United States: Government Contracts Legislative And Regulatory Update - February 2017

Our February edition of "Government Contracts Legislative and Regulatory Update" offers a summary of the relevant changes that took place during the month of January.

Highlights this month include:

  • President Trump orders regulatory freeze pending review
  • President Trump's executive actions and their impacts on the government contracting community
  • FAR Council issues final rule prohibiting contracting with firms that require confidentiality agreements restricting disclosure of fraud or abuse

This update will also be available in Contract Management Magazine, which is published monthly by the National Contract Management Association (NCMA).

EXECUTIVE ACTION UPDATE

  • President Trump orders regulatory freeze pending review
  • Impacts of the executive actions on the government contracting community

LEGISLATIVE UPDATE

  • Despite opposition, recent developments signal a dramatic increase in defense spending under President Trump

REGULATORY UPDATE

  • FAR Council issues final rule extending prohibition on costs related to a congressional investigation or inquiry
  • FAR Council issues final rule prohibiting contracting with firms that require confidentiality agreements restricting disclosure of fraud or abuse
  • FAR Council issues final rule to implement SBA's regulatory clarifications for contracts under its 8(a) program
  • FAR Council issues final rule to increase the SAT for special emergency procurement authority
  • DHS issues proposed rules to expand security and privacy requirements for contractors
  • DoD issues guidance on implementing controversial IR&D costs rule
  • OMB updates guidance for agencies, contractors and grant recipients on preparing for and responding to a PII breach
  • Treasury's OFAC issues guidance to attorneys and compliance officers on the provision of services related to US sanctions laws

EXECUTIVE ACTION UPDATE

President Trump orders regulatory freeze pending review

On January 20, 2017, the Office of the Press Secretary for the White House released a memorandum outlining President Trump's plan for managing new and pending federal regulations. In particular, the memorandum requested the following:

  1. Send no regulations to the Office of the Federal Register (OFR) until a department or agency head appointed or designated by President Trump has reviewed and approved the regulation. The department or agency head has the power to delegate this authority to another person appointed or designated by the President. This order is "subject to any exceptions the Director or Acting Director of the Office of Management and Budget (OMB) allows for emergency situations or other urgent circumstances . . . ."
  2. Immediately withdraw regulations that have been sent to the OFR but have not yet been published in the Federal Register for review and approval as described above, subject to the exceptions described above.
  3. Temporarily postpone the effective date of regulations that have been published in the OFR, but have not yet taken effect, for 60 days from January 20, 2017, as permitted by applicable law, for the purpose of reviewing questions of fact, law and policy raised in the regulations. This temporary postponement is subject to the exceptions described above in paragraph 1.

[Note: None of the regulations included in the Regulations section below are impacted by this directive.]

The memorandum further states that the above-requested actions do not apply to regulations subject to statutory or judicial deadlines. Additionally, it directs individuals to promptly "[n]otify the OMB Director . . . of any regulations that, in [their] view, should be excluded from the directives in paragraphs 1 through 3 because those regulations affect critical health, safety, financial, or national security matters, or for some other reason." Finally, it orders continued compliance, in all circumstances, with any applicable executive orders (EOs) regarding regulatory management.

The purpose of the aforementioned directives is to ensure that President Trump's appointees or designees have an opportunity to review any new or pending regulations. Contractors should anticipate a shakeup in the flow of regulations and withhold commenting on proposed rules until it is clear that any delays have ended. More important, any regulations signed by former President Obama during his final weeks in office that have not yet taken effect are on hold pending their review by the Trump administration. (Memorandum Re: Regulatory Freeze Pending Review, 01/20/2017)

Impacts of the executive actions on the government contracting community

Just two weeks into his presidency, President Trump has issued a total of 18 EOs and presidential memoranda, altering the regulatory landscape for government contractors. The following presidential actions are of particular relevance to government contractors:

  • Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs: Issued on January 30, 2017, this EO requires federal agencies and departments to identify at least two existing regulations for repeal in order to offset the costs of any newly promulgated regulations. Agencies are directed to ensure that the total incremental cost of all new regulations, including repealed regulations, be "no greater than zero" for fiscal year 2017. Further, the EO directs the OMB director to set a cap on the cost of new and repealed regulations in FY 2018. Notably, the EO exempts rulemaking otherwise required by law, and regulations relating to "military," "national security" or "foreign service." Further, it only applies to executive branch agencies and not to independent agencies, such as the General Services Administration (GSA) or the Small Business Administration (SBA). Contractors should understand that this EO injects a degree of uncertainty into the federal rulemaking process.
  • Presidential Executive Order on Border Security and Immigration Enforcement Improvements: Issued on January 25, 2017, this EO directs agencies to commence planning, and identifying funding sources for, the construction of a wall on the Mexican border. Further, the EO directs agencies to construct, or contract out for, additional detention facilities at or near the border. Construction of the border wall and detention centers could present construction opportunities for government contractors.
  • Presidential Memorandum Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing: Issued on January 24, 2017, this presidential memorandum (PM) directs executive departments and agencies to support the expansion of manufacturing in the United States via (i) faster reviews of, and approvals for, proposals to construct or expand manufacturing facilities; and (ii) reductions in regulatory burdens impacting domestic manufacturing. Further, the PM charges the Secretary of Commerce with (i) reviewing the impact that federal regulations have on domestic manufacturing; and (ii) soliciting comments from the public for a 60-day period regarding federal actions that can be taken to streamline permitting and reduce regulatory burdens on domestic manufacturers. The result of this process could mean less red tape for contractors.
  • Presidential Memorandum Regarding Construction of American Pipelines: Issued on January 24, 2017, this PM directs the Secretary of Commerce to "develop a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines . . . use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law." This PM, along with two PMs specifically relating to the Keystone XL and Dakota Access pipelines, includes a message of particular significance to the government contractor community: Buy American. The administration's stated preference for the use of domestic materials and equipment on the pipeline projects may signal the imposition on government contractors of new domestic-preference requirements, increasing enforcement of the Buy American Act (BAA) and, perhaps, curtailing the viability of the Trade Agreements Act (TAA), which allows contractors to procure materials and supplies from countries that have entered into a trade agreement with the United States under certain conditions. Contractors should evaluate their compliance with existing domestic preference laws, regulations and contract requirements, prepare for potential new obligations, and anticipate heightened enforcement activity in this area.

LEGISLATIVE UPDATE

Despite opposition, recent developments signal a dramatic increase in defense spending under President Trump 1

Following the November 2016 elections, pro-defense Congressional members expressed optimism that a Republican-controlled Congress and White House would work together to effectuate defense spending increases that they believe are vital to our nation's near- and long-term national security interests. Wasting little time in this effort, Senate Armed Services Committee (SASC) Chairman John McCain (R-AZ) on January 16 released a defense budget white paper, the opening salvo in a push by pro-defense Congressional Republicans and the Trump administration to lift existing defense spending caps. Entitled "Restoring American Power," the white paper recommends an increase of approximately $430 billion in defense spending projections for FYs 2018-2022, including a proposed increase of $54 billion for FY 2018 (for a total spend of $640 billion), and 4 percent annual defense budget growth from FYs 2019-2022. Sen. McCain posits that this level of year-over-year growth is required to sustain the military buildup that he believes to be necessary.

A longtime advocate for defense acquisition reform and innovation, Sen. McCain recommends continued support within the Department of Defense (DoD) for "alternative acquisition pathways to improve and accelerate [the DoD's] ability to acquire new commercial technologies and adapt them for military use." Additionally, he calls for increased funding for research and development to develop improved capabilities in priority areas, including:

  • Unmanned and autonomous systems
  • Artificial intelligence
  • Robotics
  • Cyber and space capabilities
  • Hypersonic munitions
  • Directed energy
  • Electronic warfare
  • Nanotechnology
  • Lightweight protective materials

To achieve the defense spending increases envisioned by Sen. McCain, Congress must overturn defense spending caps imposed by the Budget Control Act of 2011, a process often referred to as sequestration. Under current law, these defense spending caps are not set to expire until after 2021. Despite their, at times, thorny relationship over a range of military and foreign policy matters, Sen. McCain and President Trump have found some common ground in their mutual support for a dramatic increase in spending to rebuild and reshape the US Armed Forces.

On January 27, President Trump issued a memorandum calling for Secretary of Defense Jim Mattis to, among other actions: (i) conduct a 30-day military readiness review; (ii) develop a supplemental budget request for FY 2017 to fund military readiness requirements; and (iii) submit within 60 days of the date of the memorandum a plan "to achieve [before FY 2019] the levels of readiness identified" in Secretary Mattis' readiness review. 

Mattis responded with a memorandum, issued on January 31, emphasizing the following three overriding DoD objectives: (i) improve warfighting readiness; (ii) achieve program balance by addressing pressing shortfalls; and (iii) build a larger, more capable and more lethal joint force.

