Category Archives: Bureau of Industry and Security (BIS)

Continuity and Change at the Intersection of National Security and Corporate Crime

by Marshall L. Miller

Photo of the author

Photo courtesy of the author

Much recent attention has centered on shifts in approach at the Department of Justice in the new Administration, but one area where we should expect as much continuity as change is at the intersection of corporate crime and national security. 

During two separate leadership stints at the Department of Justice, I oversaw corporate criminal enforcement—from 2014 to 2015 and again from 2022 to 2024.  The difference was night and day.  Where national security prosecutions were corporate crime outliers in the mid-2010s, by 2022 they represented a majority of DOJ’s major corporate criminal resolutions.  And then the number doubled from 2022 to 2023. Early signals indicate that national security will be a continued area of white-collar focus in 2025 and beyond.

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Trust, But Verify…Therein Lies the Rub: A Fresh Look at Audits of Export Controls Compliance Programs

by Brent Carlson and Michael Huneke

Photos of the authors

Left to right: Brent Carlson and Michael Huneke (Photos courtesy of the authors)

Export controls have risen to a top corporate compliance priority in recent years, and now even pose enterprise risk for many companies.[1] The combination of new rules and enforcement signals from the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and increasing bipartisan congressional scrutiny, means that in-house legal and compliance teams face enormous challenges. New, innovative tools and techniques are necessary to stay ahead of the game, and this includes making upgrades to keep a company’s audits effective.

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Avoid Kicking the Hornet’s Nest: A Fresh Look at How to Anticipate, Avoid, and Respond to BIS Administrative Subpoenas (Part 2)

by Brent Carlson and Michael Huneke

Photos of authors.

Brent Carlson and Michael Huneke (photos courtesy of authors)

In Part 2 we pick up where we left off in Part 1 to continue our discussion of how best to avoid an administrative subpoena. We then discuss how best to respond, if and when they cannot be avoided, and conclude with some practical guidance.

Avoid:  How to Dissuade BIS from Resorting to Administrative Subpoenas (Continued)

Prepare well for outreach visits

Companies should prepare for outreach visits. Persons who will be meeting or speaking with OEE agents should be well prepared to do so with an eye toward and an awareness of the implications of the information and representations they are providing to BIS. Any and all information that company representatives provide to BIS representatives is fair game for future enforcement and for sharing with other U.S. agencies.

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BIS Final Rule on Voluntary Self-Disclosure Process and Penalty Guidelines Highlights Significant Export Control Violations and Higher Penalties

by Christopher Timura, David Burns, Adam M. Smith, Stephenie Gosnell Handler, Samantha Sewall, Cody Poplin, Chris Mullen, and Audi Syarief

Top left to right: Christopher Timura, David Burns, Adam M. Smith, and Stephenie Gosnell Handler.
Bottom left to right: Samantha Sewall, Cody Poplin, Chris Mullen, and Audi Syarief. Photos courtesy of the authors.

In a final rule effective September 16, 2024, the Department of Commerce’s Bureau of Industry and Security (“BIS”) updated its process for handling voluntary self-disclosures from industry and expanded its discretion to impose higher monetary penalties for violations of export control laws. Whether to submit a voluntary self-disclosure remains a fact-dependent decision and requires careful weighing of factual, legal, practical and policy considerations.

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Avoid Kicking the Hornet’s Nest: A Fresh Look at How to Anticipate, Avoid, and Respond to BIS Administrative Subpoenas (Part 1)

by Brent Carlson and Michael Huneke

Photos of authors.

Brent Carlson and Michael Huneke (photos courtesy of authors)

Anticipating, avoiding, and responding to administrative subpoenas pose the next in a long line of challenges facing U.S. companies and their legal and compliance teams as the new wave of export controls enforcement unfolds.

The Department of Commerce’s Bureau of Industry & Security (“BIS”) has primed the corporate enforcement engine[1] through (1) public guidance identifying “red flags” indicating a “high probability” of diversion in violation of U.S. export controls, (2) successful criminal prosecutions in partnership with the U.S. Department of Justice (“DOJ”) in the Disruptive Technology Strike Force of intermediaries facilitating diversion,[2] and (3) “supplier list” and “red flag” letters warning companies of the risks of diversion posed by certain counterparties.[3]

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It May Not Be Worth the Paper (or Pixel) It’s Written On (Part 2): A Fresh Look at Common Responses to Bolster Export Controls Compliance Programs as BIS Primes the Corporate Enforcement Engine

by Brent Carlson and Michael Huneke

Photos of the authors

Brent Carlson and Michael Huneke (photos courtesy of authors)

Amid reports of continued export controls diversion[1] to entities in locations including China, Russia, Iran, and North Korea, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) has been priming the corporate enforcement engine.[2] This dynamic increases challenges for in-house legal and compliance teams to respond to BIS’ latest moves and bolster compliance program effectiveness. In this new environment, the greatest compliance risks revolve around explaining and defending relationships with distributors and resellers in the face of allegations and reports of product diversion or other “red flags” indicating the same—a task made more nuanced under the “high probability” standard of “knowledge” recently highlighted by BIS in new guidance issued on July 10, 2024 (the “July 10 BIS Guidance”).[3]

In Part 1 we previously discussed the practice of using letters of assurance—and the problems of relying solely upon them without resolving related red flags—to bolster export controls compliance programs in response to the new BIS enforcement playbook.[4] In Part 2 we now examine other common responses based on legacy approaches to export controls and why they are ineffective—and even detrimental—in today’s new and evolving enforcement environment.

