Managing Government-Imposed Monitors in Export Enforcement Actions

  • United States
  • 09/10/2018
  • Morgan Lewis

Companies settle export enforcement actions with US government agencies for a variety of reasons. In some cases, the company has disclosed violations voluntarily and seeks to resolve matters quickly so that it can expend its time and resources on other priorities. In other cases, the government presses a settlement to encourage compliance within the company—and across an industry—or to reinforce the interpretation of specific legal requirements. In either circumstance, the government may call upon a number of enforcement mechanisms to settle the case.

In addition to fines, audits, training, and new policies and procedures, government agencies may require that an external monitor oversee the company’s compliance with the settlement agreement. In fact, the US Departments of State (on the civil and administrative enforcement side) and Justice (on the criminal and civil enforcement side) have often included the appointment of monitors as a condition of settlement. At the State Department alone—the agency tasked with licensing and compliance of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR)—external compliance monitors have been included as a condition of settlement in over 20 of the last 30 enforcement actions settled by the department since 1999.

While potentially challenging and possibly unpleasant, monitors, if chosen wisely and managed well, can enhance a company’s compliance posture and its ability to engage effectively with the government. Chosen poorly, however, monitors may represent an expensive hemorrhage of time, resources, and funds that drain a company’s accounts and return little to either the company or the government. Identifying a competent and effective monitor takes time and requires establishing ground rules that delineate the monitor’s responsibilities while preserving the monitor’s objectivity. This article highlights key factors implicating the monitor’s and company’s roles and outlines strategies for managing the monitor-company-government relationship effectively to meet everyone’s objectives.

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