Republican control of both the legislative and executive branches for the first time in a decade bodes well for proponents of increased defense spending.  However, rebuilding and reshaping the military will face some challenges. The Republican congressional leadership and the Trump administration have put forth a bold policymaking agenda for the 115th Congress that includes repeal and replacement of the Affordable Care Act (ACA) and tax reform, both of which will require a substantial amount of time and attention from the President's key advisors and Republican lawmakers. Additionally, the federal government is currently funded under a continuing resolution (CR) which is set to expire on April 30, 2017, so Congress has less than three months to pass legislation funding defense and domestic programs through the remainder of FY 2017, which ends on September 30. This process is not expected to be seamless.

Further, the DoD is not expected to submit its FY 2018 budget proposal until May 1, long after the typical annual February submission, which will result in a delayed, and possibly compressed, defense authorization consideration process by the House and Senate Armed Services Committees and affect the debate between the members of these committees regarding a topline defense spending level.

Finally, any attempt to increase defense spending will be met with demands from congressional Democrats to pass a corresponding increase in domestic spending. Although this policy fight will not stymie House passage of a significant increase in defense spending, if and when existing defense budget caps are eliminated, the current composition of the Senate will require Republicans to recruit eight Democrats to vote in favor of a given measure to overcome procedural hurdles, leaving little to no room for Republican attrition on key votes.

Despite these obstacles, we anticipate that the Trump administration and pro-defense members of Congress will succeed in their effort, and that a new era of significantly increased defense spending will soon be underway.

REGULATORY UPDATE

Final Rules

FAR Council issues final rule extending prohibition on costs related to a congressional investigation or inquiry

On January 13, 2017, the Federal Acquisition Regulatory Council, consisting of representatives from the DoD, GSA and the National Aeronautics and Space Administration (NASA), issued a final rule amending the Federal Acquisition Regulation (FAR) to extend the current prohibition on reimbursement of contractor costs related to certain covered proceedings to include costs associated with a congressional investigation or inquiry.

The final rule adds this provision at FAR 31.205-47(f)(9), Costs Related to Legal and Other Proceedings. Proceedings also covered under the existing rule include:

  • A government claim against a contractor for failure to comply with an applicable law or regulation;
  • A contractor or subcontractor employee whistleblower claim; and
  • A False Claims Act suit brought by a third party (qui tam action). 

Further, this rule only applies to covered proceedings that result in certain dispositions, specifically:

  • A conviction resulting from a criminal proceeding;
  • Where fraud or similar misconduct is alleged, a finding of contractor liability; where fraud or similar misconduct is not alleged, the imposition of a monetary penalty or the issuance of an order to take corrective action;
  • Suspension or debarment of a contractor, or the government's decision to rescind or void a contract, or to terminate a contract for default for failure to comply with an applicable law or regulation;
  • Disposition of a case by consent or compromise, if the proceeding was likely to have resulted in any of the aforementioned outcomes; and
  • Dispositions not otherwise listed in the subpart but where the underlying misconduct could have led to an aforementioned proceeding where costs are not allowable. 

In response to comments received, the FAR Council clarified several points. It noted that the disallowance of costs applies only to investigations and inquiries by Congress, "per se," and does not include an investigation by the Government Accountability Office (GAO). Further, it reiterated that FAR 31.205-47(g), which requires segregation of costs that may be unallowable under the section, covers all aspects of FAR 31.205-47, including the new section (f)(9).

Finally the FAR Council clarified that the proceeding at issue must be a known event, "whether it has already commenced or is known to be commencing on a future date." Thus, a contractor need only begin segregating costs when they know a proceeding is occurring, or is to follow. While the underlying statute, 10 U.S.C. section 2324(e)(1), applies only to contracts with DoD, NASA and the Coast Guard, the final rule applies to all agencies subject to the FAR.

The impact of this rule on contractors is two-fold. First, contractors, as a general matter, should seek to avoid conduct that may result in a Congressional investigation or inquiry, as they will be left to front the costs relating to that proceeding. Second, and more specifically, if a contractor is aware that a congressional investigation or inquiry has ensued, or will ensue at a future time, the contractor is required under the subpart to segregate the associated disallowable costs. This final rule became effective January 13, 2017. (82 Fed. Reg. 4,732, 01/13/2017)

FAR Council issues final rule prohibiting contracting with firms that require confidentiality agreements restricting disclosure of fraud or abuse

