Where Industry and Security Intersect
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This afternoon, I would like to discuss with you BIS’s Export Enforcement efforts. Before I do, so however, let me take the opportunity, at the outset, to thank all of you for being here and for your interest in and compliance with the export control laws. Compliance is the arena in which the government and the private sector can act as partners, rather than as adversaries – and we welcome your partnership in that effort.
Your compliance with the export control laws is the first and best line of defense in protecting our national security. Those of us in enforcement recognize the sacrifices that you are making and those sacrifices are well-founded. As world events continue to demonstrate, our collective vigilance in this area remains critical to our national security and to the economy. So, once again, we thank you for your efforts to keep us safe and, therefore, prosperous.
Export Enforcement’s Accomplishments
In discussing BIS’s enforcement efforts, let me set the stage for the details that you will hear from the Enforcement Panel that will follow. Then I want to discuss what some of the “hot topics” in enforcement will be as we continue to move forward in 2007.
As you will hear in greater detail from our Enforcement Panel, Export Enforcement recorded one of the highest levels of enforcement activity in its history.
Our cases have involved such violations as the export of night vision equipment to the terrorist group Hezbollah in Lebanon, financial support to the terrorist group Hamas, and exports of computer and electronics components with military applications to the People’s Republic of China. Returning for a moment to our focus on our top enforcement priorities -- which are WMD proliferation, terrorist support, and diversions to military end use -- 85% of our criminal convictions were in those three areas.
The Enforcement Panel will discuss that in more detail, and the results are continuing into Fiscal Year 2007. As of the end of February we have seen 8 criminal convictions, with terms of imprisonment ranging as high as 84 months; and 14 administrative enforcement cases in which $1.1 million in penalties have been issued.
We also remain committed to supporting free and fair international trade by ensuring that no U.S. parties participate in prohibited foreign boycotts.
Our Office of Antiboycott Compliance (OAC) continues to educate the regulated public through its advice line and various outreach events and enforces the antiboycott provisions of the Export Administration Regulations (EAR) through vigorous investigative efforts.
Going forward, OAC is expanding these efforts by partnering with other federal national security and law enforcement agencies, as well as with trade advocates, to facilitate and enhance Administration trade initiatives in boycotting countries. OAC is also working with U.S. commercial officers to proffer acceptable language to foreign government officials in boycotting countries. In doing so, OAC seeks to replace boycott-related terms and conditions in commercial documents at source, before they reach U.S. entities.
In addition, as you are aware, we have published our proposed antiboycott penalty guidelines. We received comments on the proposed rule and have taken those comments into account. We look forward to publishing the final rule in the near future.
With that as our backdrop, let me discuss where Export Enforcement is going in 2007, which involves three important topics. The first topic is the enhanced prosecutorial focus on export control violations. The second is the need for a law enforcement-focused renewal of the Export Administration Act (EAA). And the final topic involves important information about how BIS will handle administrative enforcement penalties in the future.
The Government’s Enhanced Focus on Export Violations
Let me begin with the Government’s enhanced prosecutorial focus on export control violations. Just last month, the Department of Justice’s newly-formed National Security Division announced that its top counterintelligence and counterespionage prosecutorial priority is now pursuing violations involving export controls and technology transfers. This is an important recognition of the significant impact that export control violations can have on our national and economic security.
You can expect to see this new Justice Department priority result in greater involvement in criminal export enforcement cases by BIS’s Office of Export Enforcement (OEE), the Federal Bureau of Investigation (FBI), and the Department of Homeland Security (DHS). Our Office of Export Enforcement already participates in a number of Joint Terrorism Task Forces and Counterintelligence Working Groups with the FBI, DHS and other agencies around the country. We will continue and expand our work with these groups in the coming year. Those of us in BIS certainly welcome the Justice Department’s announcement, and we look forward to continuing our work with U.S. Attorneys around the country in pursuing these important cases.
