Bass, Berry & Sims attorney Thad McBride provided insight on the sanctions evasion techniques being used by foreign owners of seemingly legitimate money services businesses (MSBs) to move funds illicitly. The article provides examples of foreign entities – such as those in countries faced with strict U.S. sanctions, such as Iran or North Korea – taking control of MSBs in foreign jurisdictions and then using the ownership status to pass money and convert funds to U.S. dollars. Because entities in sanctioned countries are severely restricted related to the amount of money that can be brought into or moved within the United States, ownership of these MSBs can be a profitable way of avoiding detection.
On July 31, 2018, the Interagency Suspension and Debarment Committee delivered its annual report to Congress on the status of the suspension and debarment system. The report shows a continued high level of activity relative to the last decade and serves as a reminder that exclusion from the federal marketplace continues to be a risk for contractors that do not “cut square corners” with the government.
Decline in Suspensions May Indicate an Increase of Proactive Communication Between Contractors and Officials
The FY2017 report shows a modest decrease in the number of suspensions, proposed debarments, and debarments from the last fiscal year, a trend that has continued since the high-water mark set in FY2014. But it also notes that the number of exclusions in FY2017, over 3,000, are almost double those reported when the Committee first began formally tracking the data in FY2009, approximately 1,800.
In a Law360 article published on August 7, Bass, Berry & Sims attorney Thad McBride provided insight on how the Foreign Risk Review Modernization Act (FIRRMA) legislation included in this year’s National Defense Authorization Act (NDAA) would alter the Committee on Foreign Investment in the United States (CFIUS) by broadening its authority when reviewing foreign investments in the U.S.
As part of FIRRMA’s effort to broaden CFIUS’s power, the interagency committee will officially have the ability to review foreign investments in U.S. companies that hold personal information of U.S. citizens. While this has been an issue for potential foreign investors in the past (i.e. MoneyGram International Inc.), its formal inclusion in the legislation text takes it to another level.
Bass, Berry & Sims attorney Richard Arnholt was quoted in an article regarding a little-known provision allowing the government to continue working with companies excluded from the government marketplace. Companies who have received such waivers include IBM, Boeing and BP along with 19 others to fulfill specific contracts that the government has deemed necessary. Officials distributing these waivers are required to notify the General Services Administration (GSA) which posts the information to the public. Since the law was passed in 1981, 30 waivers have been provided to the GSA. The waivers can be used for companies that otherwise are prohibited from bidding on future contracts or seeking extensions on existing contracts.
- Ericsson Caused Violation by Having U.S. Party Ship Equipment to Sudan
- U.S. Employee Facilitated Sudan Business
- OFAC Expects Parties Conducting International Business to Have Robust Compliance Processes
In June 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Ericsson, a Swedish telecommunications company, agreed to pay approximately $145,000 for violating U.S. sanctions on Sudan. Among other things, this is one of the few OFAC enforcement actions explicitly premised on a non-U.S. actor causing a U.S. company to violate U.S. sanctions.
- FIRRMA would significantly expand CFIUS jurisdiction.
- Mandatory filing would be required in some cases.
- Parties that protect and maintain personal information are likely to face more scrutiny.
As we have described in recent blog posts in March 2018, January 2018 and October 2017, a rash of proposed transactions have not survived the Committee on Foreign Investment in the United States (CFIUS) process. Most notably, as we described here, in March 2018, President Trump announced that he would not allow Singapore-based Broadcom to acquire U.S.-based Qualcomm, a rival chipmaker.
The president made his decision based on the recommendation of CFIUS, the U.S. government’s inter-agency committee that reviews transactions that could result in control of a U.S. business by a foreign person in order to determine if the transaction would have an effect on the national security of the United States.
Bass, Berry & Sims attorney Richard Arnholt provided comments on the questionable communications related to the bidding process for two separate contracts awarded by the St. Louis Economic Development Partnership. In both cases, email exchanges between individuals in the St. Louis county executive and economic partnership offices and a top donor to the county executive’s campaign revealed that the donor requested feedback on his proposal prior to formally submitting the bid. The Economic Development Partnership subsequently awarded the two government contracts to the donor’s company.
- Previously permissible activities must be wound down in 90 or 180 days
- Non-U.S. companies at particular risk of enforcement action
- Only limited guidance issued so far, unclear what authority U.S. companies have
On May 8, 2018, President Trump announced that the United States is leaving the Joint Comprehensive Plan of Action (JCPOA). The U.S. Treasury, Office of Foreign Assets Control (OFAC), which administers most U.S. economic sanctions programs, has taken an initial stab at providing guidance in a set of Frequently Asked Questions (FAQs) released the same day as the President’s announcement.
In early April, the GAO issued a final rule revising the existing bid protest process—the major revisions being the introduction of an Electronic Protest Docketing System (EPDS) and a protest filing fee. When the rule takes effect on May 1, 2018, the new EPDS will launch as the GAO’s electronic filing and document dissemination system for bid protests.
Richard Arnholt will speak at the 17th Annual DOE Small Business Forum & Expo. Richard will speak on the topic of, “Teaming 101: Utilizing Teaming Arrangements and Joint Ventures in Subcontracting as a Competitive Advantage.”
- Practical guidance about teaming agreements and joint venture agreements
- Key terms that both types of arrangements should contain
- Pros and con of each arrangement type
- Overview of associated risks