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.
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:
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.
On June 16, 2017, President Trump issued a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, which began the process to alter some aspects of U.S. policy toward Cuba. [See prior blog post here]. On July 25, 2017, OFAC updated its Cuba FAQs to address upcoming changes to its Cuba sanctions rules as they relate to pre-existing contracts, licenses, and travel arrangements.
Some of the more important points in the new OFAC guidance include the following:
- Treatment of existing contracts and companies engaged in the Cuban market
OFAC states that companies already engaged in the Cuban market with entities related to the Cuban military, intelligence, or security services that may be affected by the new Cuba sanctions regime will be allowed to continue after issuance of the new regulations. In the updated FAQs, OFAC further clarifies that “businesses will be permitted to continue with transactions outlined in contingent or other types of contractual arrangements agreed to prior to the issuance of the new regulations, consistent with other [Cuban Assets Control Regulations] authorization.”
- Addition of “subentities”
OFAC indicated that the State Department will be publishing a list not only of “entities with which direct transactions generally will not be permitted,” but also a list of “subentities.” This suggests that the Administration plans to assemble its own list of entities that are considered to be owned or controlled by the Cuban military, intelligence, and security services, which may be useful to U.S. companies by lessening their burdens to investigate the ownership of some Cuban entities.
OFAC explains that for travel after issuance of the forthcoming regulations, as long as a traveler has already completed at least one travel-related transaction prior to June 16, 2017, such as purchasing a flight, the trip and any meetings with listed entities/subentities will be permitted.
- People-to-People Travel. The latest FAQs reiterate that the general license allowing individual people-to-people travel will end once Treasury issues the upcoming regulations. Nevertheless, group people-to-people travel will remain available subject to the rules in 31 CFR § 515.565(b).
- Persons Organizing or Sponsoring people-to-people or educational travel. OFAC clarifies in new FAQs that such parties are covered by the general licenses and do not need to apply for a specific license.
The latest Cuba FAQs explain that remittances to Cuba will still be permitted under the new regulations. However, “changes will be made to the definition of prohibited members of Government of Cuba that may exclude certain persons from receipt of such remittances.”
The June 16, 2017 Cuba FAQs may be found here.
The July 25, 2017 Cuba FAQs may be found here.
On April 19, 2017, the Department of Commerce (DOC), through its Bureau of Industry and Security, self-initiated an investigation into the effects that steel imports may be having on U.S. national security interests. The investigation was initiated under a rarely-used statutory authority, Section 232 of the Trade Expansion Act 1962 (19 U.S.C. § 1862).
On 16 March 2017, the European Parliament approved a draft EU regulation intended to ensure that trade in certain minerals and metals from high-risk or warn-torn areas does not fund conflict and human rights abuses. The regulation would apply to trade in tin, tantalum, tungsten and gold which are used in a variety of industries ranging from electronics, automotive, jewelry, aerospace, packaging, construction, lighting, industrial machinery and tooling.
The regulation is expected to come into effect as of 1 January 2021, at which time it would apply to up to 95% of EU imports. Although this presents a substantial delay in implementation, the scope of impact means that this regulation bears watching and merits advance compliance consideration. Continue reading →
On January 27, 2017, the Commerce Department’s Bureau of Industry and Security (BIS) recently made two significant changes to the Export Administration Regulations (EAR) concerning India that will facilitate the export of controlled items to that country.
The regulations reflect a June 7, 2016 joint U.S.-India statement in which the United States recognized India as a Major Defense Partner, laying the ground work for facilitating technology sharing with India on a level commensurate with that of the United States’ closest allies and partners. The two countries reached an understanding under which India would receive license-free access to a wide range of dual-use technologies in conjunction with steps that India committed to take to advance its export control objectives.
Favorable Licensing Policy
BIS has amended section 742.4 and section 742.6 pertaining to controls for purposes of National Security and Regional Stability reasons to state that export, reexport, or transfer items, including “600 series” items, for civil or military end uses in India will be assessed under a general policy of approval. The items can also be for the ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as such items are not for use in nuclear, missile, or chemical or biological weapons activities. The rule does not amend any licensing policies with respect to Missile Technology items.
Companies seeing to export controlled items to India can now expect that their license applications will be reviewed more favorably and will routinely receive approvals for transactions as opposed to the “case-by-case” approach previously followed by BIS in reviewing license applications for India, which involved more rigorous scrutiny and possible denials of license applications. Continue reading →
Policy makers in Europe continue to explore responses to the Panama Papers revelations and recent terrorist attacks. On 28 February, European law makers approved important amendments to the EU’s Anti-Money Laundering (AML) Directive, 2015/849 (the “Directive”) that would implement new rules to combat money-laundering, terrorism financing and tax evasion.
The amendments would include:
- Expansion of AML obligations to trusts and certain virtual currency platforms;
- Public access to registers of beneficial ownership information; and
- Lower value thresholds for regulation of pre-paid instruments.
“We will follow two simple rules: buy American and hire American.” While world leaders are pondering what these words from President Trump’s Inaugural Address mean for international trade, a different question looms for U.S. Government contractors—what is on the horizon as far as the Buy American Act and similar protectionist regulations?
- Any new infrastructure spending bill that provides funding for state and local public works projects likely will incorporate domestic preference requirements similar to those incorporated in 2009’s American Recovery and Reinvestment Act.
- The process for issuing new waivers when a particular item is not available in commercial quantities from U.S. producers may be further restricted, and some existing waivers could be cancelled.
- Even if no new rules are implemented, contractors should be prepared for increased enforcement.
The Buy American Act, Balance of Payments Program, Cargo Preference Act, Berry Amendment and similar regulations all require U.S. Government contractors to exclusively use, or give a preference to, U.S. suppliers. Further, the Trade Agreements Act prohibits U.S. Government purchases of products from many foreign countries. Continue reading →
OFAC has issued a new General License to address problems raised by the sanctioning of the Federal Security Services (FSB). This adjustment serves to authorize permits by the FSB needed for certain commercial transactions and is a limited exception to the sanctions listing of the FSB on December 28, 2016 in connection with Russia’s alleged interference in the U.S. presidential election.