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On December 5, 2017 the Securities and Exchange Commission (“SEC”) awarded more than $4.1 million to a whistleblower for alerting the SEC to a multi-year securities fraud engaged in by his employer. The award is significant in that the recipient, a company insider who alerted the SEC to the securities fraud, is a non-U.S. national working overseas. This is not the first time that the SEC has awarded a large sum to a foreign whistleblower. The distinction for the largest award ever awarded goes to an award of $30 million awarded in 2014 to a whistleblower living in a foreign country. In that case the whistleblower provided the SEC with information about an on-going fraud that the SEC claimed was hard to detect.

This is a noteworthy trend and highlights another way that corrupt practices can come to light and lead to enforcement for U.S. and multinational companies exposed to U.S. jurisdiction. Between fiscal years 2011 and 2017, the SEC received tips from individuals in 114 foreign countries and in FY 2017 alone the SEC received tips from 72 countries. Since the whistleblower program began, the top five countries from where the SEC has received tips are the United Kingdom (438), Canada (357), China (238), Australia (198), and India (187). Of a total of 4,484 tips received in 2017, almost 5 percent related to violations of the Foreign Corrupt Practices Act (“FCPA”).

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On November 22, 2017, Apple, Inc. released a statement confirming reports that its major supplier in China, Foxconn Technology Group has used illegal student labor to assemble the latest version of the iPhone. Apple indicated that the company and Foxconn are taking corrective action in response. In the past, both Apple and Foxconn have been accused of employing forced labor practices. This time, the discoveries coincide with a time of renewed focus on enforcement of the decades-old U.S. ban on imports of forced labor, carrying consequences for importers in terms of penalties, and withholding and/or seizure of merchandise. As reviewed below, U.S. Customs and Border Protection (CBP) has recently taken measures to enforce the import ban and sanctions for forced North Korean labor (described below), and issued guidance to importers in this regard.

On November 7, 2017, U.S. CBP issued a press release reminding “importers of their obligation to exercise reasonable care and take all necessary and appropriate steps” to comply with the forced labor import ban and the sanctions for forced labor and slavery overseas of North Koreans under the Countering Adversaries through Sanctions Act (CAATSA). In addition, CBP stated that it is “committed to preventing the importation of merchandise produced with forced labor or the labor of North Korean nationals or citizens anywhere in the world.” CBP is authorized to take a variety of actions toward that end, and has recently taken steps to enforce the ban.

Below, we discuss the forced labor import ban, the North Korea related sanctions, recent enforcement-related actions, and guidance issued by CBP to assist importers with exercising reasonable care to comply with the forced labor import ban. Continue reading →

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On November 8, 2017, members of the U.S. House and Senate introduced companion legislation that would update the Committee on Foreign Investment in the U.S. (CFIUS) and the national security review process. The bill, entitled the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA), would change the scope of what is considered a “covered transaction” and add a new “declaration” process that would be required in certain cases. Below are three of the most significant changes contained in the proposed bill.

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During his visit to China, President Trump raised concerns about the trade deficit between the United States and China as well as China’s trade practices. One longstanding concern in this regard has been technology/intellectual property (IP) transfer requirements in China—an issue the U.S. Trade Representative is currently investigating through a rarely used tool under U.S. law. In their recent alert on the topic, colleagues Nancy A. Fischer, Stephan E. Becker and Sahar J. Hafeez examine the issue and its potential trade implications.

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Following President Trump’s trip to Asia, sanctions policies for North Korea continue to evolve. The U.S. government has strengthened sanctions through legislation and Presidential Executive Orders. Further, it is enforcing its secondary sanctions against companies doing business with the North Korean regime, thus far targeting banks, businesses and individuals. The UN Security Council has approved resolutions imposing sanctions on North Korea in reaction to its nuclear and missile tests. Aggressive enforcement by the United States and actions by China and other Asian countries in light of the UN resolutions should be expected. Indeed, President Trump recently tweeted that China would be “upping” sanctions against North Korea.

Below is a summary of key pronouncements from the U.S. government, UN, and other countries.

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On November 8, 2017, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced amendments to the Cuban Assets Control Regulations (“CACR”) and Export Administration Regulations (“EAR”). In addition, the State Department published a list of entities and subentities deemed to be under the control or to act on behalf of the Cuban military, intelligence, or security services or personnel. These steps implement the changes to the Cuba sanctions program announced by the President in his June “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba” (“NSPM”). The changes reflect adjustments to the broader Cuba reform initiated by former President Obama in January 2015. A majority of the general license and guidance issued since that time remain in effect.

The key changes to the Cuba sanctions program are as follows:

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On November 1, 2017, the Department of Commerce’s Bureau of Industry and Security (BIS) introduced clarifications to the Export Administrative Regulations (EAR) for the use of license exception “Governments, International Organizations, International Inspections under Chemical Weapons Convention, and the International Space Station” (GOV), and license exception “Strategic Trade Authorization” (STA). BIS explained that the agency is not changing the requirements for the use of these exceptions, instead it is only providing guidance to answer questions frequently received from the public.

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This week, the U.S. government took several steps to implement sections of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA), with implications for Russia-related sanctions and their enforcement. On October 27, 2017, the Department of State (DoS) published guidance on sanctions with respect to Russia’s Defense and Intelligence Sectors under Section 231 of CAATSA. In addition, on October 31, 2017, DoS published guidance on how it would view secondary sanctions for investments in special Russian crude oil projects and energy export pipelines. Separately, the Department of Treasury’s Office of Foreign Assets Control (OFAC) amended Directive 4 of the Ukraine/Russia related sanctions and published updated FAQs relating to the amended Directive as well as new guidance on CAATSA sections 223(a), 226, 228, 233.

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On October 25, 2017, the U.S. House of Representatives passed three bills and a resolution in response to Iran’s ballistic missile program and threats posed by Hizballah. Notably, neither the bills nor the resolution would directly affect U.S. obligations in relation to the Iran Nuclear Agreement (Joint Comprehensive Plan of Action, or JCPOA). Further, because Hizballah is already sanctioned on the U.S. List of Specially Designated Nationals and the President already has authority to impose sanctions based on Iran’s ballistic missile program, it does not appear that the bills would result in substantive changes to existing law if enacted.

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Effective October 12, 2017, the Sudanese Sanctions Regulations (SSR) have been revoked in recognition of the Government of Sudan’s (GOS) sustained positive actions in stopping conflict and improving humanitarian access in Sudan.  This latest action makes permanent the general license issued in January 2017.  However, Sudan remains designated as a “State Sponsor of Terrorism” and accordingly, key restrictions remain.

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