On January 13, 2017, the FAR Council issued a final rule amending the FAR "to implement section 743 of Division E, Title VII, of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions in subsequent appropriations acts (and as extended in continuing resolutions)." Section 743 prohibits the federal government from using funds for a contract, grant, or cooperative agreement with an entity that requires its employees or subcontractors seeking to report waste, fraud or abuse to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or subcontractors from lawfully reporting such waste, fraud or abuse to a designated investigative or law enforcement representative of a federal department or agency. The rule applies to contracts, grants and cooperative agreements using FY 2015 funds or subsequent FY funds that do not contain a comparable provision or clause. Additionally, the rule applies to contracts and subcontracts for acquisitions below the simplified acquisition threshold (SAT), and to contracts and subcontracts for the acquisition of commercial items and commercially available off-the-shelf (COTS) items.

Contractors should take immediate steps to comply with this final rule by ensuring that their current confidentiality agreements do not prohibit or otherwise restrict their employees or subcontractors from lawfully reporting waste, fraud or abuse to a designated investigative or law enforcement representative of a federal department or agency authorized to receive such information. If language in a contractor's confidentiality agreements violates this final rule, revisions should be made to those agreements for use going forward, and notice should be provided to employees and subcontractors that such prohibitions in preexisting agreements are no longer in effect. This final rule became effective January 19, 2017. (82 Fed. Reg. 4,717, 01/19/2017)

FAR Council issues final rule to implement SBA's regulatory clarifications for contracts under its 8(a) program

On January 13, 2017, the FAR Council issued a final rule amending the FAR to implement regulatory clarifications made by the SBA for its 8(a) Business Development Program, a business assistance program for small disadvantaged businesses. To be eligible for assistance, the business must be majority-owned and controlled (51 percent or more) by socially and economically disadvantaged individuals. This final rule clarifies the following:

  • Language at FAR 19.804-6(a) has been revised to state that separate offers and acceptances are not required for individual orders under multiple-award contracts that have been set aside for exclusive competition among 8(a) contractors; however, separate offers and acceptance are required for individual orders under multiple-award contracts that have not been set aside for exclusive competition among 8(a) contractors.
  • Language at FAR 19.814(a) has been revised to state that the SBA Inspector General can request a formal size determination.
  • Language at FAR 19.815 has been revised to clarify that, to release a performance or delivery requirement that is currently accepted by the SBA into the 8(a) Program, a contracting officer must submit a formal request to the SBA Associate Administrator for the release, if the contracting officer intends to procure the item from a non-8(a) source. Additionally, new language has been added at FAR 19.815(a) and (b) to clarify that once a requirement is accepted into the 8(a) program, it shall remain in the program "unless the requirement can be satisfied through one of the mandatory sources listed at FAR 8.002 or 8.003 or the SBA Associate Administrator for Business Development agrees to release it."

The 8(a) program currently has approximately 6,885 active participants, of which approximately 1,289 are owned by Native Americans. The clarifications provided by this final rule protect these participants by safeguarding the release of performance or delivery requirements accepted into the 8(a) Program unless certain conditions are met. This final rule became effective January 13, 2017. (82 Fed. Reg. 4,724)

FAR Council issues final rule to increase the SAT for special emergency procurement authority

On January 13, 2017, the FAR Council issued a rule finalizing, without change, a proposed rule (81 Fed. Reg. 39,882, 06/20/2016) to implement section 816 of the National Defense Authorization Act (NDAA) for FY 2016. This final rule revises FAR 2.101, 13.003, 19.203 and 19.502-2 to increase the SAT for special emergency procurement authority "for acquisitions of supplies or services that, as determined by the head of the agency, are to be used to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack." The final rule raised the SAT to $750,000 from $300,000 within the United States and to $1.5 million from $1 million outside the United States.

This final rule will have little impact on small businesses because the arena of special emergency procurements is dominated by larger businesses. For those businesses that are affected, the monetary implications of this final rule are substantial. Under the SAT, not every federal acquisition law is fully applicable, and the SAT procedures regulations (FAR Part 13), such as the terms and conditions applicable to reporting and subcontracting, are dramatically simplified. Therefore, with the increase in the SAT threshold for special emergency procurement authority, contractors can expect a greater number of contracts to be subject to simplified procedures. This, in turn, will ease the administrative and compliance burdens for contractors on contracts that fall below the newly elevated SAT. This final rule became effective January 13, 2017. (82 Fed. Reg. 4,716, 01/13/2017)

Proposed Rules

DHS issues proposed rules to expand security and privacy requirements for contractors

On January 19, 2017, the Department of Homeland Security (DHS) issued three proposed rules that would expand security and privacy requirements for contractors. Collectively, the rules address requirements for protecting controlled unclassified information (CUI), handling and safeguarding personally identifiable information (PII) and sensitive personally identifiable information (SPII), and standardizing the information technology (IT) security awareness training that contractor and subcontractor employees are required to complete before gaining access to DHS information systems. These proposed rules signify DHS's recent efforts to protect sensitive government information.

