Essential Compliance Updates For Multinational Automotive Companies - Export Controls & Trade & Investment Sanctions

Recent White House initiatives and speeches by Department of Justice officials (and the President himself) have emphasized the importance that the Biden Administration is putting on enforcement of international regulations, such as the Foreign Corrupt Practices Act (FCPA), export controls, and the economic sanctions overseen by the U.S. Treasury Department. Although these international regulations saw record fines under the Trump Administration, the billions of dollars of imposed penalties largely were confined to a few, high-profile enforcement actions. But all indications are that enforcement of international regulations will be broader and deeper in the new administration, putting all multinational automotive companies that operate, source from, or sell abroad on notice that they need to enhance compliance measures in these areas.

The opening salvo occurred in a June 2021 speech by President Biden. The President designated the fight against corruption as a core national security interest of the United States and directed members of his team to develop a Presidential strategy to support this initiative.¹ By explicitly linking corruption with U.S. national security interests, the President elevated the rationales and importance of fighting corruption, from one of leveling the competitive playing field for companies that follow the law to one of national security imperative.

In accordance with this directive, the White House followed up with a December report, titled the U.S. Strategy on Countering Corruption.² The strategy focuses on five main pillars:

modernizing, coordinating, and resourcing U.S. Government efforts to fight corruption;
curbing illicit finance;
holding corrupt actors accountable;
preserving and strengthening the multilateral anti-corruption architecture; and
improving diplomatic engagement and leveraging foreign assistance resources to advance policy goals.

The administration has started to implement these goals. During the keynote address at the Global Investigations Review Connect: New York event, Principal Associate Deputy Attorney General John Carlin provided concrete examples of how the administration is taking action and augmenting resources to fight corruption.³ For the first time, there will be a FBI squad dedicated to DOJ's Criminal Fraud Section, with a specific emphasis on investigating FCPA violations, commodities and securities fraud, cryptocurrency and financial institutions fraud, and health care fraud. PADAG Carlin further stated that the government will increase its current practice of using "big data" to identify and prosecute cases.

Importantly for multinational companies and companies that export U.S.-origin goods, PADAG Carlin also stated that the administration will emphasize economic sanctions and export control enforcement. He emphasized that the DOJ has broadened its view on what could be an export control violation, now including both transferring intellectual property and "human knowledge." This expansive view of what constitutes controlled technical data represents a subtle but important change in the breadth of technical information that can support a deemed export violation. Because sanctions and export controls are both ways to protect national security and U.S. technology, PADAG Carlin's speech aligns with President Biden's approach of linking enforcement of international regulations with U.S. national security interests.

Along these lines, on October 28, 2021, Deputy Attorney General Lisa Monaco gave the keynote address at the ABA Conference on White Collar Crime.⁴ In her address, DAG Monaco emphasized four main points of key concern to multinational automotive companies.

Key Concerns for Multinational Automotive Companies

DOJ Movement to a Holistic Review of a Corporation's Entire Criminal, Civil and Regulatory History. DAG Monaco's speech noted a clear shift in DOJ policy when it comes to reviewing a corporation's violations and compliance history, emphasizing that the DOJ will consider all prior misconduct (and not simply "similar" prior misconduct) when making charging, penalty, and other decisions. This change can have particular relevance for multinational automotive companies, as it opens the door to considering charges of multiple legal regimes, even potentially including those of other countries. This policy shift could be especially relevant for automotive companies that operate in foreign, high-risk environments, such as China, Brazil, or Mexico, or that have regular exposure to multiple legal regimes, such as in the areas of export controls and economic sanctions.
DOJ Continuing Emphasis on Knowing Specific Personnel Involvement. DAG Monaco also emphasized the importance of corporate entities being explicit and fulsome when it comes to identifying personnel involved in any enforcement action. Specifically, DAG Monaco emphasized that when cooperating with the government, companies must identify all individuals involved in the misconduct, regardless of their individual levels of involvement. DAG Monaco also indicated that the DOJ was restoring prior guidance that to be eligible for any cooperation credit, companies truly need to provide all non-privileged information about involved individuals, regardless of magnitude of involvement.
DOJ Will Not Tilt the Scales Against Having Corporate Monitors. DAG Monaco explained that in recent years there has been guidance suggesting that corporate monitor-ships would be the exception and not the rule. She stated that the DOJ had rescinded that guidance and clarified the DOJ is free to require independent corporate monitorships whenever it deems appropriate.
The DOJ Expects Companies to Actively Review their Compliance Programs to Monitor and Remediate Misconduct. Perhaps the most useful piece of DAG Monaco's speech was her guidance surrounding compliance policies and why these are key consideration in charging and other enforcement decisions. While many of the new (or newly re-implemented) DOJ policies focus on the prior misconduct of companies or individuals, compliance programs are a way to prevent and preempt the misconduct in the first instance, as well as a way to signal to enforcement authorities that a company is and was taking compliance with the international regulations seriously. For automotive companies that operate in high-risk environments on multiple continents, the new emphasis on heightened compliance is an invitation to perform new risk assessments and evaluations of the efficacy of existing compliance measures.