BIS is also actively engaged in partnerships with the FBI and DHS in pursuing joint cases involving dual-use violations, and is also involved in a Department of Justice-led working group to find enhanced ways to share information between our sister agencies and coordinate our mutual efforts to combat export crimes. We are doing everything we can to make sure that we are focused on the most significant export crimes that pose the greatest threats to our national security. We are also doing everything we can to ensure that we are pursuing these crimes in the most effective and efficient ways possible in partnership with other Federal enforcement agencies.
EAA Renewal
Next, let me discuss what will be an important goal for Export Enforcement for the balance of 2007: renewal of the Export Administration Act. Last year, then-Chairman Hyde of the House International Relations Committed introduced a bill, H.R. 4572, that contained important provisions to enhance our export law enforcement authorities. Although the Congress adjourned without action on that bill, BIS will want to see these provisions in any bill that goes forward in the current Congress. They include:
First, we need to eliminate the sunset provisions as they relate to BIS’s law enforcement authorities. By contrast, BIS understands the value of having sunset provisions regarding the export control sections of a renewed EAA. Such sunset provisions will help facilitate an ongoing dialog between Government and private sector stakeholders to ensure that export controls properly reflect current global economic and political security concerns. But there is no value in sun-setting enforcement’s legal authorities, which involve preventing and deterring violations, and bringing violators to justice.
The current sunset provisions adversely affect our law enforcement authorities. They require that we implement needless administrative stop-gap measures to continue to provide our Special Agents with basic law enforcement authorities, such as the ability to execute search warrants to gather evidence, and also the ability to arrest violators. Eliminating the sunset provisions on the EAA’s law enforcement authorities will help ensure that our Special Agents always have the full authority they need to act promptly and decisively to protect our national security.
Second, we need increased criminal and civil penalties for export violations. BIS believes that we need significantly increased penalty provisions in order to make our penalties commensurate with the seriousness of export violations, which deal with such national security issues as WMD proliferation, terrorism and military diversions. Increased penalties will also provide the incentive for violators to cooperate with law enforcement in investigating and prosecuting co-conspirators. Such penalties will also provide more effective deterrence by narrowing the gap between the possible profit and the consequences imposed upon violators. Although the increased penalties afforded us by the USA PATRIOT Act (PATRIOT Act) renewal help, they still are not enough. Accordingly, we will seek higher penalty amounts in any renewal of the EAA.
Finally, we need provisions to enhance the law enforcement authorities of BIS’s Special Agents so that they can fully and properly investigate these important cases. Export enforcement cases involve overseas activity. And export cases involving WMD proliferation, terrorism and illicit military acquisition of U.S. items commonly involve conspiracies.
By definition, conspiracies involve attempts to maintain secrecy and evade detection. Penetrating conspiracies requires that law enforcement be able to utilize a broad array of sophisticated tools. Indeed, it often requires that law enforcement use several such tools during the course of a single investigation.
Providing explicit authority for overseas investigations, undercover investigations, and permitting the use of wiretaps to investigate export violations are important in allowing our Special Agents to gather evidence of export crimes.
Having explicit authority for foreign investigations will make plain our authority to pursue evidence of export crimes, in partnership with our U.S. and foreign law enforcement colleagues, wherever the trail may lead us.
Expanding our undercover authority is also important. BIS now has general authority to conduct financial transactions during undercover investigations. Expanding that authority so that we can use the funds generated during undercover investigations to continue conducting those operations will significantly enhance our capabilities.
Additionally, wiretap authority, which is commonly used to penetrate other types of criminal conspiracies, will give law enforcement access to the inner-workings of export control conspiracies as they are occurring, thereby providing invaluable evidence to a jury about the knowledge and intention of the parties. Wiretaps also tell law enforcement about the conspirators’ plans in real time – as those plans are being hatched and implemented. This unique access allows law enforcement to use additional investigative means to thwart those plans and gather additional evidence to bring violators to justice.
