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African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the assistance of Kerry Contini (Senior Associate, Washington, DC) Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. © 2015 Baker & McKenzie LLP

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Page 1: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

African Trade Compliance

Amcham Regional Trade Forum | 11 February 2016

Darryl Bernstein (Partner, Johannesburg)

Prepared with the assistance of Kerry Contini (Senior Associate, Washington, DC)

Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss

Verein with member law firms around the world. In accordance with the common

terminology used in professional service organisations, reference to a "partner" means a

person who is a partner, or equivalent, in such a law firm. Similarly, reference to an

"office" means an office of any such law firm.

© 2015 Baker & McKenzie LLP

Page 2: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

Sanctions

Page 3: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

EU and U.S. Sanctions Targets

3

Afghanistan

Lebanon

Burma

DR Congo

Egypt

Tunisia

Libya

Eritrea

Somalia

Guinea and

Guinea-Bissau

Sudan and

South Sudan

Iraq

Ivory Coast

Iran

Liberia

Belarus

North Korea

Syria

Burundi

China

SFRY Armenia and

Azerbaijan

Cuba

USA (EU/Cuba

Blocking

Measures)

Cyprus

Fiji

Haiti

Sri Lanka

Venezuela Vietnam

EU and U.S.

EU only

U.S. only

U.S. Anti-

Boycott only

Saudi Arabia

Central African

Republic

Russia

Ukraine

UAE

Kuwait

Yemen

Crimea

and Sevastopol

Zimbabwe

Page 4: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Embargo

• Sudan

Other Significant Sanctions

• Burundi (EU and US)

• Central African Republic (EU and US)

• DR Congo (EU and US)

• Egypt (EU)

• Eritrea (EU)

• Guinea (EU)

• Guinea-Bissau (EU)

• Ivory Coast/Cote d’Ivoire (EU and US)

• Liberia (EU)

• Libya (EU and US)

• Somalia (EU and US)

• South Sudan (EU and US)

• Sudan (EU and US)

• Tunisia (EU)

• Zimbabwe (EU and US)

Libya

Sudan

Somalia

Zimbabwe

Democratic

Republic of

Congo

Central African

Republic

South

Sudan

Burundi

Ivory

Coast

Liberia

Egypt

Guinea -

Bissau

Guinea

Eritrea

Tunisia

Sanctions Programs in Africa

Page 5: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

US Sanctions Target Groupings

Comprehensively

Sanctioned

Territories

Significantly

Sanctioned

Territories

Limited Sanctions

(SDNs)

Restricted Persons

(SDNs)

• Cuba, Iran, Sudan, Syria, Crimea region

• Burma/Myanmar, North Korea, Russia

• W. Balkans, Belarus, Burundi, Central African Republic, Côte

d’Ivoire, DR Congo, Iraq, Lebanon, Libya, Somalia, South

Sudan, Ukraine, Venezuela, Yemen, Zimbabwe

• Specially Designated Nationals (SDNs)

• Terrorists, WMD proliferators, human rights violators, transnational

criminal organizations, narcotics traffickers, malicious cyber-related

activities, rough diamonds, foreign sanctions evaders, etc.

5

Page 6: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Broad Jurisdictional Scope of US Sanctions

US Persons

Anyone

dealing in

US Origin/

Content

Items

Non-US

Persons

engaged in

sanctionable

activity

6

Page 7: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

US Sanctions - Penalties

• Criminal: up to $1 million and/or 20 years imprisonment

• Civil: up to the greater of $250,000 or twice

the value of the transaction per violation

• Strict liability regime

• Other consequences

• Collateral designation as SDN (Specially Designated Nationals)

• Inclusion on Entity List

• Revocation of export or OFAC licenses

• Denial of export privileges

• Negative publicity, loss of reputation

66

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© 2015 Baker & McKenzie LLP

Largest Fines in US Sanctions/Export Controls

8

Company Industry Fine Year

1 BNP Paribas S.A. Financial Services $8.96 Billion 2014

2 HSBC Bank Financial Services $2.29 Billion 2012

3 Commerzbank AG Financial Services $1.45 Billion 2015

4 Standard Chartered Bank Financial Services $967 Million 2012/2014

5 Credit Agricole Corporate and Investment Bank Financial Services $787 Million 2015

6 Bank of Tokyo - Mitsubishi UFJ Financial Services $574 Million 2013/2014

7 ING Bank N.V. Financial Services $619 Million 2012

8 Credit Suisse AG Financial Services $536 Million 2009

9 Royal Bank of Scotland

(formerly ABN Amro Bank, N.V.)

