As risks and complexities for sanctions investigations have grown, so has the number of regulators and enforcement agencies bringing enforcement actions, and not just in the United States. Enforcement agencies around the world are becoming more active, with a focus on enforcing sanctions and export controls targeting Russia since its February 2022 invasion of Ukraine. There has been a particular uptick in public enforcement of EU sanctions targeting Russia by various EU Member States in recent months – case in point: Lithuania recently imposed fines of EUR 1.27 million and EUR 13.6 million for violations of these EU sanctions.
The inherently international nature of sanctions investigations means that implicated products or funds flows will likely have touched multiple jurisdictions on their way to or from the hands of restricted parties or sanctioned territories. In addition, relevant laws often have expansive extraterritorial reach to capture conduct occurring outside of the enforcing jurisdiction.
As a result, non-compliance may lead to enforcement by several different authorities across multiple countries, which can have overlapping jurisdiction over the conduct and equal interest in seeking to enforce their respective laws in this area. We see this increasingly often in sanctions investigations.
These developments create challenges – and present opportunities – for companies that find themselves before multiple regulators, seeking to coordinate and resolve these cases. In this blog post, we identify key areas that present such challenges and opportunities to defendant companies seeking to effectively resolve these cases.
Parity of Information
Nobody likes to feel left out, and enforcement agencies involved in sanctions investigations are no different. Such agencies will have varying expectations in terms of how they seek information and cooperation from companies. However, all of them will expect the same minimum cooperation and information sharing provided to other relevant agencies in a sanctions investigation.
Accordingly, a company needs to consider whether all information presented to various authorities is consistent. If not, the company should ensure that distinctions in information sharing is well rationed (as there may well be valid reasons to do so). Having such a strategy ahead of time can avoid accusations that information provided to one agency is incomplete or cooperation insufficient.
Leveraging Investigation Outcomes (or Blunting their Effects)
Proactively leveraging a positive outcome or view from one enforcement agency involved in a sanctions investigation may guide and influence the outcome with another. For example, if the same conduct has resulted in a warning or no-action letter in one country, a company can use that as the basis to advocate for an agency in an allied country to reach a similarly favourable decision in their equivalent case. But there are no guarantees that agencies will take the same view based on the same facts. The reality is that companies have to contend with differences in enforcement policies as well as facts, potentially resulting in distinguishable violations under varying laws.
Conversely, there is a risk that a negative outcome by one authority might be considered persuasive or otherwise taken into account by another enforcement agency. In those circumstances, a company should carefully consider what factors might be used to distinguish such an unfavourable position in other countries implicated in a sanctions investigation. This often requires an in-depth and nuanced knowledge of sanctions and export-control regulations in numerous countries, which Global Sanctions Investigations Group members stationed around the world can bring from their day-to-day experience in this area of law.
Timing
Credible sanctions investigations, and the negotiation of their resolution, are rarely quick affairs. That is more so when a company has to contend with apparent violations of laws and regulations in multiple countries. Enforcement agencies in different countries will move at their own paces. This can create challenges where a company’s resolution with one enforcement agency is close to completion while similar efforts in another country lie further behind. This can affect, for instance, the timing to notify other stakeholders of the issue and its potential resolution (e.g., shareholders or implicated counterparties) or to issue press releases.
That said, companies may find there can be some benefit to the different pace at which a sanctions investigation progresses in multiple countries. If one is progressing more speedily, a company can consider whether it is worthwhile to ask the “slower” authority to hold its investigation. This is particularly true if it appears likely that a favourable decision would be reached in the more developed case in another country, an outcome that might be leveraged with other enforcement agencies, as noted above.
Coordinating Penalties
Here lies maybe the most significant challenge in any substantial multinational case. Facing enforcement by multiple agencies raises the prospect that each may seek to impose its own penalty for the same conduct. In the worst case, a company may be penalized several times over for the same conduct. Carefully coordinating resolution between each involved agency can help to avoid that outcome.
Among the US enforcement agencies, the enforcement policies of BIS and OFAC do not explicitly address whether they seek to minimize having both agencies assess penalties for the same transactions where they both have jurisdiction. In practice, our experience is that these US agencies are willing to mitigate double penalties but this often has to be actively raised and coordinated by a company and its counsel. In recent enforcement cases, we see OFAC and BIS crediting penalties imposed by the other agency against their own penalties – see here, here, here, and here.
Internationally, the position is even less clear, and there is no formal guidance. As these multinational cases continue to proliferate, the practice of each enforcement agency will become clearer. There is some precedent in other areas. In the criminal context, the US Department of Justice has adopted a “no piling on” policy requiring DOJ prosecutors to coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct – i.e., to prevent penalizing the same conduct multiple times. This policy is often invoked in foreign corruption cases that implicate multiple international enforcement agencies. The rationale behind this DOJ policy is equally applicable now to the muti-agency and increasingly international sanctions enforcement environment.
Conclusion
Coordinating international sanctions enforcement cases and how they are settled will continue to be increasingly complicated for companies facing these situations. Carefully considering these complexities and ensuring effective coordination across relevant jurisdictions can help companies to resolve these cases more quickly with the relevant agencies and obtain more successful outcomes.
View all posts in the “Navigating the Impending Global Sanctions Enforcement Storm” series.
