BIS Aiming for More Corporate Enforcement This Year, Official Says

The Bureau of Industry and Security will increase the number of penalties it issues against corporations for export violations this year, an effort it hopes will lead to improved industry compliance, the top export BIS enforcement official said last week. DOJ also will concentrate more resources on targeting export violators, a top agency official said, and plans to significantly expand its Export Control Section.

Matt Axelrod, BIS assistant secretary for export enforcement, said the agency wants "to bring more corporate enforcement actions” this year to better impress on exporters the importance of compliance. Speaking during a conference hosted by the American Bar Association, Axelrod said he wants compliance departments to view export control risks the same way they view compliance with the Foreign Corrupt Practices Act, which has received major enforcement resources from DOJ over the last 15 years.

“In other words, we want them to know that this is an important area,” said Axelrod, who last year announced a host of new enforcement policy changes, including higher penalties for more serious violations and the elimination of no-admit, no-deny settlements (see 2206300069 and 2211150056). “I am a firm believer that we need companies to invest in compliance.”

He said BIS would “much rather” work with companies to “help them prevent violations on the front-end than enforce on the back-end,” which would mean the agency is stopping an illegal export rather than reacting to a shipment that has already harmed U.S. national security. “But sometimes, as I'm sure you all know, to get companies to really focus on the front-end prevention, there has to be a couple of examples of back-end consequences in order to get people's attention,” Axelrod said. “And so I imagine this year you might see some of that.”

DOJ also will be boosting its export enforcement efforts this year, said Matt Olsen, assistant attorney general for national security. He said the agency is preparing for “some structural changes” within its National Security Division (NSD), including hiring more officials for its Counterintelligence and Export Control Section.

“We're going to add a significant number of people,” Olsen said, including a new chief counsel for corporate enforcement. “There's going to be opportunities for folks to come in and work in the government on these incredibly important cases.”

Olsen also said his division is revising its voluntary disclosure policies, which could formally align them with the revised criminal corporate enforcement policies announced by the agency in January (see 2301190031). Law firms expect those policies, which outline new criteria companies must meet to qualify for declinations, to lead to more disclosures (see 2302060034).

“We're doing a number of things that we can do just structurally to enhance our capacity to go after corporate wrongdoers and to be better at enforcing sanctions and export control violations,” Olsen said.

He added that DOJ is taking “very seriously” how companies are setting up their compliance programs. The agency “learned what a good compliance regime looks like and how that matters in making prosecution decisions” from “the Foreign Corrupt Practices Act context,” Olsen said.

Axelrod made similar points, saying export enforcement is “going to be an increasing and sustained area of focus” of the Commerce, Treasury and Justice departments, and won’t end when the Russia-Ukraine war is over. “My prediction is, this is not a flash in the pan,” he said. “The risk of getting this wrong is no longer some sort of technical regulatory risk, but it’s an enterprise risk for your company. I think that's here to stay.”

BIS also is continuing to work “hard” on creating a first-of-its-kind multilateral export enforcement mechanism to better share information with allies, particularly surrounding Russian trade restrictions, Axelrod said (see 2302240054, 2210210029 and 2212160027). He said he’s “pushing” for more coordination “in a bunch of different areas,” including through the U.S.-EU Trade and Technology Council, at G-7 meetings and in bilateral meetings with trading partners in Asia. A delegation from Malaysia visited BIS last week to receive enforcement training, Axelrod said.

“It's taking a lot of work,” he said. “My view is, let's get them all, let's push them all. If they all get stood up, great. We can see whether there's overlap. But I'm not sure which one will get across the finish line first.”

U.S. officials have said coordinating with the EU has been especially challenging, particularly because each member state has different domestic rules, procedures and enforcement capacities. That coordination has included helping the bloc set up a “centralized sanctions body,” said Andrea Gacki, director of the Treasury Department’s Office of Foreign Assets Control.

“It's going to be tough,” Gacki said during the event. “But we're going to work with them very closely to see if we can actually improve enforcement implementation across jurisdictions.”

But Gacki said she’s hopeful, saying the Russia-Ukraine war has convinced allies to devote more resources to sanctions. The U.K. in particular is “radically scaling up” its Office of Financial Sanctions Implementation to almost reach the size of OFAC, Gacki said. She also said the U.S. “regularly” shares licensing practices, policies, and enforcement information with the U.K., and the U.S. is helping the country build its civil enforcement authority.

“There was a time that a lot of our sanctions programs actually created friction with our closest friends,” she said. “But that's changed with the crisis in Ukraine.”