OFAC — the Treasury Department’s Office of Foreign Assets Control — publishes a running log of its sanctions enforcement activity against corporations. The DOJ and SEC do the same with the FCPA. That gives us a way to compare sanctions and FCPA enforcement.
The comparison isn’t perfect. As I explained last time, sanctions enforcement isn’t about OFAC alone. The State and Commerce Departments also have a role.
But OFAC does the heavy lifting. It has jurisdiction to administer 35 sanctions programs, including both country- and policy-based programs. So OFAC’s enforcement count is complete enough to provide a meaningful comparison with FCPA enforcement.
(For both sanctions and FCPA enforcement, parallel DOJ criminal prosecutions against corporate defendants simultaneously with civil actions by OFAC or the SEC respectively count as one action, not two. That eliminates double counting.)
Here are corporate enforcement results for the FCPA and sanctions from 2018 through July 11, 2023.
During the period surveyed, OFAC brought 94 corporate enforcement actions for sanctions violations, and the DOJ and SEC brought 61 corporate FCPA enforcement actions.
The annual volume of OFAC cases has been high and holding fairly steady since 2019, while yearly FCPA cases have declined since 2018. Separately, the number of pending FCPA-related investigations that companies or enforcement agencies have disclosed has held steady since 2018.
Our comparison reveals that the average amount of financial penalties imposed in OFAC corporate enforcement actions fell far below average penalties in corporate FCPA cases in all years surveyed except 2023 (so far). This year, average penalties in FCPA corporate cases have fallen well below their five-year historical average, while average penalties for OFAC corporate enforcement actions are far above their historical five-year average.
What to make of the significant decline in the number of cases and average penalties of FCPA corporate enforcement actions beginning in 2021 and continuing through today? Initially, some commentators attributed the declines to Covid-19 and the government’s overall slowdown. But with more than 18 months of additional enforcement data, it looks like something more is at work.
The direction of FCPA corporate enforcement since 2021 and the partial 2023 OFAC corporate enforcement numbers show contrasting trends. The key question is whether the trends represent permanent shifts, or whether temporary external factors are influencing the numbers?
It’s too early to know for sure. But the feds focus on the Russia sanctions and efforts to disrupt crypto flows can’t be discounted. Even the DOJ’s initiative to track down and prosecute pandemic-related fraud could be impacting criminal enforcement in other areas, including the FCPA.
In another 18 to 24 months, Washington’s longer-term priorities should become clearer.
By then, as Harry has said, we may be facing a full-blown compliance crisis. If that happens, it’s likely to cause a spike in FCPA-related investigations and spur policy makers to shift resources back to anti-corruption enforcement, triggering a new enforcement cycle.