Financial Services $500 Million 2010

10 BAE Systems PLC Defense $400 Million 2010

11 Barclays Bank PLC Financial Services $298 Million 2010

12 Deutsche Bank Financial Services $258 Million 2015

Includes civil penalties paid by banks to NY regulators (e.g., NYDFS, DANY)

Page 9: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Key US Compliance Issues

• US Persons prohibited from dealing, directly or indirectly, with SDNs

(Specially Designated Nationals)

• Causing, conspiring, aiding or abetting US sanctions violations by others

• Property or property interests received by any U.S. Person or in the United

States must be blocked and reported to OFAC

• Includes funds, contracts, L/Cs, shares, guarantees, etc.

• Initial and annual reports

• Collateral risk of designation for providing “material support” to SDNs

• SDNs can be located anywhere!

• SDNs are Listed | 50% owned | Controlled

9

Page 10: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

US Embargo Updates

Page 11: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Libya: Potential Re-Intensification

‒ OFAC and BIS rules published in February 2015

‒ Authorize export or reexport to Sudan of certain software, hardware, and services incidental to

personal communications

Even fee-based (previously only no-cost)

Hand carries from the United States to Sudan

‒ Case-by-case licensing policies for certain similar items not eligible for the general license

11

Sudan: Personal Communications

‒ EU | US sanctions lifted 2011

‒ February - March 2015 – European Council reaffirmed willingness to strenghten Libyan

sanctions and to designate individuals threatening the peace, stability or security of Libya

pursuant to UNSCR 2174

Zimbabwe: EU & US Sanctions ‒ EU: 26 October 2015 Council Regulation (EU) 2015/1919 suspended targeted sanctions in

Zimbabwe against all but President Robert Mugabe, his wife Grace, and Zimbabwe Defence

Industries

‒ US: SDNs under EOs 13288, 13391 and 13469

‒ Sanctions block the property and interests in property of listed individuals and entities

Page 12: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

CAR, South Sudan and Burundi: First

Designations

12

‒ Central African

Republic

‒ U.S.

• 12 May 2014 - EO 13667

authorized designation of

SDNs; first 5 SDNs

designated

• 7 July 2014 - Central

African Republic Sanctions

Regulations issued

• 21 8 2015 – 5 SDNs

‒ EU

• EU arms embargo from 23

December 2013

• 10 March 2014 - EU

implements UN travel ban

and asset freeze regime

• 24 June 2014 - first 3 DPs

‒ Burundi

‒ U.S.

• 23 November 2015 – EO

authorises designation of

SDNs; first 4 SDNs

designated

• 18 December 2015 –

Additonal designations

• 4 February 2016 – One

SDN removed

‒ EU

• 02 October 2015 – EU

implements travel ban

and asset Freeze regime,

first 4 DPs

‒ South Sudan

‒ U.S.

• 3 April 2014 - EO 13664

authorizes designation of

SDNs

• 1 July 2014 - South Sudan

Sanctions Regulations

issued

• 6 May and 18 Sep 2014 -

first 4 SDNs

• 2 July 2015: 2 SDNs

‒ EU

• 24 Nov 2011 - EU extends

arms embargo against

Sudan to South Sudan

• 11 July 2014 - first 2 DPs

Page 13: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Liberia | EU, US and UN Sanctions

