A senior official at the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) gave a cautionary tale to companies in the export sector to start investing in their compliance programs early on rather than wait for an enforcement action to be taken against them to remediate.
Speaking at BIS’s annual update conference on March 28, Assistant Secretary for Export Enforcement Matthew Axelrod warned that companies trying to cut corners to finalize a deal is not worth it, as “the stakes have never been higher” given the current geopolitical landscape.
“It’s not worth prioritizing short-term profits over long-term reputational risk,” Axelrod said.
He emphasized that an effective and robust compliance program is essential in order to identify and manage risks with new or existing customers, suppliers, and distributors.
“It’s the time, money, and effort that you put into your compliance programs that stop sensitive U.S. technology from going to our adversaries,” he said, adding that failure to do so is “not just a significant reputational risk for individual companies,” but also can result in “serious consequences for our collective national security.”
Axelrod added that BIS’s goal is to encourage and incentivize companies to invest in their compliance programs, while also reminding them of the potential financial and reputational costs that can come with an enforcement action.
“Sometimes, for companies to be convinced that it’s worth it to invest in compliance on the front end, they need a reminder of the potential consequences of what can happen to them on the back end when they fail to make that investment and they’re then facing a significant enforcement action,” he said.
The senior official also highlighted several guidance documents and advisories released by BIS intended to help companies identify and mitigate risk in various industries.
The bureau has sent out numerous advisories on several matters, including voluntary self-disclosures, the transfer of cargo in the maritime sector, Iran’s drone program, and Russia’s evasion tactics. It has also published guidance to help exporters prevent “high-priority ‘battlefield items’” such as microelectronics from being diverted to Russia.
Axelrod also warned companies that their competitors have been encouraged to report on those that violate export regulation in exchange for future cooperation credit.
While concluding his speech, Axelrod reminded companies to build a strong compliance program so that they don’t increase the risk of having one of their products being “unlawfully exported,” hence facing possible enforcement action.
He noted an enforcement action BIS took last year against Seagate Technologies, which had to pay a $300 million penalty to resolve allegations that it had shipped millions of hard disk drives to Huawei Technologies without a license, violating the foreign direct product rule (FDPR).
“We’d much prefer that you spend that money investing in compliance on the front end rather than paying it in fines on the back end,” Axlerod said.
Speaking at BIS’s annual update conference on March 28, Assistant Secretary for Export Enforcement Matthew Axelrod warned that companies trying to cut corners to finalize a deal is not worth it, as “the stakes have never been higher” given the current geopolitical landscape.
“It’s not worth prioritizing short-term profits over long-term reputational risk,” Axelrod said.
He emphasized that an effective and robust compliance program is essential in order to identify and manage risks with new or existing customers, suppliers, and distributors.
“It’s the time, money, and effort that you put into your compliance programs that stop sensitive U.S. technology from going to our adversaries,” he said, adding that failure to do so is “not just a significant reputational risk for individual companies,” but also can result in “serious consequences for our collective national security.”
Axelrod added that BIS’s goal is to encourage and incentivize companies to invest in their compliance programs, while also reminding them of the potential financial and reputational costs that can come with an enforcement action.
“Sometimes, for companies to be convinced that it’s worth it to invest in compliance on the front end, they need a reminder of the potential consequences of what can happen to them on the back end when they fail to make that investment and they’re then facing a significant enforcement action,” he said.
The senior official also highlighted several guidance documents and advisories released by BIS intended to help companies identify and mitigate risk in various industries.
The bureau has sent out numerous advisories on several matters, including voluntary self-disclosures, the transfer of cargo in the maritime sector, Iran’s drone program, and Russia’s evasion tactics. It has also published guidance to help exporters prevent “high-priority ‘battlefield items’” such as microelectronics from being diverted to Russia.
Axelrod also warned companies that their competitors have been encouraged to report on those that violate export regulation in exchange for future cooperation credit.
While concluding his speech, Axelrod reminded companies to build a strong compliance program so that they don’t increase the risk of having one of their products being “unlawfully exported,” hence facing possible enforcement action.
He noted an enforcement action BIS took last year against Seagate Technologies, which had to pay a $300 million penalty to resolve allegations that it had shipped millions of hard disk drives to Huawei Technologies without a license, violating the foreign direct product rule (FDPR).
“We’d much prefer that you spend that money investing in compliance on the front end rather than paying it in fines on the back end,” Axlerod said.
