Earlier this month, Deputy Attorney General for the U.S. Department of Justice (DOJ) Lisa Monaco reiterated that “sanctions are the new FCPA.” During the last year, the DOJ has begun pouring resources into sanctions enforcement, just as it did 20 years ago when it revitalized the Foreign Corrupt Practices Act (FCPA).
But the similarities between sanctions and anti-bribery do not end there. The path of sanctions enforcement appears to be closely tracking the FCPA’s trajectory, from underenforcement, to prioritization by the United States, to adoption in Europe, and ultimately to becoming a compliance priority in the private sector. Banks, asset managers, and operating companies should understand this evolution to avoid being caught flat-footed by new sanctions developments.
Anti-Bribery and Corruption
To highlight the similarities between sanctions and anti-bribery, it is worth thinking back in time to the early 2000s. The FCPA had been on the books since the late 1970s, but at that point the U.S. government had rarely enforced this law and, when it did, the penalties that violators faced were modest. Within a few years, the DOJ and the U.S. Securities and Exchange Commission drastically ramped up FCPA enforcement. Through these efforts, multinational companies began to resolve FCPA cases for jaw-dropping amounts. Notably, many of the largest settlements involved non-U.S. companies agreeing to pay massive fines and to adopt remedial compliance measures to resolve their potential liability for FCPA violations.
The United States’ emphasis on FCPA enforcement—and the huge monetary penalties that the violators paid—led many European countries to either implement or enhance their own anti-corruption laws. The UK government’s adoption of the Bribery Act in 2010 is the best-known example of this trend, but many other European countries took similar steps, including France, Italy, and Spain. Following implementation of these new and improved anti-bribery laws, the UK and EU member states initiated their own significant enforcement actions against companies that violate them.
There has also been a rise of multijurisdictional anti-corruption enforcement actions. Indeed, many of the most significant recent anti-corruption cases—including Petrobras, Airbus, Rolls Royce, and Alstom—involved coordinated prosecution efforts by U.S. and European government authorities.
Due in large part to these settlements, anti-corruption compliance has become a top priority for financial institutions, companies, and asset managers across the globe. Most companies that engage in cross-border transactions now have adopted anti-corruption compliance policies and procedures. Anti-corruption due diligence has become standard practice when onboarding customers, engaging third-party distributors, and completing M&A transactions.
Just 20 years ago, bribery and corruption were almost afterthoughts for business leaders, lawyers, and compliance professionals. The U.S. government’s decision to emphasize FCPA enforcement, however, triggered other countries to enact and enforce anti-corruption laws. In response, companies, financial institutions, and asset managers prioritized anti-corruption compliance measures.
Sanctions
History may be repeating itself when it comes to sanctions. Just as FCPA enforcement increased dramatically in the early 2000s, the U.S. government has been ramping up its sanctions programs and sanctions enforcement during the past decade. And just as European governments followed the United States’ lead on anti-corruption matters, the UK and EU member states again appear to be adopting many of the U.S. government’s positions with respect to imposing and enforcing sanctions.
United States
The United States has utilized sanctions for decades. But in the past 10 years, the U.S. government has become increasingly reliant on sanctions as a core element of its foreign policy. Due in part to the United States’ experience in Afghanistan and Iraq, U.S. politicians have increasingly looked to sanctions to counter perceived threats and further its national security interests. The United States has adopted and utilized a series of novel sanctions—including sectoral sanctions, foreign sanctions evader sanctions, and secondary sanctions—to deal with a host of international crises and to further U.S. interests.
The U.S. government also has become increasingly active in enforcing sanctions violations. The DOJ and the Office of Foreign Assets Control (OFAC) have brought a series of high-profile cases that have resulted in significant penalties. For example, in 2014, BNP Paribas paid just under $9 billion to settle its U.S. sanctions liability, while more than a dozen banks and multinational companies each paid over $200 million to resolve pending sanctions cases since 2012.
This trend is likely to continue. Attorney General (AG) Merrick Garland wrote in March 2022 that the U.S. government would “leave no stone left unturned” when enforcing U.S. sanctions violations. Deputy AG Monaco elaborated on this warning a few months later, explaining that the DOJ has brought “a new level of intensity and commitment to sanctions enforcement.” She further noted that “sanctions should be at the forefront” of compliance for multinational companies and any other businesses with international supply chains. Finally, just a few weeks ago, Deputy AG Monaco announced that the DOJ will be hiring 25 new prosecutors to focus on sanctions and export control violations, including the first-ever Chief Counsel for Corporate Enforcement within the DOJ’s National Security Division.
The DOJ senior officials’ comments and actions make clear that sanctions enforcement will be a priority for the U.S. government. Given the broad jurisdictional remit of the U.S. sanctions programs, many of these enforcement actions likely will be brought against European and other non-U.S. companies.
UK and EU
Prior to 2022, the UK and EU adopted various sanctions, but they were more targeted and less expansive than the U.S. sanctions. Historically, the EU and UK have been critical of many aspects of the United States’ approach to sanctions, including the extraterritorial reach of certain U.S. sanctions program. The EU and, to a lesser extent, the UK also were much less aggressive than the United States when it came to sanctions enforcement. Although the UK government had some notable sanctions cases, EU member states have shown little commitment to enforcing sanctions violations.
Russia’s invasion of Ukraine appears to have been an inflection point in the EU’s and UK’s approach to sanctions. As expected, the United States quickly unveiled a series of aggressive sanctions directed at Russia shortly after the invasion. Somewhat more surprisingly, the UK and EU also adopted wide-ranging and draconian sanctions directed at Russia in close coordination with the United States. Notably, the UK and EU borrowed many concepts from the United States’ sanctions programs when instituting these new sanctions. Viewed collectively, the UK’s and EU’s measures have gone far beyond what many commentators thought possible in early 2022.
The UK government and EU officials also might be following the United States’ lead when it comes to sanctions enforcement. In recent months, there has been speculation that the EU will create an EU-wide sanctions authority to push for tougher and more consistent enforcement of sanctions. Somewhat similarly, the European Commission has put forward a proposal to harmonize criminal offenses and penalties for violations of EU sanctions. Various government officials from EU member states also have publicly stated that they will prioritize sanctions enforcement. The UK government also has made clear that sanctions enforcement will be a priority going forward.
Sanctions compliance already has become more important than ever. The level of sanctions diligence that parties are undertaking has increased dramatically during the past year, and it will continue to increase in the future as governments become more active in enforcing sanctions violations.
Conclusion
The increased focus of Western governments on sanctions is reminiscent of the rise of anti-corruption enforcement in the early 2000s. Operating companies, asset managers, and financial institutions should ensure that their sanctions compliance programs are updated and proportionate in the light of this new reality. Firms should consider undertaking sanctions-focused risk assessments, adopting policies and procedures, delivery training sessions, and taking other proactive steps to avoid violating sanctions and export control laws. Given the recent push to vigorously enforce sanctions—on both sides of the Atlantic—companies that identify potential sanctions violations should consider self-reporting such violations to relevant government authorities.
Please direct any questions regarding these topics to Wilson Sonsini partners Mike Casey, Tarek Helou, Tim Broas, or another member of our national security practice or government investigations practice.