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DOJ National Security Division Issues First-Ever Declination Under Enforcement Policy

by Satish M. Kini, David A. O’Neil, Jane Shvets, Rick Sofield, Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley

Photos of the authors

Top left to right: Satish M. Kini, David A. O’Neil, Jane Shvets, and Rick Sofield. Bottom left to right: Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley. (Photos courtesy of Debevoise & Plimpton LLP)

Key Takeaways

  • Even in criminal national security matters, early self-reporting, remediation and cooperation can enable companies to avoid prosecution and penalties.
  • Federal enforcement agencies are continuing to collaborate in investigating and prosecuting criminal cases at the intersection of national security and corporate crime.
  • Multinational corporations and academic institutions should be aware of the risk of outsiders fraudulently affiliating themselves with legitimate institutions to skirt export control laws.

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BIS Primes the Corporate Enforcement Engine: A Fresh Look at What Recent BIS Actions & Statements Mean and a Proposed Framework for How U.S. Companies Can Best Prepare

by Brent Carlson and Michael Huneke 

Photos of the authors.

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

The risk of corporate criminal enforcement actions for export controls evasion or diversion is significantly increasing. Recent actions and statements by the Department of Commerce’s Bureau of Industry & Security (“BIS”) suggest that, beyond saber-rattling, BIS is deliberately priming the corporate enforcement engine with the fuel for an enforcement wave that will follow the Foreign Corrupt Practices Act (“FCPA”) “playbook” that the U.S. Department of Justice (“DOJ”) has successfully deployed for the last two decades.

The fuel comes in the form of official, multiagency guidance documents and other actions that describe circumstances indicating a “high probability” of misconduct, which as we have previously written is a freestanding basis for enforcement actions under both the FCPA and the Export Administration Regulations (“EAR”).[1] Such agency actions by BIS notably include the issuance to U.S. companies of lists of counterparties under cover of what BIS officials describe as “red flag” letters. Since our prior analysis,[2] BIS has reemphasized the significance of such letters and underscored the importance of how U.S. companies respond.

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New U.S. Law Extends Statute of Limitations for Sanctions Violations and Enhances Regulatory and Enforcement Focus on National Security Priorities

by Anthony Lewis, Eric Kadel Jr., Sharon Cohen Levin, Craig Jones, Adam Szubin, Amanda Houle, and Bailey Springer

Photos of the authors

Top: Anthony Lewis, Eric Kadel Jr., and Sharon Cohen Levin
Bottom: Craig Jones, Adam Szubin, and Amanda Houle
(Photos courtesy of Sullivan & Cromwell LLP)

Statute Doubles the Statute of Limitations for Sanctions Violations, Expands the Scope of Sanctions Programs, and Focuses on China’s Technology Procurement, Iranian Petroleum Trafficking, and Fentanyl Production

Summary

On April 24, President Biden signed into law H.R. 815, a sweeping national security legislative package that—in addition to providing foreign aid funding for Ukraine, Israel, and Taiwan—includes the 21st Century Peace Through Strength Act, which contains a number of provisions implementing the Biden administration’s national security priorities. As summarized below, provisions of the Act align with U.S. authorities’ continued focus on China and emphasis on sanctions enforcement. In particular, the Act:

  • Doubles the statute of limitations for civil and criminal violations of U.S. sanctions programs from five to 10 years—raising questions about retroactive application of the statute and whether authorities will amend current rules on corporate record-keeping practices;
  • Requires additional agency reports to Congress, reflecting a focus on U.S. investments in, and supply-chain contributions to, the development of sensitive technologies used by China—a topic that has likewise been the recent focus of the Department of Justice and the Department of Commerce;
  • Targets the Chinese government’s alleged evasion of U.S. sanctions on Iranian petroleum products and involvement in related financial transactions by directing the imposition of sanctions; and
  • Directs the President to impose sanctions aimed at curbing China’s alleged involvement in fentanyl trafficking and calls for forthcoming guidance for financial institutions in filing related SARs.

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A Whole New National Security Ballgame: Key Practical Takeaways for Export Control Compliance from the 2024 BIS Update Conference

by Brent Carlson and Michael Huneke

Photos of the authors.

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

On March 27–29, 2024, the U.S. Department of Commerce’s Bureau of Industry & Security (“BIS”) hosted an Update Conference on Export Controls & Policy. The event was a major outreach effort by the U.S. government. Nearly 100 BIS and other U.S. agency officials engaged with 1,200 attendees over three days.

As was appropriate for an event coinciding with Opening Day of the U.S. Major League Baseball season, BIS officials emphasized that they—and those they regulate—are playing a whole new national security ballgame. This theme ran through every topic. It also drives the key practical takeaways that we highlight below for in-house compliance professionals assessing evasion and diversion risks and responding to reports of the same—particularly reports that some U.S. companies recently received directly from the U.S. government. Continue reading →