Finally, being able to seek the forfeiture of the fruits and proceeds of export crimes will enable us to attack underlying economic motives for export offenses and deprive violators of the profits of their illegal activities.
These are important provisions that BIS was very pleased to see in the last proposal to renew the EAA. We will continue to seek them in a renewed EAA in the coming year.
Increased IEEPA Penalties
For our final topic this afternoon, let me turn to the topic of penalties. Let me give you some important information on how BIS intends to administer the higher penalty levels it now has.
For several years, BIS has advocated for increases in the maximum criminal and civil penalties for export violations. It is important to have penalties that are commensurate with the national security threats posed by the most significant export crimes. Increased penalties will also provide meaningful incentives for violators to cooperate with law enforcement. Such penalties will also deter future violations. As I mentioned, we will seek higher penalties in renewal of the EAA.
As you know, the penalties for EAR violations were increased last year. Almost exactly a year ago today, on March 9, 2006 to be exact, the President signed into law the PATRIOT Act renewal. It included provisions that increased penalties under the International Emergency Economic Powers Act (IEEPA) to 20 years’ imprisonment for criminal offenses, and to $50,000 per violation for civil offenses.
Since the PATRIOT Act renewal, BIS has been working to revise our penalty practices to take these new penalty provisions into account. As you know, under the prior penalty amounts of $11,000 per violation, our practice was to charge every offense for which we had evidence to sustain a charge. We did so in an attempt to compensate for our lack of sufficient penalties, and to gain cooperation and achieve deterrence.
We recognize that the new PATRIOT Act provisions put us somewhat closer to these goals than the old penalties. We also heard your concerns about our current penalty practices, their lack of transparency and the differences between BIS’s practices and those of other agencies involved in export enforcement such as Customs.
Increased IEEPA Penalties Announcement
I am very pleased today to announce publicly for the first time that BIS will shortly implement refined practices for the charging and settlement of administrative enforcement cases brought under the new PATRIOT Act provisions.
As you will hear in more detail from the Enforcement Panel, in cases to which the higher penalties apply that settle before issuance of a charging letter, BIS will only charge the most serious violation per transaction. We will continue to draw meaningful distinctions between the seriousness of violations, with more serious offenses resulting in higher penalties for the purposes of settlement discussions. We will also continue to evaluate aggravating and mitigating factors, and will also continue to give “great weight” mitigation for valid Voluntary Self-Disclosures.
These refined practices are, in significant part, based upon feedback we received, and listened to, from the export trade community. That includes input from BIS’s Regulatory Procedures Technical Advisory Committee (RPTAC) and also numerous comments made to us in our public outreach visits and presentations. It includes feedback that challenged us to draw meaningful distinctions between the seriousness of offenses and the degree of culpability of involved parties.
The goals of our refined practices include continuing to deter future violations, reinforcing good business practices, and encouraging the development and maintenance of effective export compliance programs in the private sector.
Conclusion
I would like to close my remarks this afternoon by introducing our Export
Enforcement Panel: Wendy Wysong, Deputy Assistant Secretary for Export Enforcement; Tom Andrukonis, Director of the Office of Enforcement Analysis; Ned Weant, Director of the Office of Antiboycott Compliance; and John Sonderman, Assistant Director of the Office of Export Enforcement.
The Panel will discuss several important export enforcement topics, including:
We hope that you leave here this afternoon as the best-informed group of practitioners on BIS’s Export Enforcement Programs.
I appreciate the opportunity to be with you today and to share with you the status of our Export Enforcement program. The men and women of BIS Export Enforcement are doing outstanding work in enforcing our export control and antiboycott laws and protecting our national security, and I feel privileged to lead them in their efforts.
Again, I want to acknowledge the significant contributions that those of you in the export trade community make to our national and economic security through your compliance efforts. I am privileged to work with you as well. I look forward to our continued work together, as we promote U.S. technological leadership around the world and keep the most sensitive goods out of the most dangerous hands.