  • Protecting CUI: This proposed rule would amend the Homeland Security Acquisition Regulation (HSAR) to amend and expand a subpart, remove an existing clause (and reserve the clause number), add definitions to an existing clause, and add a new contract clause "to implement expanded safeguarding requirements and identify new policies for incident reporting, incident response, notification and credit monitoring." The new clause at 3052.204-7X, Safeguarding of Controlled Unclassified Information, must be inserted in all contracts and, in turn, subcontractors must include this clause in all lower-tier subcontracts. This proposed rule would impose heavy administrative and compliance burdens on contractors and subcontractors. For example, cost information received from DHS by DHS contractors indicated that the costs associated with full-time equivalent (FTE) oversight of the requirements contained in the new proposed clause, Safeguarding of Controlled Unclassified Information, ranged from $65,000 to $324,000 annually. Contractors and subcontractors should be prepared for enhanced administrative and compliance burdens in the handling, monitoring and safeguarding of CUI with respect to DHS contracts. Comments on the proposed rule should be submitted in writing on or before March 20, 2017. (82 Fed. Reg. 6,429, 01/19/2017)
  • Handling and safeguarding PII and SPII: This proposed rule would standardize the privacy training requirements across all DHS contracts by amending the HSAR, and make the training more readily accessible by posting it on a public web site. Notably, the proposed rule would add a new subsection at HSAR 3052.224-7X, Privacy Training, to provide the text of the proposed clause. This proposed clause would require that contractors and subcontractors complete privacy training within 30 days of a contract award, and annually thereafter, before accessing a government system of records and handling PII or SPII. Further, contractors must maintain copies of training certificates for all contractor and subcontractor employees, and provide such certificates to the contracting officer. If finalized, contractors should be prepared to complete annual privacy training, maintain compliance certificates and provide such certificates to the contracting officer. Comments on the proposed rule should be submitted in writing on or before March 20, 2017. (82 Fed. Reg. 6,425, 01/19/2017)
  • Standardizing IT security awareness training: This proposed rule would standardize IT security awareness training and DHS Rules of Behavior (RoB) requirements across all DHS contracts for contractor and subcontractor employees who access DHS information systems by amending the HSAR, and would make the training and RoB more easily accessible by hosting them on a public web site. Notably, the proposed rule would add a new subsection at HSAR 3052.239-7X, Information Technology Security Awareness Training, to provide the text of the proposed clause. This proposed clause would require that contractor and subcontractor complete IT security awareness training within 30 days of a contract award, and annually thereafter, "before accessing DHS information systems/information resources and before contractor-owned and/or operated information systems are used to collect, process, store, or transmit CUI." If the rule is finalized, contractors and subcontractors should be prepared to complete privacy training annually, maintain compliance certificates, and provide such certificates to the contracting officer. Comments on the proposed rule should be submitted in writing on or before March 20, 2017. (82 Fed. Reg. 6,446, 01/19/2017)

Agency Guidance

DoD issues guidance on implementing controversial IR&D costs rule

On January 4, 2017, the Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) issued a memorandum providing implementation guidance for the controversial Defense Federal Acquisition Regulation Supplement (DFARS) final rule, "Enhancing the Effectiveness of Independent Research and Development." The final rule requires that contractors, before generating costs, engage in "technical interchanges" (i.e., informal engagements with the DoD designed to promote communication and transparency between independent research and development (IR&D) participants and the department). However, with respect to IR&D projects initiated in the contractor's FY 2017, the DoD, approximately one month ago, issued a class deviation relaxing the requirement that technical interchanges occur "before IR&D costs are generated." with respect to IR&D projects initiated in the contractor's FY 2017. Nevertheless, the memorandum provides the following implementation guidance:

  • DoD government employees do not have the authority to stop an IR&D project;
  • DoD government employees will neither issue an official declaration stating whether a particular project should or should not be pursued, nor will they issue an official declaration stating whether project costs are reimbursable or should be declined;
  • Although face-to-face discussions are the preferred approach to the technical interchanges, they are not required by the final rule; and
  • No government approval of IR&D plans is required or expected.

