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Enforcement Edge
March 11, 2024

Companies on the Front Lines of National Security

Enforcement Edge: Shining Light on Government Enforcement

Last week, several top government officials in the national security space took the stage at the annual ABA White Collar Crime Conference in San Francisco. Conference attendees were eager to hear from the officials, given that national security issues have recently taken on new significance in white collar practice. Throughout their remarks, the government officials highlighted a prominent trend: corporate enforcement cases are increasingly national security cases. This development has been borne out in the recent actions of the Departments of Justice (DOJ), Treasury, and Commerce, and all indications suggest this trend will continue in full — or greater — force this year.

On Day Two of the conference, Matthew Axelrod (Assistant Secretary of Commerce for Export Enforcement, Bureau of Industry and Security, Department of Commerce), Matthew Olsen (Assistant Attorney General for National Security, DOJ), Bradley Smith (Director, Office of Foreign Assets Control (OFAC), Department of Treasury), and Tatum King (Special Agent in Charge, Homeland Security Investigations (HSI)), spoke on a panel about this year’s sanctions and export control enforcement agenda. The panel emphasized three themes: (1) increasing inter-agency collaboration; (2) increasing international collaboration; and (3) a shared emphasis on voluntary self-disclosure (VSD).

Axelrod and Olsen introduced the topic of inter-agency collaboration by explaining how government agencies are teaming up to combat threat actors such as Russia, China, and Iran, as well as non-state actors. Axelrod emphasized that threat actors are continuing to seek and acquire Western technology — for example, semiconductors and microelectronics — and that export controls and sanctions are the preeminent tools in the national security toolbox to counteract those efforts. Olsen suggested that one of the more concerning trends he has seen in the threat landscape is that adversaries are collaborating in ways the government had not seen or did not identify last year. As a result, the agencies’ abilities to work together and quickly share information has become critical. King stressed that partnership has always been critical to HSI, and that HSI has the benefit of hands-on, on-the-ground experience that can be shared with DOJ, OFAC, and the Commerce Department.

The panelists highlighted several inter-agency efforts from the past year to illustrate the agencies’ commitment to teaming up to increase and hasten enforcement efforts. For example, DOJ, Commerce, and Treasury have now published three tri-seal compliance notes, one of which was issued just last week. The panelists also referenced recently-formed strike forces aimed at facilitating inter-agency cooperation, such as DOJ and Commerce’s Joint Disruptive Technology Task Force. The panelists noted that, although these initiatives are highly publicized, the public does not see the immense amount of day-to-day coordination going on behind the scenes. Smith, for his part, stated that he is struck by the growing maturity in inter-agency process.

The panelists similarly provided examples of international cooperation, though they acknowledged that progress in that area has been a bit slower. Both Axelrod and Olsen discussed intense collaborative efforts to support our Ukrainian partners. They had recently traveled to Kiev together, and Olsen had just earlier that week met with the Ukrainian prosecutor general in Washington to discuss sharing intelligence in the efforts to prevent U.S. components from being used by Russians in the war in Ukraine. Smith mentioned that OFAC has embedded personnel in the European Union and UK offices to help improve coordination with our allies.

With respect to VSDs, the officials reiterated a message familiar to the audience, many of whom represent corporate clients: come to us before we come to you. Axelrod and Olsen both highlighted recent tweaks to their agencies’ VSD policies. Specifically, Olsen discussed how DOJ’s recently revised VSD policy puts emphasis on resolving corporate cases through non-prosecution agreements (NPAs). Axelrod noted that Commerce’s policy underwent two important revisions last year — first, that failure to disclose will now be considered an aggravating factor in penalty considerations; and second, that credit is offered for disclosure of misconduct by others (not a “get out of jail free card,” Axelrod explained, but a potential mitigating factor if a corporation gets into trouble down the road). Smith emphasized that OFAC’s VSD program has existed for 15 years and that disclosure has the potential to cut liability in half. Smith stressed, though, that just because violations are not reported does not mean they will not be discovered by OFAC. Indeed, he noted that approximately 50% of OFAC’s enforcement actions are self-initiated by OFAC. Each of the panelists’ remarks revealed that corporations are uniquely poised to detect, investigate, and report corporate misconduct, particularly through VSD efforts.

On Friday, Olsen capped off this year’s conference in a keynote address. Olsen once again echoed the call to action voiced throughout the conference: corporations are on the front lines of national security enforcement efforts and should act accordingly. Olsen reiterated DOJ’s sharpened focus on sanctions and export control violations, especially in the corporate setting and with emphasis on individual wrongdoing. To that end, DOJ is doubling the number of prosecutors involved in sanctions, export control, and foreign agents-related laws and is already seeing results from those efforts. DOJ is seeing results from its push for VSD, as well — Olsen cited recent reports from two major, multi-national companies regarding national security-related violations. Olsen stressed that these reports show companies are heeding DOJ’s warnings and illustrate how a strong compliance culture can benefit national security.

Taken together, the message coming out of these discussions is clear: national security stakes have never been higher, and the U.S. government has determined that the private sector can and must play a significant role in counteracting national security threats. Corporations must be on high-alert for national-security related violations — fostering a culture of corporate compliance with respect to sanctions and export controls, implementing appropriate safeguards to prevent and detect violations, and, if violations are uncovered, carefully considering the risks and benefits of VSD.

This concludes our coverage of this year’s ABA White Collar Crime Conference. Thanks for tuning in to Enforcement Edge! As always, please reach out to the authors of any blog posts or members of Arnold & Porter’s White Collar Defense & Investigations group if you have any questions.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.