Companies should prepare for more U.S. sanctions to be levied against China and Russia under the Biden administration, two former financial crime regulators predicted Tuesday at Compliance Week’s “Financial Crimes Risks, Trends, and Proven Practices” virtual conference.
Charlie Steele, who retired last year as chief counsel for the Office of Foreign Assets Control (OFAC) and is now a partner at consulting firm Forensic Risk Alliance, told an audience of compliance practitioners he expects OFAC to issue a slew of new sanctions in 2021. The rollout will be slow at first, he said.
With the change in administration comes a change in philosophy, Steele said. There will be more deliberation by OFAC and others in the Biden administration to determine when and where to levy sanctions. That is in stark contrast to the way sanctions were developed and issued under the Trump administration, added Brandon Van Grack, a partner at law firm Morrison & Foerster and former chief of the Foreign Agents Registration Act Unit at the Department of Justice (DOJ).
“Under [former President Donald Trump], sanctions decisions were not centralized, and so they were made much quicker,” Van Grack said.
Under President Joe Biden, OFAC will seek to consult on sanctions with traditional partners like the United Kingdom and the European Union, Steele said, in an attempt to build consensus on which sanctions to impose. More entities issuing the same sanctions will also give them more teeth, he said.
But that deliberation and coordination will take time, he said. The rollout of sanctions will also be slowed by the fact that not all of Biden’s appointments have been confirmed.
The Biden administration has made it clear it is more willing to issue sanctions against Russia for its interference in the 2016 and 2020 presidential elections, as well as for malicious cyber-activity. China could receive sanctions for more recent cyber-attacks it might have launched against the American government and industrial targets.
“I think we can expect to see broad use of government tools on cyber-issues—not just sanctions, but AML and others as well,” Steele said.
China will continue to come under fire from OFAC for human rights abuses against Muslim minorities in the Xinjiang region. Communist Chinese military companies, a group already under sanctions issued by Trump, will receive increased scrutiny for potential sanctions under Biden, Steele said.
Under Biden, OFAC will increase scrutiny of compliance programs and measures, Steele said. Sectors that may receive added attention in terms of sanctions include energy, FinTech, marine, logistics, and transportation.
Companies can prepare for increased sanctions by ensuring their compliance programs are up-to-date, with clear policies and procedures and regular training for staff, Van Grack said.
Van Grack has heard of two-day meetings at the DOJ held just to analyze whether a particular company’s compliance program is effective. “It can’t just be a program, [compliance] needs to be a tool that will be deployed and understood by the persons at the company,” he said.
Compliance programs need to be constantly monitoring and evaluating the information—financial activity, exports, imports, supply, even where your firm has investments—so they fully understand where the business may be touched by sanctions. Knowing your customers and your suppliers is also key, Van Grack said.
“The expectations are greater than ever before,” he said. “It’s not just where are your items going but who is providing those items to you or what you are relying on in a way that is requiring a diligence unlike anything that has existed before.”