Additionally, by no later than January 31, 2017, DoD will implement an electronic process to facilitate technical interchanges for companies or researchers who may not have access to an informed DoD government official with which to discuss their project. In particular, future IR&D opportunities will be able to be submitted through the Defense Innovation Marketplace (DIM), which, in turn, will "be directed to the appropriate Service/Agency/Command for awareness of the IR&D project." The IR&D submitter will then receive the name of the DoD government employee who was made aware of the project. Contractors should take steps to assess the financial viability of their IR&D projects in light of the guidance contained in this memorandum. Although this final rule will likely result in heightened administration costs for contractors, this memorandum suggests that the burdens will not be too onerous. (Memorandum Re: Implementation of Defense Federal Acquisition Regulation Supplement Final Rule 2016-D002, Enhancing the Effectiveness of Independent Research and Development, 01/04/2017)

OMB updates guidance for agencies, contractors and grant recipients on preparing for and responding to a PII breach

On January 3, 2017, the OMB issued M-17-12, a memorandum setting forth the policy for agencies, contractors and grant recipients to prepare for and respond to a PII breach. This memorandum rescinds and replaces 2006 and 2007 OMB memoranda on preparing for and responding to breaches of PII by imposing certain minimum requirements for agencies to adhere to when dealing with such breaches. These include developing training and awareness programs for all individuals with access to an agency's federal information and information systems, establishing reporting and documentation requirements, and using a flexible framework to assess and mitigate the risk of harm to individuals potentially affected by a PII breach.

Of particular importance to contractors is a section titled "Contracts and Contractor Requirements for Breach Response," which provides guidance on terms to be included in contracts where a contractor "collects or maintains federal information on behalf of [an] agency or uses or operates an information system on behalf of [an] agency." Notably, it states that contracts should include terms that, among other things: (i) require contractors and subcontractors at all tiers to properly encrypt PII in accordance with OMB Circular A-130; (ii) require regular training for contractors and subcontractors at all levels on the identification and reporting of a breach; (iii) require contractors to exchange information with agency officials to report and address a suspected or confirmed breach; and (iv) allow for an inspection, investigation, forensic analysis and any other action necessary to ensure compliance with the memorandum. Finally, the memorandum directs "[t]he [FAR] Council, in coordination with OMB . . . [to] promptly create appropriate contract clauses and regulatory coverage to address contractor requirements for breach response in the FAR . . . ."

Contractors should be prepared for heightened regulatory activity and enhanced compliance with respect to PII in the near future. Additionally, contractors should begin evaluating how they handle PII with a particular focus on the guidance contained within OMB M-17-12. (OMB M-17-12, Preparing for and Responding to a Breach of Personally Identifiable Information, 01/03/2017)

Treasury's OFAC issues guidance to attorneys and compliance officers on the provision of services related to US sanctions laws

On January 12, 2017, the Department of the Treasury's (Treasury) Office of Foreign Assets Control (OFAC) issued guidance for attorneys and compliance personnel regarding the provision of certain services to "covered persons" relating to the requirements of US sanctions laws. "Covered persons," as used in this Compliance Service Guidance (CSG), means US persons and foreign persons that are not listed on OFAC's Specially Designated Nationals and Blocked Persons (SDN) List, and to US persons and foreign persons "to whom a US person is [not] prohibited from exporting services or from whom a US person is [not] prohibited from importing services . . . ." In other words, US attorneys and compliance personnel are allowed to provide information or guidance on the requirements of US sanctions laws administered by OFAC, and to express an opinion on the legality of specific transactions under US sanctions laws, as long as the person(s) receiving the advice is a "covered person." This CSG applies to the provision of services to "covered persons" by US persons regardless of the person's employment classification.

Importantly, this CSG does not reflect a change in OFAC's policy regarding the provision of these services; rather, it simply clarifies that such advice is permitted. Notably, US persons may not "approve, finance, facilitate, or guarantee" a transaction by a foreign person, even one that is a "covered person" as defined above, where such transaction would be prohibited under 31 CFR Chapter V if performed by a US person or within the United States. Further, US persons cannot engage in the exportation of services if such services are prohibited by any part of 31 CFR Chapter V. (Compliance Services Guidance Re: Guidance on the Provision of Certain Services Relating to the Requirements of U.S. Sanctions Laws, 01/12/2017)

Footnotes

1 We thank Chris W.K. Fetzer, Senior Advisor, in Dentons' Public Policy and Regulation practice for this contribution to the Legislative and Regulatory Update.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.