Export Penalties Increase to $250,000 or More Per Violation
The new
law
increases civil penalties from
$50,000 to the greater of
either $250,000 or twice the amount of the
transaction that is
the basis for the violation. Fines for willful and
knowing violations (criminal
penalties) were
increased from $50,000 to
$1,000,000 with the
maximum term of imprisonment remaining at 20 years.
Prior to changes brought by the USA PATRIOT ACT
Improvement and Reauthorization Act of 2005, which
went into effect in March 2006, civil penalties for
such violations were limited to only $11,000 per
violation and the maximum term of imprisonment was
only 10 years.
Thus, the new penalties are 250 times the amount of
just 2 years ago!
Under the new law, it appears that even low dollar
amount transactions could be subject to the maximum
civil penalty of up to $250,000. For example, if a
violative export transaction of $5,000 occurred,
the Department of Commerce’s Bureau of Industry and
Security (BIS) could impose a penalty of up to
$250,000 (the greater) versus a penalty of up to
twice the amount of the transaction, or $10,000
(the lesser).
Moreover, BIS or OFAC could impose a much higher
penalty in the case of a large dollar amount
transaction. For example, in the case of a
violative export transaction or wire transfer of
$1.5 million, BIS or OFAC would have the authority
to impose a maximum penalty of twice the amount of
the transaction or $3 million.
It remains to be seen how BIS or OFAC will actually
assess maximum penalties in practice.
However, in a November 1, 2007 BIS Fact Sheet, BIS
states that it will continue to grant up to a 25%
reduction of the amount of penalties to be assessed
for the existence of an effective export compliance
program in place before the violation and later
upgraded. Furthermore, for all valid Voluntary
Self-Disclosures, BIS will generally reduce any
calculated penalty by at least 50% - and does so
after considering the aggravating and mitigating
factors in the case.
Keep in mind that
penalties may increase even more in the near
future.
Senator Christopher Dodd introduced bill S. 2000 on
August 3, 2007, that is intended to increase the
enforcement authority and extend the Export
Administration Act of 1979. If that bill is passed,
the Export Administration Act of 2007 will increase
the
maximum civil penalty to
$500,000 per violation. It
will also increase the
maximum criminal penalties to the greater of $5
million or 10 times the value of the
transactions involved
for corporations and $1,000,000 and 10 years
imprisonment for individuals.