Ashley: My name is Ashley Csaki, Director of Content and Experience at Momentum and it is my great pleasure to introduce Thad McBride, Partner at Bass Berry & Simms. Thad advises public and private companies on the legal considerations essential to successful business operations in a global marketplace. He focuses his practice on counseling clients on compliance with U.S. export regulations, economic sanctions and the Foreign Corrupt Practices Act.Welcome Thad.
Thad: Thank you very much, Ashley. It’s really nice to spend a little time with you this afternoon.
Ashley: Great. The ACES Compliance Summit will be exploring anti-corruption, export controls and sanctions compliance – explain to us how these three areas are related and how enforcement may overlap
Thad: Well, one of the things that we’ve seen in all these areas over the last, at least 5 years (if not over the last 7-10 years) is that the government has been vigorously enforcing these laws – and that’s not only against U.S. companies over whom they exercise most obvious jurisdiction – but also over non-U.S companies. And so, when you are – as a U.S. company or a U.S. individual (or you are counsel to them, as we often are) – one of the things that’s important to do when you’re considering new transactions, new acquisitions, possible ventures, the engagement of agents – is to really drill down and do the appropriate level of due diligence on the risk areas that are associated with export, with sanctions, with FCPA. And a lot of times the information you get when you’re doing what you might call the “focused export diligential review” will be useful as you’re starting to think about the sanctions diligence and identifying red flags related to sanctions. Likewise, when you’re looking at the sanctions diligence piece, you may often encounter things that give you some concern (or at least need to be reviewed more carefully) from a FCPA perspective. Because a lot of times these issues of compliance vulnerability will run across different areas of law. If you’re looking at an agent who would be acting on your behalf over in the Middle East, you may need to look at whether they understand U.S. export laws; you may need to look at whether they’re going to provide or create some sort of risk under U.S. sanctions because of their proximity to Iran or Sudan or Syria. You may have to look at the extent to which they may create some risk under the FCPA and so all of those areas are worth looking at together – not only because some of the information you get as you’re focused on one area may be useful when you’re focused on another area – but also at a time where budgets are being squeezed; when everybody from the business side to the legal side to the compliance side is being asked to do more with less – if you can find efficiencies in doing reviews like this and doing diligence such as this, it can be really useful and it can save money and precious resources. So, we like to think of these things as coming in pairs at least (if not coming in threes) if you will – and I think, to have an effective compliance program as a company doing business overseas, you have to be able to look at each of these issues both separately at times but also together.
Ashley: All right. So Thad, as you know, due diligence is always a hot topic for the global trade community. How does performing due diligence within your anti-corruption program differ from that of your export controls or sanctions programs – if at all?
Thad: Well, I’ve just spoken about the important overlap between export and sanctions and FCPA and I really do think there is an important overlap. But I also think it’s critically important in each of these areas of the law – each of which are quite technical- the FCPA in a way – even though it’s kind of the hottest topic, hottest ticket the hottest ticket item of all – is in some ways the least complicated. But it’s still the way it’s interpreted – the way the government’s enforcing the law – the really broad theories of interpretation they’ve used to bring actions, means that requires some sort of specialized advice and some specialized analysis and experience when looking at FCPA issues in a due diligence exercise. Certainly the same is true of export and sanctions: the regulations under U.S. law – the export regulations – are very complicated, very very technical in many cases; and then the same could be said about the economic sanctions regulations; but what I think what makes exports and export sanctions particularly difficult is that there is sort of “lore” in addition to “law” – namely the way the government has traditionally interpreted and enforced its laws may go a bit beyond what the regulation of the laws actually say – and sometimes beyond what guidance the government itself has issued. And so, having somebody who really knows export law, and somebody who really knows economic sanctions and someone who really knows FCPA, is extremely important I think if you’re doing a diligence exercise because you can have one person with a “mile wide and inch deep” knowledge of these areas, collecting data and gathering information, but you ultimately do need to have people who really know the sanctions laws, who really know the export laws and who really know the FCPA, doing the analysis and coming up with the recommendations about whether you can proceed with the transaction; whether there are too many red flags; whether there are red flags that can be addressed and rehabilitated (if you will); or if there’s something where you think: “there’s too much meat on the bone” and you don’t want to try to bite it off.
