On April 24, 2024, President Biden signed into law H.R. 815[1], an emergency supplemental appropriations law, that provides $95.3 billion in military aid to U.S. allies and requires the divestiture of certain social media applications.
While much of the discussion surrounding the new law focuses on the emergency foreign aid funding for Ukraine, Israel, and Taiwan, and a prohibition on the provision of certain services related to social media apps owned by “foreign adversaries,” the legislation materially changes U.S. sanctions law by extending the amount of time that regulators and prosecutors have to investigate and prosecute civil and criminal sanctions violations from five to 10 years.[2]
In our previous article on this topic (which you can read here), we analyzed recent enforcement activity by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) related to the maritime transport of Russian-origin crude oil and Russian-origin petroleum products above price caps agreed by the “Price Cap Coalition,” comprising Australia, Canada, France, Germany, Italy, Japan, the European Union, the United Kingdom, and the United States.
In this second article, we focus on recent OFAC guidance that serves to shield U.S. Persons [1] providing “Covered Services,” including trading/commodities brokering, financing, shipping, insurance, flagging, and customs brokering, from strict liability for sanctions violations in cases where those U.S. Persons inadvertently deal in the purchase of Russian oil or Russian petroleum products sold above the relevant price cap owing to falsified or erroneous records provided by those who act in bad faith or make material misrepresentations. We also summarize seven recommendations published by the Price Cap Coalition to promote responsible practices in the industry and disrupt sanctioned trade.
Congress recently passed the Rebuilding Prosperity and Opportunity for Ukrainians (“REPO”) Act, bipartisan legislation authorizing the Administration to seize billions of dollars in Russian sovereign assets to fund Ukraine reconstruction and aid. The legislation raises issues that could have political and legal consequences – for companies and individuals.
Join members of the firm’s Policy and Government Investigations teams on May 7 for a webinar covering:
What does the REPO Act say?
How did Congress reach bipartisan consensus to pass it?
Will the REPO Act survive US court challenges?
How will the Biden Administration use this new authority?
How will Europe treat Russia’s frozen assets?
Will Russia retaliate, and in what form?
How can US, European and International businesses protect themselves against retaliation?
In June 2022, the Group of Seven (“G7”) countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—decided to pursue a policy to cap the price of Russian oil. In December 2022, the G7 countries, joined by Australia and the supranational European Union (together, the “Price Cap Coalition”) officially implemented measures to ban a range of services related to the maritime transport of Russian-origin crude oil wherever the price being paid for that oil was above a capped threshold. The intent of the price cap was to keep Russian oil flowing to world markets, since it is vital to the global economy, while simultaneously reducing the revenues going to Russia and, therefore, Russia’s ability to sustain its actions in Ukraine. The Price Cap Coalition implemented similar measures for petroleum products in February 2023.
Over the past year, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has ramped up its enforcement of the price cap by sending information requests to marine industry actors and imposing sanctions on entities implicated in transporting Russian crude oil being sold above the price cap. The Price Cap Coalition has expressly supported OFAC’s actions, including in an October 2023 statement noting that “Russian oil tax revenue was down 45%” and confirming the focus “on supporting compliance and enforcement.”[1]
The Price Cap Coalition, including the U.S. government, also has continuously published guidance to promote compliance with the price cap. For example, in conjunction with the October 2023 statement, the Price Cap Coalition released an advisory for the maritime oil industry and related sectors, outlining risks in the maritime oil trade and proposing recommendations as best practices.[2] OFAC also recently updated its guidance on the implementation of the price cap policy, setting out new expectations for maritime transport service providers.[3]
In this first article, we focus on OFAC’s recent enforcement activities and its guidance on compliance requirements.
In today’s rapidly evolving technological landscape, the integration of artificial intelligence (“AI”) into business operations presents unparalleled opportunities for efficiency and innovation. Alongside these advancements, however, come new challenges and risks that must be addressed to ensure regulatory compliance and ethical responsibility. Recently, the Department of Justice (“DOJ”) has underscored the importance of proactively managing AI-related risks as part of an effective compliance program, signaling a shift in regulatory expectations. In this blog post, we explore the key considerations and actionable steps for organizations to effectively navigate AI-related risks and enhance their compliance efforts.
Understanding the DOJ’s Guidance:
In our last blog post, we discussed Deputy Attorney General Monaco’s announcement directing DOJ to incorporate assessment of risks associated with AI into its policy on Evaluation of Corporate Compliance Programs. DAG Monaco’s directive emphasized DOJ’s focus on targeting illegal activities from disruptive technologies, including AI, in its efforts to combat new and emerging threats.