‒ Removal of all sanctions: EU 6/11/2015 | US 12/11/2015 | UN 2/09/2015

DR Congo | EU and US Sanctions

‒ EU: DR Congo remains subject to EU Sanctions imposing asset freezes and travel restrictions

on persons violating the UN arms embargo of 2003 and various political and military leaders

and those supporting such persons

‒ US: DR Congo remains subject to US Sanctions – July 2014, issued EO expanding sanctions

criteria to allow for more US flexibility in targeting persons contributing to the conflict in the

DRC, including entities complicit in the “illicit trade in natural resources”, as well as to conform

more closely to the criteria established in relevant United Nations Security Council Resolutions

Page 14: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Sanctions and The African Union

Page 15: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

15

The African Union ‒ Charged with promoting Peace, Security and Stability on the continent.

‒ The AU's Peace and Security Council (PSC), whose descisions are binding on member states,

is empowered to impose sanctions in cases of:

unconstitutional change of government; and

potential or actual conflicts.

‒ Since its first meeting (2004) the PSC has been active in relation to the crises in Darfur,

Comoros, Somalia, Democratic Republic of Congo, Burundi, Côte d'Ivoire and other

countries.

‒ It has adopted resolutions creating the AU peacekeeping operations in Somalia and Darfur,

and imposing sanctions against persons undermining peace and security (such as travel bans

and asset freezes against the leaders of the rebellion in Comoros).

‒ Most recently it suspended Burkina Faso and slapped sanctions on the leaders of its military

coup, imposing a travel ban and asset freeze on the junta's leaders.

Page 16: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

South African Export

Controls

Page 17: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Export of Military Items

‒ The Non-Proliferation of Weapons of Mass

Destruction Act No. 87 of 1993 ("NPWMD")

weapons of mass destruction

‒ The National Conventional Arms Control Act No. 41

of 2002 ("NCAC")

conventional weapons

Page 18: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

18

The Non-Proliferation of Weapons of Mass

Destruction Act No. 87 of 1993 (NPWMD)

‒ Governs the control, possession, export, import, manufacturing and transport of

non-conventional weapons intended for mass destruction - chemical, biological,

missile and nuclear weaponry.

‒ Controlled goods will generally require:

registration with the South African Council for the Non-Proliferation of Weapons of Mass

Destruction ("the Council");

a permit in the prescribed format obtained from the Council along with the required fees;

a declaration to the Council in accordance with the provisions of an international

convention, treaty or agreement with regard to the manufacture, procurement in any

manner, use, operation, stockpiling, maintenance, transport, import, export, transit or re-

export of such goods; and

potentially the submission of samples of the "controlled goods" upon registration or

upon application for a permit.

Page 19: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

19

The National Conventional Arms Control Act No.

41 of 2002 (NCAC)

‒ Governs the control, possession, export, import, manufacturing and transport of

weapons/military goods. Excludes conventional firearms and ammunition (e.g. for the police

or private persons), as well as conventional explosives (e.g. for mining applications).

‒ Controlled Items are those listed by the 2010 Wassenaar Control List (Version

10.1 - dated 22/12/2010). This is not the most recent version of the international

Wassenaar List used by other states. South Africa simply uses an older version.

‒ Controlled goods will generally require:

an export permit from the National Conventional Arms Control Committee ("NCACC");

registration by any person involved, with the NCACC;

possession requires a registration certificate from the NCACC; and

any export must be confirmed by an end-user certificate from the authorised agent in

the receiving country.

‒ Exception for ‘insignificant' items or those used solely in commercial and/or

banking applications

Page 20: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

Anti-bribery & Anti-corruption

Page 21: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

21

FCPA Provisions ‒ Antibribery Offense

Prohibits U.S. persons and, in some cases, foreign persons from corruptly offering, authorizing, or making payments, or giving anything of value, to any foreign official or political parties for the purpose of obtaining or retaining business

‒ Books and Records Issuers are required to make and keep detailed books, records, and accounts that fairly and accurately reflect transactions and

dispositions of assets

‒ Internal Accounting Controls

Issuers must devise and maintain internal accounting controls to ensure that:

financial records and accounts are accurate for external reporting,

access to assets is permitted only in accordance with management instructions, and

the books are audited at reasonable intervals.

