Global Anti-Corruption Laws and Trade Sanctions Jason Prince

Important Information This presentation is similar to any other seminar designed to provide general information on pertinent legal topics. The statements made and any materials distributed as part of this presentation are provided for educational purposes only. They do not constitute legal advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the speakers. This presentation is not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel. All Presentations and Other Materials © Holland & Hart LLP 2016

Agenda U.S. Foreign Corrupt Practices Act International Anti-Corruption Laws U.S. Trade Sanctions International Trade Sanctions Compliance Program Best Practices

Anti-Corruption Laws Historical Context Watergate Scandal Church Committee FCPA - 1977

FCPA Penalties Criminal: Companies = Up to $2,000,000 per violation Individuals = Up to $100,000 per violation, or imprisonment of up to 5 years, or both Civil: Companies = Up to $100,000 per violation Individuals = Up to $10,000 per violation

FCPA Penalties Top 10 Largest FCPA Enforcement Actions Siemens AG (2008) $800 million Alstom (2014) $772 million KBR/Halliburton (2009) $579 million BAE Systems (2010) $400 million Total, S.A. (2013) $398 million Alcoa (2014) $384 million ENI/Snamprogetti (2010) $365 million Technip S.A. (2010) $338 million JGC Corp (2011) $219 million Daimler AG (2010) $185 million

TI Corruption Perceptions Index

FCPA Enforcement Authority All criminal enforcements All civil actions, except those against issuers Department of Justice Only civil actions against issuers Securities and Exchange Commission

FCPA: Two Primary Components Anti-bribery Provisions: Prohibit most bribery and non-routine payments to foreign government officials; and Financial Record Keeping & Internal Control Provisions: Require specific records and financial internal controls to be maintained to provide reasonable assurance of accuracy of financial records and to demonstrate compliance.

FCPA Anti-Bribery Provisions

Anything of Value

Anything of Value No de minimis or “small payment” exception under FCPA Subjective standard

Foreign Officials

What About These Individuals?

Who Is a “Foreign Official” Foreign governments and instrumentalities State-Owned and State-Controlled Companies Public international organizations Foreign political parties, officials, or candidates Royal family members (fact specific) Any person, while knowing that all or a portion of thing of value will be promised or given to foreign official

Foreign Official - Knowledge A company has “knowledge” when it: Knows that a bribe will be paid to a foreign official, or Consciously disregards a high probability that a bribe will be paid to a foreign official.

Foreign Anti-Corruption Laws OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Anti-Bribery Convention”): Entered into force in February 1999 41 participating countries account for 80% of global exports Includes: Canada, Brazil, Japan, Mexico, Russia, South Africa, United States Excludes: China, India, Peru, Taiwan, Vietnam Generally tracks FCPA, with a few exceptions

Foreign Anti-Corruption Laws Chinese Anti-Corruption Laws: Prohibit giving and receiving of bribes and applies to public and private bribery Amended on May 1, 2011 to expand prohibition on bribery of foreign officials Growing enforcement activity

Trade Sanctions Laws Summary - The Office of Foreign Assets Control (OFAC) is part of the U.S. Department of Treasury. It enforces U.S. economic sanctions against specific countries, as well against individuals and companies Global Reach - OFAC also imposes restrictions on U.S. persons working globally and prevents these persons from facilitating or approving transactions that would be prohibited if performed in the United States

OFAC: Country Sanctions OFAC administers U.S. trade sanctions on select countries These sanctions bar or restrict trade activity by U.S. individuals or companies

OFAC: Country Sanctions Main Embargoed Countries Each embargo regime is different Embargoes change as U.S. foreign policy evolves Iran Sudan Cuba Syria

OFAC: Country Sanctions Countries subject to OFAC targeted sanctions include: Liberia Balkans Libya Belarus North Korea Myanmar (Burma) Russia Cote d’Ivoire Somalia Democratic Republic of the Congo Yemen Iraq Zimbabwe Lebanon

OFAC: Burma Sanctions Program Example--Myanmar (Burma) Targeted at blocked individuals and entities – U.S. entities cannot conduct business with these parties absent a license General license now authorizes importation of Burma-origin goods General licenses authorizing the export and re-export of financial services and new investment in Burma

OFAC: Prohibited Parties U.S. Blocked Parties – OFAC maintains a regularly updated list of foreign individuals and companies with which U.S. parties are prohibited from conducting business Specially Designated Nationals List (“SDNL”) - Individuals on the blocked party registers are frequently referred to as “Specially Designated Nationals” or “SDNs” Other lists are maintained by the U.S. Departments of Commerce and State

OFAC: Prohibited Parties Rule - OFAC sanctions prohibit U.S. citizens, businesses, and financial institutions from engaging in business or financial transactions with persons or entities on the SDNL or other lists Financial institutions are required to file reports with OFAC for: Blocked payments or transfers held at the financial institution Rejected transactions in which parties blocked by OFAC or listed on the SDNL have any interest Reports must be filed within ten business days of the transaction

OFAC: Prohibited Parties Screening - A company that is subject to OFAC jurisdiction must screen customers and third-party agents to identify and prevent possible transactions involving a proscribed party

OFAC: Penalties Criminal Penalties (IEEPA) for violating most OFAC regulations range up to 20 years in prison, and up to $1,000,000 in fines Cuban Sanctions (TWEA) – $1,000,000 / $100,000 Civil Penalties (IEEPA) up to $250,000 per violation Cuban Sanctions (TWEA) – $65,000 Transactions can be parsed to produce potentially multiple violations for each non-compliant transaction

OFAC: Special Compliance Risks Non-listed Sanctioned Parties Parties with an interest (e.g., ownership, control) in a blocked party Foreign ownership changes Facilitation of a prohibited transaction Financing, legal/compliance support or counseling Mandatory financial institution reporting (Suspicious Activity Reports) Exceeding the scope of a General License or exemption

International Trade Sanctions United Nations Issued through U.N. Security Council Canada Key Differences with United States Example—Exports to Belarus banned Example—No Cuba embargo Blocking Statute

Compliance Programs Written Policy & Training Due Diligence Compliance Documentation Compliance Monitoring

Written Policy & Training Provision of regularly updated written policy Appointment of Compliance Officer/Manager Standard Guidelines for Anti-Corruption Gifts, Meals, Entertainment, Product Promotion Events, Facilitating Payments, Foreign Political Contributions and Charitable Donations Required Denied Party Screening Periodic training of key employees and foreign agents

Due Diligence Background Checks: U.S. Department of Commerce’s U.S. Commercial Service U.S. Government’s Consolidated Screening List http://export.gov/ecr/eg_main_023148.asp High Risk: Additional due diligence and written due diligence report submitted every 1-2 years

Due Diligence Red Flags: Country or industry corruption Refuses to certify compliance and/or rejects anti-corruption terms in proposed contract Not qualified and/or lacks resources Related to or referred by a government official Heavy reliance on political or government contacts Requests for strange payment terms or arrangements Vague payment descriptions Over-invoicing or false invoices Unrecorded accounts or transactions History of bribery allegations or investigations Lacks code of conduct or anti-corruption program

Compliance Documentation Contract Terms: Representations and covenants Certification obligation Right of termination Audit rights Written Procedural Documents and Certifications

Compliance Monitoring Periodic Certifications: Employees, Directors & Officers Foreign Agents Whistleblower Procedures: Immediate reporting to Compliance Officer Strict prohibition on retaliating against anyone for raising or helping to address anti-bribery issues Periodic Audits

Jason Prince jeprince@hollandhart.com 208-383-3919 Questions? Jason Prince jeprince@hollandhart.com 208-383-3919