Export Compliance Program: A Risk Based Approach and ... · A Risk Based Approach and Disclosure...
Transcript of Export Compliance Program: A Risk Based Approach and ... · A Risk Based Approach and Disclosure...
Export Compliance Program: A Risk Based Approach and Disclosure Considerations
Presented by: Kevin Doane, Senior Counsel Compliance, Dresser-Rand Law Department
Mary Menz, Vice President, Corporate Trade Compliance, Harris Corporation Beverly Demma, U.S. Trade Compliance Manager, Melles Groit-Optical Systems Group
Jessica Blum, Compliance Specialist, Directorate of Defense Trade Controls Compliance, U.S. Department of State
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Pillars of Export Control Program
2 Management Support, Policies, Procedures
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Export Control
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What is A “Restricted Party”? – Party that creates some sort of restriction for US
transactions
Could be a “denied party”
Could be a lesser restriction
– Restricted party lists are fluid and 100,000’s names long
Terrorists
Terrorist financers
Narco-traffickers
Certain international political figures 3
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Restricted Parties
– US Companies are obligated to adhere to limitations and prohibitions
“Strict liability” standard for failures
– Must develop a screening process – “KYC”
Search engine vs. “search person”
Automatic vs. manual
Frequency of rescreening
Don’t’ forget about suppliers….Employees… External sales…
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Restricted Party Screening, Manual
– Screening performed through Kewill web-based portal
– Screening performed at Customer and Supplier set up
Locations responsible for screening
Local Export Compliance Manager reviews results
– Periodic rescreening
TCD responsible for rescreening
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Restricted Countries State Sponsors of
Terrorism
– No US business with US
designated State Sponsors of
Terrorism
Cuba
Iran
Syria
Sudan
Other Restricted Countries
– Business may be possible with restrictions
North Korea
Others – Depends on Risks
o Myanmar?
o Russia?
o Belarus?
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Restricted Goods - Export Restrictions
– Determine What Control Regimes Apply
International Traffic in Arms Regulation (ITAR)
o “Specially Designed” for military application
Nuclear Regulatory Commission (NRC)
Export Administration Regulations (EAR)
o Commerce Control List
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Restricted Goods - Export Restrictions
– Step 1: Evaluate the products for export control
– Step 2: Implement process to identify those items that are controlled
– Step 3: Review control restrictions prior to export
– Step 4: Obtain export license if necessary
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DRESSER-RAND CONFIDENTIAL – REDISTRIBUTION PROHIBITED
Recordkeeping – Export Control Documents
– EAR Parts 762 / 772
– Minimum Period – 5 years from export (or re-export)
– What is an Export Control Document?
Extensive list – almost anything related to an export transaction
– Paper vs. Electronic – 762.5
– Do you have a good organization scheme??
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| 10 | Harris Proprietary Information harris.com
Mary Menz
GRE Conference
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Compliance Program Audit
Registered exporters of defense controlled articles are expected to review and improve their Trade Compliance program on a regular basis. This can be achieved in a number of ways. Self audits Compliance department staff will review specific activities against manuals and documented processes and procedures to determine if there are inconsistencies or deviations from the required practices. A schedule should be developed which requires the assessment of critical compliance areas on a regular basis. Document the activity and outcome. Internal Audit Department performs a targeted audit of trade practices and controls. External audits A consultant with subject matter expertise is selected to assess the trade compliance program and the organization’s ability to meet program requirements. Partners are asked to review documentation or activity to confirm compliance requirements are being followed.
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What to do when inconsistencies, deviations or in the worst case, violations are discovered from these audits? • Analyze and investigate the deviation and determine if it is an anomaly or systemic
problem. • If it is a systemic problem a remedial action plan has to be developed and implemented
to resolve the issue. • Update manuals, procedures or processes to reflect the remedial action plan. • Develop targeted training for the departments/individuals affected.
• Document all activity.
• Confirm any changes to processes have been implemented!
