Consent Agreements - About 1 1100_DTC... · Consent Agreements Arthur Shulman Office of Defense...
Transcript of Consent Agreements - About 1 1100_DTC... · Consent Agreements Arthur Shulman Office of Defense...
Consent Agreements
Arthur Shulman
Office of Defense Trade Controls ComplianceDirectorate of Defense Trade Controls
U.S. Department of State
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Overview
• Defense Trade Controls Compliance Organization
• Review and Adjudication of Violations
• Consent Agreement Process
• Systemic Problems Culminating in Settlement
• Corrective Actions and Solutions
• Trends
• Case Studies
• Lessons Learned
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NOTE: All speaker comments are off-the-record and not for public release
Organizational Chart
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Acting DirectorArthur Shulman
Policy & Operations TeamCompliance and enforcementpolicies and procedures
Intra-DDTC and internal ops
IT coordination
Company Visit Program
Senior liaison with lawenforcement
Mergers and acquisitions
DoS/PM lead for CFIUS matters
Compliance and EnforcementTeam
Voluntary and directed disclosures
Debarments, denials, reinstatements,policy exceptions
Consent agreements and monitoring
Coordination with law enforcement
AECA Section 3 investigations /reporting
Registration TeamRegistration of exporters,manufacturers, and U.S. brokers
Registration fee collection
Senior AdvisorDaniel Buzby
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Enforcement ofU.S. Laws & Regulations
Consequences of compliance failures:• Affects United States and partners’ national security and foreign policy• Affects exporter and recipient entities’ reputation and business opportunities• Affects ability to obtain sensitive technologies• Denial or revocation of export authorizations• Financial cost – costs associated with review, issue resolution and
administrative/criminal penalties
U.S. and foreign individuals and corporations may be held liable for criminaland civil offenses under the AECA and its enumerated statutes
Civil Violations• >$1 million for each violation• Extra compliance measures• Debarment
Criminal Violations• $1 million for each violation• 20 years’ imprisonment• Debarment
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Watch ListBlue Lantern
DTSA coordinationInterrogatories/
imposedrequirements
Notice/warning letterCompany visitReferral to lawenforcement
Civil EnforcementActions
AdministrativeProceedings
Review ofViolations
Directed audit
Directed CommodityJurisdiction
determination
Export authorizationdenial/revocation
Charging letter
Consent agreementsettlement with
monetary penaltyand/or monitored
remediation
Debarment
Review and Adjudicationof Violations
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Administrative EnforcementWhether to Pursue and How – Factors Considered
• Degree of willfulness• Destinations involved• Systemic nature of violations• Related and unrelated violations• Related criminal or other civil violations• Similarity to other civil administrative cases• Mitigating and aggravating factors
– Harm to U.S. national security or foreign policy– Nature of disclosure– Nature of violations– Remedial compliance measures
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Administrative EnforcementProcess
• Charging letter– Sets forth alleged violations– May begin negotiation process with a proposed charging
letter– If no settlement, submit charging letter to
Administrative Law Judge to initiate civil administrativeproceedings
• Consent Agreement (CA)– Negotiated settlement between Department and
company– May enter into settlement negotiation process before or
after filing charging letter with Administrative Law Judge(can withdraw charges)
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Consent AgreementProcess
• Charges are usually resolved via a consentagreement settlement
• Settlement components:– Proposed charging letter and consent agreement– Negotiate language of the proposed charging letter
and settlement terms set forth in the consentagreement
– Action memo package for Assistant Secretary– Final proposed charging letter, consent agreement,
order
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Consent AgreementRequirements and Monitoring
• Consent agreement sets forth certain requirements to befulfilled during agreement term– Special Compliance Official (internal/external)– Reviews and audits– Reports (special compliance official and company)– Implementation/enhancement of compliance program policies
and procedures, including training– Debarment, if applicable– Civil penalty, a portion of which may be suspended– Term of agreement, typically 2-4 years
• DTCC monitors company’s fulfillment of consent agreementrequirements for the agreement term
• Settlement documents are published on the Department’swebsite
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Civil Penalty
• Penalty amount varies based on:– Number, nature, and severity of charged and other
violations– Company cooperation and negotiations
• Aggregate civil penalty typically includes:– Fine (paid in installments or in full)– Suspended penalty assessed/credited for:
• Self-initiated pre-CA remedial compliance measures• CA-authorized remedial compliance costs
• Suspended penalty expenditures reviewed by specialcompliance official and subject to DTCC approval
• At CA conclusion, any remaining portion of suspendedpenalty generally must be paid in full in 30 days
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Systemic ProblemsCulminating in Settlement
• Authorization management
• Improper jurisdiction/classification
• Culture of Non-compliance
• Reporting requirements11
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Corrective Actions and Solutions
• Centralized oversight• IT automation and consolidation• Business/company-wide analysis• Effective root cause analysis• Involving engineers in the
jurisdiction/classification process• Detailed processes & checklists to
track administrative requirements12
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*CA has not yet concluded** UTC CA concluded; terms/requirements followed Sikorsky divestment to Lockheed Martin+ Suspended in whole or in part as provided in the Consent Agreement
Active & Recent Agreements
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AgreementType Company Year Penalty (USD)
# ofProposedCharges
OversightAgreement Rocky Mountain Instrument Company 2016 N/A N/A
ConsentAgreement
Turi/TDG 2016 200,000+ 2
Esterline Technologies Corporation 2014 20,000,000+ 282
Aeroflex, Inc. 2013 8,000,000+ 158
Raytheon Company 2013 8,000,000+ 125
Sikorsky/Lockheed Martin** 2012 N/A N/A
BAE Systems, plc* 2011 79,000,000+ 2,591
Microwave Engineering Corporation(penalty only) 2016 100,000 1
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Trends
• Increase in voluntary disclosures submitted under CA• Agreement term extension• Tailored agreements for specific cases
– Oversight Agreement– Penalty-only Agreement
• SCO/ISCO effectiveness and availability• Significant investments in IT infrastructure• More frequent DDTC visits• Tailored reporting requirements• Consolidated reporting of violations• Disclosure trends – FY 2016
– Voluntary disclosures: 929 (-137)– Directed disclosures: 56 (+2)
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Case Study #1
• Background– Company submitted numerous disclosures related to the
management of authorizations.– Company failed to identify that there was a systemic
company-wide problem– DDTC directed the company to perform multiple large scale
reviews of authorizations
• Solution– Company entered into a consent agreement with DDTC– SCO directed a company-wide audit of all Agreements– Company has invested significantly in IT automation to ensure
all requirements are met prior to export under anyauthorization
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Case Study #2
• Background– Multinational conglomerate with decentralized oversight of export
control compliance– Multiple disclosures from various business units covering repeat
or similar violations– Uncoordinated and incomplete corrective actions evidenced a
systemic company-wide problem
• Solution– Company instituted policy to disclose all suspected violations and
entered into a consent agreement– Company centralized compliance oversight and began large-scale
reviews of problem areas– Company developed IT solution to report, analyze, and track
suspected violations through corrective action completion16
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Lessons Learned
• Company-wide investigations• Ensure effective implementation of
corrective actions• Accurate root cause analysis• Central oversight
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