Treliant Takeaway…DOJ Continues Scaling Up of Corporate Enforcement

DOJ Continues Scaling Up of Corporate Enforcement 

• Sources: justive.gov; fincen.gov; and wsj.com

Takeaway:

On Monday, September 11, 2023, the National Security Division (NSD) of the U.S. Department of Justice (DOJ) announced its appointment of two key personnel to lead its corporate enforcement program. These appointments were made as part of the DOJ’s commitment to investigate and prosecute sanctions evasion, export control violations, and similar economic crimes. Treliant’s team of regulatory experts have the knowledge and experience to assist financial institutions and other impacted entities with maintaining compliance with applicable laws and regulations.

Highlights:

Ian C. Richardson has been named the first Chief Counsel for Corporate Enforcement. As a former Assistant U.S. Attorney for the Eastern District of New York, he obtained the Department’s first corporate conviction for providing material support to foreign terrorist organizations. Recently, in Operation Medusa, Richardson obtained the court order that authorized an FBI-led computer network operation to remotely neutralize malware used by Russia for long-term cyber-espionage.

Christian J. Nauvel has been named as Deputy Chief Counsel for Corporate Enforcement. He previously served as Senior Counsel to the Assistant Attorney General for the Criminal Division, as well as a Trial Attorney in the Criminal Division’s Money Laundering and Asset Recovery Section and the National Cryptocurrency Enforcement Team.

Both attorneys will coordinate and oversee the NSD’s investigation and prosecution of corporate crime relating to the national security of the United States.

This announcement comes six months after Deputy Attorney General Lisa Monaco’s remarks on the DOJ’s strategy and efforts aimed at increasing enforcement of corporate compliance. The new positions were first announced on March 2, 2023, when Monaco spoke at the American Bar Association National Institute on White Collar Crime, where she noted the importance of preventing misconduct, holding wrongdoers accountable, and deterring and punishing recidivism. Monaco encouraged corporations to invest in compliance culture, and emphasized the importance of empowering the DOJ to prosecute individuals and organizations that don’t follow the law. She also referenced the Department’s plan to, “add more than 25 new prosecutors who will investigate and prosecute sanctions evasion, export control violations and similar economic crimes,” adding that the recent initiatives demonstrate the DOJ’s commitment to fighting corporate crime, with a particular focus on the evasion of U.S. export controls, such as those implemented in connection with Russia’s invasion of Ukraine.

The DOJ’s heightened efforts have also been evidenced by the uptick in cases involving corporations doing business with sanctioned countries. The severity of the fines and punishments have sharply increased as well. This past April, British American Tobacco and its Singapore-based subsidiary pleaded guilty to criminal charges arising out of the companies’ scheme to do business in North Korea through a third-party company in Singapore, resulting in a $629 million settlement to resolve bank fraud and sanctions violations charges.

Individuals are also being prosecuted. Just this month, Maxim Marchenko, a Russian citizen residing in Hong Kong, was charged in connection with conspiring to defraud the United States, smuggling, wire fraud, and money laundering offenses based on his alleged participation in a scheme to unlawfully procure U.S.-sourced, dual-use microelectronics with military applications on behalf of end users in Russia. Marchenko and other members of the conspiracy used Hong Kong-based shell companies as pass-through entities to conceal the fact that payments for the goods were coming from Russia.

Implications:

 As U.S. tensions with Russia continue, so does the need for increased efforts at enforcing export controls designed to constrain and prevent Russia from accessing the technology and goods that benefit its military and defense. One of the most effective resources the US has in combatting these efforts is the intelligence gained from Suspicious Activity Reports (SARs) filed by financial institutions as part of their ongoing responsibility to comply with BSA/AML and sanctions laws and regulations.

By filing SARs, financial institutions contribute to financial intelligence utilized by the DOJ, FinCEN, and other law enforcement agencies who share the common goal of protecting U.S. national security interests. Per FinCEN’s September 2023 Financial Trend Analysis publication, the SARs filed in response to the aforementioned export controls provide the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) “critical insight into Russian procurement activities that tips Special Agents about potential violations of the Export Administration Regulations.”

The opening of this window into the financial networks of Russian proliferators, shell companies, and fronts has provided the basis for new investigations and strengthened existing ones. This has resulted in detentions and seizures of unauthorized exports, as well as the overall disruption of organizations attempting to circumvent Russia-related sanctions.

Financial service providers, as well as companies in other industries with overseas relationships, should be prepared for increased scrutiny and requests for financial transaction data from government agencies. However, the process of actively and accurately reviewing this trade data, maintaining compliance, and responding to information requests maybe difficult to navigate as the sanctions landscape continues to change. At Treliant, we offer a variety of services that can assist your organization in preparing for, and meeting, the challenges ahead:

• BSA/AML and sanctions screening program design
• Fraud management program implementation
• Calibration, tuning, and enhancement of existing programs
• Model validation
• Risk assessments
• Transaction monitoring
• Internal investigations
• Independent audit
• Due diligence
• Advisory and training
• Managed services and staff augmentation