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Sanctions Scrum: Changing Seas – Sanctions and a New Era of Economic Warfare

THE DEPUTY Attorney General is a big deal in the United States. Lisa Monaco is number two at the Department of Justice (DOJ), at the right hand of Attorney General Merrick Garland. When she speaks publicly, every word is carefully prepared to articulate, amplify, and promote DOJ policy. Her public comments are posted on the DOJ website and parsed over by friends and foes.

So, it was noteworthy when she recently announced to a gathering of the New York State Bar a new level of “intensity” and “commitment” to sanctions enforcement:

“We have turned a corner in our approach. Over the last couple of months, I’ve given notice of that sea change by describing sanctions as the new FCPA.”  1

It wasn’t lost on the audience that the old FCPA gave rise to a two-billion-dollar ecosystem of regulators, whistleblowers, and orange jump suits. And probably a Porsche or two out in the banquet hall’s valet-parking area.

The DOJ statement isn’t an outlier. Rather, it’s part of a growing, geopolitical consensus. The Economist has pronounced it: we’ve entered a new era of economic warfare,

“[A] economic conflict of a ferocity and scope not seen since the 1940s, as Western countries try to cripple Russia’s $1.8trn economy with a novel arsenal of sanctions.”

Tomorrow, scholars may observe this pivot as an inflection point, permanently weaponizing sanctions in the service of Western security. But for global leaders today, the response should equal the moment, leverage existing systems, and be firmly rooted in practicality.

Whistling winds

This new orthodoxy is likely to spawn whistleblowers.

A whistleblower ecosystem requires both (i) resourced regulators and (ii) a proven payment system. Both are now present.

Without resourced government prosecutors, and like-minded government regulators, the system lacks its enforcement-action input. Monaco indicates that DOJ is “pouring resources into sanctions enforcement[.]”2 When taken with parallel events, discussed below, this suggests the first element is emphatically met.

And the payment system is being finalized. To see this, insiders look to the formation and funding of a new program within the United States Department of the Treasury, Financial Crimes Enforcement Network (FinCEN). The AntiMoney Laundering Act of 2020 (AMLA) contained “a program that requires [FinCEN] to pay awards to whistleblowers who provide original information leading to successful enforcement actions”3 relating to the Bank Secrecy Act (BSA) and various anti-money laundering (AML) laws.4

Congress has recently moved to bolster this new program and dramatically expand its scope. For example, H.R. 7195,5 sets a minimum whistleblower payout of 10% (and a maximum of 30%), protects award funds from being re-directed to “program personnel or administrative expenses” and otherwise addresses the perceived weakness that “without a guaranteed fee-recovering incentive […] lawyers who specialize in representing potential whistleblowers were declining the cases.”6

But the biggest news is the expanded scope. The new legislation would, for the first time, expand the whistleblower program to three new statutes: the International Emergency Economic Powers Act, the Foreign Narcotics Kingpin Designation Act, and the Trading with the Enemy Act. As the Bill’s accompanying House Report emphatically states, “These three statutes include nearly every enforcement action with penalties arising from a U.S. sanctions program, however, none currently have a whistleblower program.”7

As such, we are confronting a perfect storm: resourced regulators, incentivized lawyers, and an expansive body of newly-applicable law.

Tackling tips

The regulators have provided direction, which makes up in enthusiasm what it lacks in clarity:

“For any multinational corporation—indeed for any business with an international supply chain—sanctions should be at the forefront to its approach to compliance. Every company needs to be pressure-testing it’s sanctions compliance program, for instance through risk assessments, technology upgrades and industry benchmarking. Every board of directors of such a company should be inquiring whether it is conducting necessary oversight of the company’s sanctions controls. Every corporate officer should be committed to ensuring they have the programs, culture, personnel, and counsel to identify problem areas and navigate the rapidly changing landscape. And for anyone who seeks to evade sanctions, the warning is simple: the justice department is coming for you.”

DOJ has called the play. Crouch, Bind, Set!

Over the months to come, Sanctions Scrum hopes to provide further insight into DOJ-advised pressure testing and necessary oversight to ensure you have the programs, culture, personnel, and counsel to navigate this rapidly changing seascape.

(1) https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-keynote-remarks-2022-gir-live-women. This quote is taken from a similar keynote by Ms. Monaco in which she made the equivalent point.
(2) Id.
(3) Report to Provide for Certain Whistleblower Incentives and Protections, 117th Congress, 2nd Session (Report 117-423).
(4) The AMLA also included anti-retaliation protections for whistleblowers, outlines criteria for awards and program processes, and establishes an AML and counter-terrorism financing fund from which the funds can be made.
(5) Senate Chuck Grassley is championing similar legislation and is predicting program growth in line with precedent: “The whistleblower programs I’ve helped create have seen roaring success, with the False Claims Act saving taxpayers $70 billion and the SEC whistleblower program saving over $4.8 billion. I’m optimistic that our new program encouraging individuals to come forward for suspected sanctions violations will be successful as well.”
(6) Id.
(7) Supra note 3.