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How to handle violations
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A Look Inside DTCC &
The Voluntary Disclosure Process
Jessica Blum Compliance Specialist
Defense Trade Controls Compliance
DTCC Organization
ICE Liaison
FBI Liaison
Senior Advisor Daniel Buzby
Compliance, Registration, and Enforcement Division
Daniel Cook
Director
Sue Gainor
Team 1 • Policies and
procedures • SOPs • Senior liaison w/
law enforcement • Training, security,
facilities
Team 2 • Company visit
program • Mergers and
acquisitions • CFIUS (PM lead) • Section 3 reports
Team 3 • Disclosures,
denials, debarments, reinstatements, policy exceptions
• Civil enforcement actions
• Support to law enforcement on criminal matters
Team 4 • Disclosures,
denials, debarments, reinstatements, policy exceptions
• Civil enforcement actions
• Support to law enforcement on criminal matters
Team 5 • Registration of
manufacturers, exporters & brokers
• Registration fee collection
• Response Team coordination
Functionally Organized by Task (Matrix Approach)
35 staff evenly divided betw civil service & contractor
Our Work: Brokering, Registration, MAD
• 12,454 Registrants (down from 13,394) – 11,401 manufacturer/exporter – 1,053 broker (81% US, 19% Foreign)
• Mergers, Acquisitions, & Divestitures
– Reviewed 323 M&A-related transactions in FY 2014 – Reviewed 85 foreign MADs in FY2014
• 50 transactions were also reviewed under CFIUS process • CFIUS Participation
– About 35-40% of CFIUS cases involve ITAR equities
Our Work: Civil Enforcement/Compliance
• Voluntary and directed disclosures – Processed ~1,400 disclosures in FY 2014 – Vast majority of disclosures are voluntary – Disclosures decreased after years of steady increases
• Civil enforcement actions: charging letters, consent
agreement, agreement monitoring, debarment – Two consent agreements concluded in 2014 – Monitoring 9 active consent agreements – Two debarments: U.S. person and foreign person
• Denials, reinstatements, policy exceptions
Our Work: Other Important Stuff
• Section 3 violations and investigations • Advisory opinions • Congressional inquiries
• Law Enforcement Support
– Trial-Certs: 23 in 2014, up from 12 in 2013 – Pre-Trial Certs: 239 in 2014, up from 162 in 2013 – FBI and HSI liaisons
• Speaking Engagements & Industry Outreach
– Approximately 105 events annually
Company Visit Program
Purpose: • Learn how companies establish a defense trade compliance
program • Understand how compliance programs are implemented and
companies comply with the AECA and ITAR • Gather info to determine whether the Department is properly
exercising its regulatory authorities and responsibilities • Use the gathered info to adjust or revise regulations and practices • Learn about and disseminate industry best practices and provide
feedback for compliance programs
Company Visit Program
Process: • Referral or select companies
– Company can request visit – Company may be selected for visit
• Company and team selection • Visit preparation • Site visit • Out-briefing with company senior management • Evaluation and outreach
Voluntary Disclosures
Disclosure Trends by FY
0
500
1000
1500
2000
2500
2006 2007 2008 2009 2010 2011 2012 2013 2014
DirectedVoluntary806
1107 1153 1312
1482 1493
456
2027
1318
back
The Black Hole?
back
Mail room
Delivered to applicable DTCC
POCs
New case?
Compliance Specialist
review & case no. assigned
Team Lead triage (new)
Case worked by DTCC DTSA staffing
DTCL/ DTCP
coordination Letter to industry
Yes
No
Staff case? Yes
No
No
Yes
Internal VD Process
Acknowledgement letter to industry
Close case
Add’l info
Req’d?
Review response
from industry
Process continues
Add’l info
Req’d?
Assessing Disclosures
• Harm to U.S. foreign policy or national security
• Adherence to law, regulations, and DDTC’s licensing and compliance policies
• Severity of violations – Minor or substantive – Procedural or judgmental – Isolated incident or repeated violation – Number of locations, programs, and business units affected
Assessing Disclosures cont.
• Destinations (126.1 countries) and other persons involved
• Whether transaction would have been authorized • Company’s approach and commitment to compliance
– Unclear or incomplete disclosure – Nature of investigation; root causes identified – Remedial measures implemented – Improved company compliance program
Voluntary Disclosures Preparation and Submission
• ITAR § 127.12(c) identifies info to include in disclosure • Who, what, when, where, how, why – provide specifics • Describe corrective actions taken – be thorough and explicit;
explain how corrective actions resolve the violation and prevent future violations
• Provide all relevant documentation and attachments – License history and copies of approvals – Descriptive literature on hardware – Technical data documents or details on defense service – CV/resume of any foreign persons involved – Provide on disc if documentation is voluminous
• Confirm senior officer informed 27
Voluntary Disclosures Suggestions
• Initial notification immediately after a violation is discovered, then a thorough review
• DTCC will issue a disclosure case number
– Provided in a 60-day notification letter – Wait for the case number before submitting related licenses –
DO NOT cite anything other than a correct case number on a license application
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Voluntary Disclosures More Suggestions
• Identify any past related disclosures
• Acknowledge underlying error/violation – enhances credibility
• Review all export-related transactions and policies – discover and disclose any other violations
• Implement remedial actions promised and verify effectiveness through audits
• Provide a matrix or timeline for multiple or complex violations
Voluntary Disclosures More Suggestions
• Submit one original and one copy; more copies will be requested if needed
• Submit only once – no faxes, emails, phone calls • Provide point of contact – name, title, phone/fax, e-mail, and
mailing address • Submit on company letterhead
– Outside counsel may submit the disclosure with a cover letter but requires certification from the Empowered Official
• Keep DTCC apprised of status and ask for extensions in advance
DTCC Procedures
• Process times vary greatly – Complexity – Related pending cases – Company history – DTSA staffing (SME, 126.1 countries) – DTCP and DTCL coordination – Sheer volume of cases office is reviewing and evaluating
• Adjudication types
– Closed or closed with action – Directed audit requested – Penalty
Voluntary Disclosures Disposition Determination Factors
• Remedial training provided
• Policies and procedures reviewed, implemented, and/or enhanced
• Violator cautioned or disciplined
• System implemented to report repeat violation
• Degree of cooperation with Department during review
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Voluntary Disclosures Disclosure Results
• Majority of disclosure cases closed without further action
• When warranted, most common DTCC actions include:
– Request additional information – Review company compliance manual – Recommend additional compliance measures – Recommend audit of compliance program – Recommend commodity jurisdiction (CJ) submission – Disclosure resolved under a consent agreement
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Directed Disclosures
• Directed disclosure not defined in the ITAR
• DTCC requests information from a company or person based on information we have received
• Information sources: – Calls, emails, DTSA, Licensing, voluntary disclosures
• 59 directed disclosures in FY 2014
• General Questions – DDTC Response Team • Phone number: (202) 663-1282 • E-mail: [email protected]
• Extensive FAQs on the website
http://pmddtc.state.gov/faqs/
Questions and Guidance
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