Page 22: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

22

Elements of an Anti-Bribery Offense

1. Covered Persons

2. Payment

3. Corrupt Intent

4. Knowledge

5. Business Purpose

6. Foreign Official/Political Parties

7. Jurisdictional Nexus

Page 23: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

23

U.S. Prosecutorial Tools for Use Against

Non-U.S. Companies

‒ “Act in furtherance” in the U.S.

Use of U.S. mails

‒ “Issuer” in U.S. by accessing U.S. public

capital markets

‒ “Agent” of U.S. entity

‒ Acts of a U.S. subsidiary

‒ “Intimidation” of U.S. customers

‒ Conspiracy involving U.S. entity/individual

Page 24: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Top 20 FCPA Settlements (Millions)

24

Siemens $800

Alstom $772

KBR/Halliburton $579

BAE $400

Total S.A. $398

Alcoa $384

ENI S.p.A. $365

Technip $338

JGC Corporation $219

Daimler $185

Weatherford $152

Alcatel-Lucent $137

Avon $135

Hewlett-Packard $108

Deutsch / Magyar Telekom $95

Marubeni Corporation $88

Panalpina $82

Johnson & Johnson $70

Pfizer / Wyeth $60

ABB $58

2008

2009

2010 2013

2011

2012

2014

Page 25: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Top 20 FCPA Settlements (Millions) Siemens $800 2008

Alstom $772 2014

KBR/Halliburton $579 2009

BAE $400 2010

Total S.A. $398 2013

Alcoa $384 2014

ENI S.p.A. $365 2010

Technip $338 2010

JGC Corporation $219 2011

Daimler $185 2010

Weatherford $152 2013

Alcatel-Lucent $137 2010

Avon $135 2014

Hewlett-Packard $108 2014

Deutsch / Magyar Telekom $95 2011

Marubeni Corporation $88 2014

Panalpina $82 2010

Johnson & Johnson $70 2011

Pfizer / Wyeth $60 2012

ABB $58 2010

Page 26: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Core risk areas to be aware of

26

1. Contributing to Communities and CSR Payments

2. Managing Security Issues and Protection

Payments

3. Working in Cash Economies

4. Dealing with Inadequate Information Sources

and Uncertain Legal Regimes

5. Flagging Political Party Connections

6. Knowing and Navigating Local Content Laws

7. Overseeing Customs and Immigration Matters

8. Negotiating Fines and Penalties

Page 27: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Summary of our 8 Tips for Anti-bribery

Success

27

1. Recognize the value and importance of contributing to local communities and be

attentive to ultimate beneficiaries.

2. Implement a narrow personal safety payments policy and stick to it.

3. Internal controls are more important than ever when working in

a cash economy – insist on appropriate backup documentation.

4. Recognize uncertainty and seek out trustworthy sources of

information.

5. Embrace the value in appropriately managed government

relationships.

6. Know your local partners and monitor diligently.

7. Be vigilant and never accept “it’s just the way it is” as an excuse.

8. Think outside of the box but within the law.

Page 28: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

Top Trends in Global Compliance 1. Increasing exposure and risk

2. Greater extra-territoriality and conflicting requirements

3. Don’t ignore High Growth Markets

4. Personal liability for individuals

5. Greater strict liability offences

6. Liability for misconduct of third parties

7. M&A risks and successor liability

8. Value of a robust compliance programme

28

Page 29: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

© 2015 Baker & McKenzie LLP

5 Essential Elements of Compliance

29

1. Leadership

2. Risk Assessment

3. Standards & Controls

4. Training and Communication

5. Monitoring, Auditing & Response

Page 30: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

Questions?

Thank You! 30

Page 31: African Trade Compliance - AMCHAM...2016/02/11  · African Trade Compliance Amcham Regional Trade Forum | 11 February 2016 Darryl Bernstein (Partner, Johannesburg) Prepared with the

Baker & McKenzie

Additional Resources

Follow ongoing developments in global

compliance and anti-corruption via:

http://globalcompliancenews.com/