travel/tourism. Cannot enter into contracts, even if executory. Auto not a sector generally licensed. Hospitality is not authorized good or service; construction is not a transaction incident to travel Likely involves an export of services to Cuban. No remittances to government officials; remittance is commercial. Tobacco not fully authorized for import by State. Import is not from an independent Cuban entrepreneur. 33

34 Burma Sanctions: Strategic Unwinding of Sanctions 34

35 Burma Most U.S. Sanctions have been Lifted Through a series of general licenses issued in 2012 and 2013, now incorporated as such into the regulations, and Executive Order 13651, OFAC has now authorized: exports of financial services to Burma imports of Burmese goods into the U.S. (except certain gemstones) new investment in Burma (with reporting requirements to Dept. of State) most transactions with four blocked financial institutions designated as SDNs: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank NOTE: this is a unique license, explicitly allowing broad dealings with SDNs 35

36 Burma Some Restrictions Still in Place Companies looking to do business in Burma need to be aware that some sanctions still exist. What Can t You Do in Burma? 115 Burmese entities or individuals remain designated as SDNs. Dealings with these entities or individuals, or their property remains prohibited this includes core players in the Burmese economy including port operators. The designated port operator has been a major problem Certain exports of financial services and new investments involving the Burmese Ministry of Defense, state or non-state armed groups (including the military). Certain transaction involving the four SDN banks noted above: No new investment in or with these four banks. Any property of these banks blocked prior to issuance of the general license remains blocked. Funds transfers between U.S. financial institutions and these banks must be routed through a third country. And remember the 50% Rule. Elections on November 8 If elections are successful, there may be more room and political appetite in the United States for further relaxation (via general or specific licenses). 36

37 Compliance Challenges 37

38 Enforcement Priorities Banks, banks, and more banks Recent cases at the federal and state levels suggest a rising importance of other sectors: Insurance: Insurance is a sector similar to banking; it is highly regulated, critical for international trade, and has both a history of enforcement actions and a distinct US nexus giving US sanctions unique power; Technology: Authorities have begun to look closely at tech due to the sector s global exposure and lack of sanctions history; OFAC has new cyber sanctions and DFS is examining cyber security in relation to its bank and insurance supervision; Energy: Sector is very active in jurisdictions where sanctions are at play. The Iran Deal may increase scrutiny depending upon investment in the sector. Structures : Parent-Sub firewall sufficiency; IRGC connections, etc. Different Member States have different goals The UK promises to become even more active, with existing authorities and the creation of a standalone, dedicated sanctions implementation and enforcement body the Office of Financial Sanctions Implementation 38

39 U.S. Sanctions OFAC Compliance OFAC requires compliance with all sanctions rules and regulations, but: The agency does not mandate the existence of, or provide robust guidance on the required form of, an adequate program. There is no one-size-fits-all approach and each institution s program needs to be tailored to address specific needs, risks, and transactions. How big is your company? Where is it located? How well do you know your customers? Who are your partners, brokers, and suppliers? How complicated are your transactions? Are they cross-border? Is there potential for diversion? OFAC Compliance Tips Exercise caution when dealing with entities owned 50% or less by sanctioned parties they may be sanctioned in the future Treat entities owned more than 50% by sanctioned parties as blocked even if they are not officially listed Conduct comprehensive due diligence to determine beneficial ownership Consider all potential restrictions on sanctioned entities multiple sanctions programs may apply in different ways Do not overstate any reduction in sanctions (e.g. Iran) 39

40 Global Compliance Best Practices Key Components of Establishing a Compliance Program Inculcating a culture of compliance from the top Establishing a strong compliance department including dedicated, empowered officers Developing robust internal controls Deploying accurate risk analysis and measurement tools Implementing training programs for key personnel Employees in high-risk areas New employees Continuing training for existing employees Developing periodic risk assessments and compliance audits Monitoring key changes to policies Best practice requires (1) maintaining leading-edge sanctions compliance policies and processes internally, as well as (2) engaging externally with business partners, banks and others to provide mutual assurances. 40

41 Best Practices Examples Issue Case Studies: Multinational / Multimodal Enforcement Accounting for the Increasingly Complex Enforcement Environment Different offenses may arise out of parallel investigations focused on related conduct. Non-Governmental Agencies are increasingly involved in enforcing ethical business conduct. The same or similar conduct may be investigated by both local and foreign enforcement agencies. Weatherford (Sanctions + Corruption, Export Controls); HSBC (Sanctions + Anti-Money Laundering). NGOs publicizing apparent wrongdoing; state authorities relying on NGO assessments in making divestment decisions. Sanctions violations being investigated by US federal and local authorities; and increasingly European agencies Integrate compliance reviews such that investigations into allegations are not focused on a single potential violation. Allocate training and compliance resources according to the type of potential violation(s) most relevant to your business. Understand that scrutiny into business practices may come from both government and non-government sources. Understand the compliance requirements of those to whom you are contractually obligated. Watch for increasing use of integrity pacts. Understand key differences between local and federal regulations. Remember that governments are increasingly implementing OFAC-like processes (e.g. UK s OFSI). Never assume misconduct is limited to local business units. It may be indicative of a global problem. 41

42 Case Study Challenging Jurisdictions Addressing Conflicting Sanctions Obligations Many countries impose inconsistent sanctions In some cases, states make it illegal to follow some third-country prohibitions What should companies do when faced with conflicting obligations? Navigating this challenge involves: Rigorous due diligence to determine if sanctions are actually implicated Assessing risks and consequences business, reputational of strategies Potential engagement with regulators for guidance Highly-tailored, creative operationally and contractually solutions Example Problem: Proposed Deal Between U.S. and EU Entities: U.S. partners require compliance with all OFAC sanctions and regulations; EU partners cannot comply with all OFAC sanctions and regulations unless Brussels has imposed similar measures (Regulation 2271/96) Potential solution: If operationally, both U.S. and EU entities are necessary to the deal: engagement with U.S. banks and other partners is critical. Robust contractual language could potentially provide sufficient assurances regarding OFAC compliance without mentioning U.S. sanctions 42 while mentioning EU regulations

43 Questions? 43

44 MCLE CERTIFICATION INFORMATION Most participants should anticipate receiving their certificate of attendance in 3 to 4 weeks following the webcast. Virginia Bar members should anticipate receiving their certificate of attendance in 6 weeks following the webcast. Questions regarding MCLE information should be directed to Jeanine McKeown (National Training Administrator) at or jmckeown@gibsondunn.com. 44

45 TODAY S PRESENTERS F. Joseph Warin Partner Gibson, Dunn & Crutcher LLP fwarin@gibsondunn.com Adam M. Smith Of Counsel Gibson, Dunn & Crutcher LLP asmith@gibsondunn.com David Wolber Associate Gibson, Dunn & Crutcher LLP dwolber@gibsondunn.com Aleksi Pursiainen Head of Trade Compliance Nokia Corporation aleksi.pursiainen@nokia.com 45