Consent Agreements - About

1 ConsentAgreementsArthur ShulmanOffice of Defense Trade Controls ComplianceDirectorate of Defense Trade Department of StateSIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseOverview Defense Trade Controls Compliance Organization Review and Adjudication ofViolations Consent agreement Process Systemic Problems Culminating in Settlement Corrective Actions and Solutions Trends CaseStudies Lessons Learned2 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseOrganizational Chart3 Acting DirectorArthur ShulmanPolicy & Operations TeamCompliance and enforcementpolicies and proceduresIntra-DDTC and internal opsIT coordinationCompany Visit ProgramSenior liaison with lawenforcementMergers and acquisitionsDoS/PM lead for CFIUS mattersCompliance and EnforcementTeamVoluntary and directed disclosuresDebarments, denials, reinstatements,policy exceptionsConsent Agreements and monitoringCoordination with law enforcementAECA Section 3 investigations /reportingRegistration TeamRegistration of exporters,manufacturers, and brokersRegistration fee collectionSenior AdvisorDaniel BuzbySIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseEnforcement Laws & RegulationsConsequences of compliance failures.

2 Affects United States and partners national security and foreign policy Affects exporter and recipient entities reputation and business opportunities Affects ability to obtain sensitive technologies Denial or revocation of export authorizations Financial cost costs associated with review, issue resolution andadministrative/criminal and foreign individuals and corporations may be held liable for criminaland civil offenses under the AECA and its enumerated statutesCivil Violations >$1millionfor each violation Extra compliance measures DebarmentCriminal Violations $1 million for each violation 20 years imprisonment Debarment4 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseWatch ListBlue LanternDTSA coordinationInterrogatories/imposedrequi rementsNotice/warning letterCompany visitReferral to lawenforcementCivilEnforcementActionsAdm inistrativeProceedingsReview ofViolationsDirected auditDirected CommodityJurisdictiondeterminationExport authorizationdenial/revocationCharging letterConsent agreementsettlement withmonetary penaltyand/or monitoredremediationDebarmentReview and Adjudicationof Violations5 SIA PROPRIETARYNOTE.

3 All speaker comments are off-the-record and not for public releaseAdministrative EnforcementWhether to Pursue and How Factors Considered Degree of willfulness Destinations involved Systemic nature of violations Related and unrelated violations Related criminal or other civil violations Similarity to other civil administrative cases Mitigating and aggravating factors Harm to national security or foreign policy Nature of disclosure Nature of violations Remedial compliance measures6 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseAdministrative EnforcementProcess Charging letter Sets forth alleged violations May begin negotiation process with a proposed chargingletter If no settlement, submit charging letter toAdministrative Law Judge to initiate civil administrativeproceedings Consent agreement (CA) Negotiated settlement between Department andcompany May enter into settlement negotiation process before orafter filing charging letter with Administrative Law Judge(can withdraw charges)7 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseConsent AgreementProcess Charges are usually resolved via a consentagreement settlement Settlement components.

4 Proposed charging letter and Consent agreement Negotiate language of the proposed charging letterand settlement terms set forth in the consentagreement Action memo package for Assistant Secretary Final proposed charging letter, Consent agreement ,order8 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseConsent AgreementRequirements and Monitoring Consent agreement sets forth certain requirements to befulfilled during agreement term Special Compliance Official (internal/external) Reviews and audits Reports (special compliance official and company) Implementation/enhancement of compliance program policiesandprocedures, including training Debarment, if applicable Civil penalty, a portion of which may be suspended Term of agreement , typically 2-4 years DTCC monitors company s fulfillment of Consent agreementrequirements for the agreement term Settlement documents are published on the Department swebsite9 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseCivil Penalty Penalty amount varies based on.

5 Number, nature, and severity of charged and otherviolations Company cooperation and negotiations Aggregate civil penalty typically includes: Fine (paid in installments or in full) Suspended penalty assessed/credited for: Self-initiated pre-CA remedial compliance measures CA-authorized remedial compliance costs Suspended penalty expenditures reviewed by specialcompliance official and subject to DTCC approval At CA conclusion, any remaining portion of suspendedpenalty generally must be paid in full in 30 days10 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseSystemic ProblemsCulminating in Settlement Authorization management Improper jurisdiction/classification Culture of Non-compliance Reporting requirements11 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseCorrective Actions and Solutions Centralized oversight IT automation and consolidation Business/company-wide analysis Effective root cause analysis Involving engineers in thejurisdiction/classification process Detailed processes & checklists totrack administrative requirements12 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public release*CA has not yet concluded** UTC CA concluded.

6 Terms/requirements followed Sikorsky divestment to Lockheed Martin+Suspended in whole or in part as provided in the Consent AgreementActive & Recent Agreements13 AgreementTypeCompanyYearPenalty (USD)# ofProposedChargesOversightAgreementRocky Mountain Instrument Company2016N/AN/AConsentAgreementTuri/TD G2016200,000+2 Esterline TechnologiesCorporation201420,000,000+28 2 Aeroflex, ,000,000+158 RaytheonCompany20138,000,000+125 Sikorsky/Lockheed Martin**2012N/AN/ABAE Systems,plc*201179,000,000+2,591 Microwave Engineering Corporation(penalty only)2016100,0001 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseTrends Increase in voluntary disclosures submitted under CA agreement term extension Tailored Agreements for specific cases Oversight agreement Penalty-only agreement SCO/ISCO effectiveness and availability Significantinvestments in IT infrastructure More frequent DDTC visits Tailored reporting requirements Consolidated reporting of violations Disclosure trends FY 2016 Voluntary disclosures: 929 (-137) Directed disclosures: 56 (+2)14 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseCase Study #1 Background Company submitted numerous disclosures related to themanagement of authorizations.

7 Company failed to identify that there was a systemiccompany-wide problem DDTC directed the company to perform multiple large scalereviews of authorizations Solution Company entered into a Consent agreement with DDTC SCO directed a company-wide audit of all Agreements Company has invested significantly in IT automation to ensureall requirements are met prior to export under anyauthorization15 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseCase Study #2 Background Multinational conglomerate with decentralized oversight of exportcontrol compliance Multiple disclosures from various business units covering repeator similar violations Uncoordinatedand incomplete corrective actions evidenced asystemic company-wide problem Solution Company instituted policy to disclose all suspected violations andentered into a Consent agreement Company centralized compliance oversight and began large-scalereviews of problem areas Company developed IT solution to report, analyze, and tracksuspected violations through corrective action completion16 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releaseLessons Learned Company-wide investigations Ensure effective implementation ofcorrective actions Accurate root cause analysis Central oversight17 SIA PROPRIETARYNOTE.

8 All speaker comments are off-the-record and not for public releaseQuestions18 SIA PROPRIETARYNOTE: All speaker comments are off-the-record and not for public releas