Higher penalties coming for export control violations -US Commerce official

Jan 17, 2024

By Karen Freifeld

(Reuters) -The U.S. government will crack down on companies that violate export rules, with stiffer penalties to deter future violations involving countries like China, Russia and Iran, a Department of Commerce official said late on Tuesday.

“There are going to have to be some penalties that get everyone’s attention,” Matthew Axelrod, assistant secretary for export control at Commerce, said at a New York University School of Law event on corporate compliance and enforcement in Manhattan. “I think we’re on the cusp of that.”

Axelrod said he viewed the $300 million penalty Seagate Technology paid in April after shipping over 7 million hard drives to China’s Huawei in violation of U.S. export control laws as a “down payment.”

“You can expect to see more big-ticket corporate resolutions going forward,” he said.

Last year, U.S. Deputy Attorney General Lisa Monaco described more aggressive enforcement of export controls and sanctions for national security, and said sanctions were the new Foreign Corrupt Practices Act (FCPA).

Axelrod said he thinks Monaco meant she wants companies to invest in compliance.

“She wants companies thinking about their national security risk the way they think about their FCPA risk,” he said.

Axelrod said Munich, Germany-based Siemens AG’s prosecution years ago for paying bribes to foreign government officials drove compliance with the FCPA.

In 2008, Siemens paid $450 million to the Justice Department in criminal penalties, and $350 million to settle with the U.S. Securities and Exchange Commission, along with a penalty of about $800 million to Munich authorities. Executives also faced charges.

“Siemens got everyone’s attention on the FCPA,” Axelrod said.Axelrod co-leads a Disruptive Technology Strike Force that was created last year, along with Matthew Olsen, assistant attorney general for national security.

On Tuesday, Axelrod said the strike force has prioritized protecting advanced technologies from illegal acquisition and use by nation state actors like Russia, China and Iran

The Department of Commerce, which regulates and enforces export control rules, has drawn fire amid reports of U.S. technology illegally ending up in China and Russia in violation of regulations.

On Tuesday, Axelrod also announced enhancements to voluntary self-disclosure policies designed to get minor violations resolved more quickly and enable authorities to concentrate on more serious violations.

“We want to clear out the underbrush of lower level administrative cases …to focus more of our time and attention on the bigger ticket items on which we’re now going to be imposing higher penalties,” he said.

(Reporting by Karen Freifeld; Editing by Alexandra Alper and Mark Porter)

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