The DOJ's guidance on the importance of compliance programs is especially important for automotive companies that operate, source from, or sell abroad. For these companies, a fresh assessment of their export controls, economic sanctions, and export controls compliance policies and related internal controls, such as OFAC screening protocols and export controls technology control plans, is a prudent investment in compliance resources. In each case, the company should assess the current compliance program to see if its compliance measures and internal controls line up with its risk profile. In particular, the evaluation should consider whether the plan properly covers the following aspects of the company's risk model.

Key Considerations for Companies to Assess Compliance Program

Does your company's relevant compliance program reflect all of the circumstances that may put the organization at risk of a violation? Is it based upon a realistic risk assessment that is up to date and consistent with the company's current circumstances and current business and regulatory risk profiles?
Does your company's export controls, economic sanctions, and FCPA compliance programs cover all aspects of the business that operate, source from, or sell overseas?
Do your export controls, economic sanctions, and FCPA compliance programs reflect the nature of the firm's foreign business operations, including both direct operations and those that can create third-party liability, such as agents, consultants, or sales through distributors?
Does each compliance program contain adequate internal controls to help buttress the compliance procedures, such as internal controls relating to gifts, meals, entertainment, and travel (FCPA/anticorruption), screening for specially designated or blocked persons (OFAC/economic sanctions), stop, hold, and release procedures (OFAC/economic sanctions and export controls), and a physical security/badging and technology control plan (for companies that deal with export-controlled goods or technical data)?
Do the relevant compliance measures compare well with codes of ethics and compliance policies used by comparable businesses in the industry and in the countries where the firm operates?
Has your company done an export controls classification review to determine whether it has correctly identified all controlled goods and technical data?
Has your company correctly identified all compliance stakeholders and confirmed that they have received tailored training on all high-risk international regulations and compliance measures that are relevant to their work? Are training and compliance materials accessible and translated into local languages?
Does your company provide adequate resources, means, and support for employees to report suspicious or improper conduct without fear of retaliation? If so, are these measures in place both in the United States and abroad?
Does your company periodically test its compliance processes and procedures to ensure that they are being implemented properly at the operational level and that they are effectively addressing risks based on the company's actual business practices?

If your organization has not conducted an international regulatory risk assessment or reviewed its compliance measures over the last three years, the recent announcements and initiatives by the Biden administration are a good reminder that such compliance steps are overdue. Because multinational automotive companies often operate in or source from high-risk countries, such as China and Mexico, it is especially important for automotive companies to take a fresh look at their compliance measures to ensure that they are meeting the expectations of regulators and are adequately protecting the company's interests in complying with the complicated laws that govern international conduct and exports.

Footnotes

1 See Memorandum on Establish the Fight Against Corruption as a Core United States National Security Interest (June 3, 2021) (available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03/memorandum-on-establishing-the-fight-against-corruption-as-a-core-united-states-national-security-interest/).

2 See United States Strategy on Countering Corruption (December 6, 2021) (available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/06/fact-sheet-u-s-strategy-on-countering-corruption/.)

3 See John Carlin on Stepping Up DOJ Corporate Enforcement (speech given on October 5, 2021) (available at https://globalinvestigationsreview.com/news-and-features/in-house/2020/article/john-carlin-stepping-doj-corporate-enforcement.)

4See Deputy Attorney General Lisa O. Monaco Gives Keynote Address at ABA's 36th National Institute on White Collar Crime (October 28, 2021) (available at https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.