The Cayman Islands, a British overseas territory, has long been recognized as one of the world’s leading providers of institutionally focused financial services and a preferred destination for the structuring and domiciling of sophisticated and specialized financial services products, particularly investment funds. However, for a number of reasons, the inherent risks to the Cayman Islands’ financial system of misuse by illicit actors such as money launderers and terrorist financiers are high. Those reasons include the complexity of the products and services on offer, the high value of assets/funds under management, the high volume of cross border activities and transactions that are processed in or through the Cayman Islands, routinely for the benefit of non-resident customers, and customer bases normally comprising significant proportions of traditionally high-risk clientele such as politically exposed persons (“PEPs”), high and ultra-high net worth individuals (“HNWIs”), and corporates owned by foreign ultimate beneficial owners (“UBOs”).
Notwithstanding these inherent risks, the Cayman Islands was removed from the Financial Action Task Force (“FATF”)’s Grey List on October 27, 2023,[1] and then the European Union (“EU”)’s High Risk Third Country list on February 7, 2024,[2] in both cases because of the steps the Cayman Islands has taken in recent times to strengthen the effectiveness of its anti-money laundering and combatting the financing of terrorism (“AML/CFT”) regime and to address certain strategic deficiencies. This is a significant victory for the Cayman Islands. Although a small collection of islands in the western Caribbean Sea spanning only 264 square kilometers (approximately 100 square miles) and comprising a population of less than 100,000 people, the economy depends upon a thriving financial services sector and the most immediate and notable impact of the FATF and EU delistings should be a reduction in due diligence requirements on Cayman-domiciled entities, easing the administrative burden when moving capital in and out of the jurisdiction.
In this article, we focus on one of the key new pieces of domestic Cayman Islands legislation that was pivotal to the delisting effort: the Beneficial Ownership Transparency Act of 2023 (“BOTA”), which was passed by Parliament on December 15, 2023.[3] BOTA will be brought into force in 2024 via a set of implementing regulations and will align the Cayman Islands’ beneficial ownership framework with the UK’s own regime.
On March 7, 2024, US Deputy Attorney General, Lisa O. Monaco announced the development of a new “DOJ-run whistleblower rewards program” during her speech at the American Bar Association’s 39th National Institute on White Collar Crime.[1] The announcement signals “a 90-day sprint to develop and implement a pilot program, with a formal start date later this year.” And Acting Assistant Attorney General Nicole Argentieri provided further clarification on March 8 at the same conference, noting that “[w]e believe that we can make the greatest impact by offering financial incentives to disclose misconduct in areas where no such incentives currently exist.”
DAG Monaco explained that since the creation of Dodd-Frank, other whistleblower programs at the SEC and the CFTC, and similar ones at IRS and FinCEN, have “proven indispensable.” However, these programs were limited in scope and did not address “the full range of corporate and financial misconduct that the Department prosecutes.”
On February 23, 2024, the Financial Action Task Force (“FATF”) removed the United Arab Emirates (“UAE”) from its list of jurisdictions under increased monitoring (the “Grey List”). As noted in our previous article (see here), FATF had intimated at its October 2023 Plenary that the UAE may be next off the Grey List as it had undertaken multiple key reforms to improve its overall anti-money laundering and combating the financing of terrorism (“AML/CFT”) compliance framework.
The United States Attorney’s Office for the Southern District of New York recently announced a policy—called the “SDNY Whistleblower Pilot Program”—that seeks to encourage individuals to voluntarily disclose financial crimes in which they themselves participated. First unveiled in January 2024 and then revised this month, the policy sets forth the circumstances under which SDNY says that it will grant a non-prosecution agreement to an individual in exchange for the individual’s cooperation. As we explain, while it remains uncertain whether and when it might make sense for any individual to come forward under the policy, the existence of the program has implications for corporate internal investigations.
Deputy Attorney General Lisa Monaco’s (“Monaco”) recent remarks at Oxford University shed light on the evolving intersection of artificial intelligence (“AI”) and the criminal enforcement landscape and its profound implications for the United States Department of Justice and beyond. As the Chief Operating Officer of the Department of Justice, Monaco’s insights underscore the critical importance of understanding and navigating the complex relationship between AI and criminal defense, particularly in the realm of white collar crime.