Ashley: All right. And what are some of the greatest pitfalls you see when assessing your client’s global trade compliance programs and how can those pitfalls be avoided?
Thad: Well, the U.S. government has come out and said quite explicitly now recently, that it’s very important for companies to do risk-based compliance. And, in an environment in which we don’t always think the government is as commercially-reasonable as they perhaps could be, it’s nice to hear that they recognize that companies can’t spend all their money and all their time and all their resources on compliance. These companies, after all, do exist to make products, export products; to manufacture things- they exist for other reasons than simply to comply with the law. So doing a risk-based approach to compliance is, I think, very very important. That may require in some cases stepping back from what you have normally been doing and using data that you have about (for instance) where you have, from a FCPA risk perspective, marketing agents who are interacting with the government; from an export perspective, where are you exporting your most sensitive equipment and technologies? From an export and sanctions perspective, where do you have non-U.S. persons that are either working in the United States or overseas? Where are your operations that may be subject to some U.S. sanctions implications? For instance, right now there’s thought that the U.S. may impose additional restrictions on Venezuela; in the meantime, we are easing restrictions on Cuba; we are easing restrictions, maybe, on Iran. So, taking account of all these different factors in terms of putting together your export compliance program, I think is really important because then you can target where you think the main risk areas are. One of the things that I think is essential for any company operating overseas (and especially with a significant footprint) is that you absolutely have to do training for all your people that are out there in the field; because they are your eyes and ears – it’s very easy for us in the U.S. – I’m sitting in my nice office in Washington, the power’s working, the heat is working, the phone works, everything works smoothly; when I want to get something done it’s easy to get it done. It’s very easy for us to think that’s the way it works throughout the world – and the reality is much different when you get not only outside the United States, but especially to parts of the developing world where the power may be out for 8 hours a day, and floods may shut down the road such that all of a sudden you can’t get the products you need to have delivered; and the customs officials only work an hour a day; and so you have to equip your folks that are in the field dealing with these situations with not only the knowledge of what’s necessary to comply, but also the understanding that, if they comply with the law as they are being told to do, they will not be punished, and, if anything, they will be celebrated by the company. And so I think that’s an important message, and companies do a lot of training but I’m not always sure that companies do this sort of granular level of training or are as committed to the training of their folks that are really the most vulnerable. It’s very easy to do training, and companies do it regularly for their personnel sitting in the United States and their personnel sitting in the UK and in France and in Germany – and that’s great – but I would suggest that far more resource should be spent on training the people on the ground, and that’s going to be most effective way to avoid compliance mistakes.
Ashley: All right. And finally, Thad, you will be speaking at Momentum’s ACES Compliance Summit this April in McLean, VA. Tell us what sets this event apart from others in the industry and what you are most looking forward to at the event.
Thad: Well, one of the things that struck me as soon as I learned about the event was that there really is this effort to bring together all of the disciplines that I’ve been talking about: export, sanctions and FCPA. There are a number of conferences that I’ve attended – and had a chance even to speak at sometimes – on the FCPA or on export controls or on sanctions – but I haven’t yet had an opportunity to participate in or attend a conference that covers these issues. And obviously I’m self-interested because they cover my primary practice areas, but I do think that these are areas of the law and compliance that run together, and so including all of them over the course of the several days that the conference will be going on, I think makes a lot of sense and I think is going to be really useful to the audience because so often they may encounter something that looks like an export issue and, in fact, it’s a sanctions issue; or they may encounter something that looks like a sanctions issue but really is more of a FCPA issue. And, being able to understand the landscape and hopefully through the conference people feeling better equipped to do that, I think is something that’s going to be really valuable.
Ashley: Excellent – well those are all the questions I have for you today, thank you so much for taking the time to speak with us and I certainly look forward to seeing you this April at Momentum’s ACES Compliance Summit in McLean, Virginia.
Thad: Great, Ashley. Look forward to it so much myself. Thank you for speaking with me this afternoon.