If you’re a lawyer, and even if you’re in some other profession, at some point or another in your career, clients will push back on what appear to be very sensible recommendations. Just this week a colleague called me to discuss such a scenario.
It involved a young European company with a business development person that kept insisting certain U.S. economic sanctions did not apply to them. My lawyer friend was recommending that the company submit a voluntary disclosure to the Treasury Department, Office of Foreign Assets Control (OFAC).
My friend told me that everyone at this company thought it was a prudent idea, except this particular fellow who was adamant that the disclosure was not legally necessary; then he went on to bash the U.S. government and U.S. policy toward the sanctioned countries. This latter one I call, the bash America defense; and I’ve heard it quite often.
While it is not generally legally required to disclosure apparent violations of economic sanctions or export control laws, there are situations that leave companies no other choice but to do so. In the case of economic sanctions, OFAC gives a company a great deal of consideration for stepping up and revealing potential issues. Timing is important.
If OFAC finds out about a company’s problem before the voluntary disclosure is made, the company loses a lot of perks including penalty mitigation of up to 50% of the base penalty as well as, especially for newer company, just starting out on a good footing with U.S. regulators. There is a lot more to it, but take it to the bank, disclosure is usually the most prudent course of action in a lot of these cases.
As far as the bash America defense, of course, there is no such thing. However, if you’ve advised enough foreign companies on economic sanctions or export control laws, sooner or later you’re bound to hear it. You can’t miss it. It usually starts off with, “You Americans.”
Then they’ll tack on a series of reasons why our foreign policy is so terrible or backward; some will even go so far as to bash the President. Most lawyers never take the bait. I always do. And, yes, I’ll defend President Obama, to a point, when sparring with foreigners.
U.S. sanctions programs, and some of the export control laws, are extremely transparent and, I’d argue, probably to the consternation of my colleagues, not very difficult to comply with.
With regards to economic sanctions, there are not many countries subject to sanctions. As of December 2013, there were 195 independent states in our great world. The United States only imposes sanctions on roughly 20; that means that more than 90% of our neighbors free of any country-based sanctions.
The entity or person-based programs, let’s call these the watch lists, have a considerably large number of persons, corporations, and organizations, but, when compared to the total global population, as well as the number of businesses and groups in the world, that number is also puny.
So what’s the issue?
Who knows. My own view is that there will always be people who really dislike the United States and what we stand for. We like to set higher standards, go figure. When it comes to foreign government officials, it’s envy. They wish they could be like us. The current French government falls into this latter category, although they would vehemently deny it. Yet if you read a few of the recent stories surround the BNP Paribas economic sanctions case, you’ll see the anti-American defense ooze out. Earlier this week I posted this gem made by the French Finance Minister on the BNP Paribas matter:
“What is being criticized by the U.S. authorities is the violation of a strictly American law. The same acts committed in France in euros would not have been reprehensible,” French Finance Minister Michel Sapin told the media. Although he quickly added: “That said, it is the American law, it should have been respected.”
BNP Paribas has made a strategic decision to become big players in the US of A, you’d think they would be a little smarter in how they engage with regulators? The French Finance Minister is not helping matter. The bottom line is that if you want to engage in the U.S. market, or access U.S. financial systems and instruments, you need to play by the rules. Access is a right, not a privilege. If you get caught, fess up and defend yourself. I’m not saying you roll over but, as in this case, going to hide behind your own government does not help matters.
As for my lawyer friend and her business with the cavalier business development person? It is ultimately the client’s decision. However, my lawyer friend will stand firm with her recommendation that a voluntary disclosure would be the most prudent step, especially if the client has tried to use the blame American defense.
P.S., Since we mentioned France in this post, look at what our ally plans to sell to the Russians. If there is any U.S. technology used on these warships, the Obama Administration should, among other things, sit on any requests for authorizations to re-export the tech.