Series: Types of Industrial Espionage

Industrial espionage refers to various activities performed to gain an unfair competitive advantage, rather than for national security purposes. As we discussed in a previous article, the ways in which industrial espionage can affect a company are numerous and include theft of trade secrets and disruption to operation.

Section 1832 of the Economic Espionage Act of 1996 (the “Act”) criminalizes the theft of trade secrets “intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner.” The trade secret owner is required to take “reasonable measures” to keep the information secret. For individuals, convictions in violation of 18 U.S.C. § 1832 can result in a prison sentence of up to 10 years or a monetary penalty, or both. For organizations, the fine may be “not more than the greater of $5,000,000 or 3 times the value of the stolen trade secret . . . including expenses for research and design and other costs of reproducing the trade secret.” Section 1832 requires that the products be “produced for” or “placed in” interstate or foreign commerce.

New DOJ KleptoCapture Task Force to Enforce Russia Sanctions

By Chase Goldstein on May 9, 2022 Posted in corruption, Cryptocurrency, cybersecurity, Department of Justice, Economic sanctions, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA), Sanctions, United States

On March 2, 2022, the U.S. Department of Justice (“DOJ”) announced the creation of the interagency Task Force KleptoCapture (the “Task Force”) to enforce the sanctions, export restrictions, and economic countermeasures against Russian officials and oligarchs in response to the conflict in Ukraine. The Task Force will consist of prosecutors and agents from numerous federal agencies and will have the authority to investigate and criminally prosecute sanctions violations, as well as seize and forfeit assets belonging to oligarchs and others who violate sanctions.

Background

In response to the conflict, the U.S. government and ally nations have imposed the most restrictive sanctions ever against a major economic power, designed to isolate Russia from global markets. President Biden signaled the creation of a task force to enforce these sanctions in his State of the Union address, stating, “I say to the Russian oligarchs and corrupt leaders who have bilked billions of dollars off this violent regime: no more. The U.S. Department of Justice is assembling a dedicated task force to go after the crimes of Russian oligarchs. We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets.” The following day, Attorney General Garland announced the launch of the Task Force, stating, “We will leave no stone unturned in our efforts to investigate, arrest, and prosecute those whose criminal acts enable the Russian government to continue this unjust war. Let me be clear: if you violate our laws, we will hold you accountable.”

Slavery in Supply Chains

By Malak Abbas and Jonathan Chibafa on April 15, 2022 Posted in corruption, Foreign Corrupt Practices Act, Oil and Gas, Power/Energy, Rail, Uncategorized

Squire Patton Boggs has published its first edition of the Commodities & Shipping Group’s (CSG) Quarterly Update. The topic we chose to focus on for this publication is slavery in supply chains.

The Global Survey Index reports over 45.8 million people are subject to modern slavery (26% of whom are children, and 55% are women and girls). The statistics are not only sobering, they have attracted global attention and understandably raised alarm.

Read our full article here.

What Price Privacy? UK Drive For Foreign Owners’ Transparency

By Ben Ticehurst on March 25, 2022 Posted in Anti-corruption, anti-money laundering, Economic sanctions, Russia, UK Bribery Act

I wanted to take a moment to thank WealthBriefing.com for featuring my recent article “What Price Privacy? UK Drive for Foreign Owners’ Transparency”.

As the geopolitical landscape evolves and global financial sanctions take hold, the Economic Crime (Transparency and Enforcement) Bill introduced into UK law this month is worth reviewing. Will the new legislation prevent money laundering through UK properties by foreign owners and have the intended impact on oligarchs? Read on:

What Price Privacy? UK Drive for Foreign Owners’ Transparency

New Law Requires 72-Hour Notice for Cyber Incidents

By Colin Jennings and Ericka Johnson on March 17, 2022 Posted in Compliance Program, cyberattack, cybersecurity, Data Protection & Privacy, Uncategorized, United States

We recently shared a timely post on Consumer Privacy World that, given the focus of, we wanted to call to your attention.

“President Biden has recently delivered on a long stated priority of his presidency: requiring the disclosure of cyber security incidents for companies that operate critical infrastructure. After announcing an executive order in May 2021 aimed at modernizing the federal government’s cybersecurity practices, the same sweeping changes will now effect private companies that operate critical infrastructure. At the time of the executive order, some noted that the recent string of high profile ransomware attacks was leading to a bipartisan effort to require disclosures of such incidents by those effected in the private sector. Indeed, Congress has acted quickly in codifying disclosure requirements for those that operate critical infrastructure.”

Check out the full blog here.

The Fine Art of Money Laundering: The Treasury Department’s Study on Money Laundering and Terrorist Financing in the Art Trade

By Sassi Riar and Rebecca Worthington on March 14, 2022 Posted in anti-money laundering, Uncategorized, US Treasury

The National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) became law early in 2021, after a congressional override of then-President Trump’s veto. Division F of the NDAA consists of the Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA expands numerous Bank Secrecy Act (“BSA”) requirements, and amends the BSA’s definition of “financial institution” to include persons “engaged in the trade of antiquities.”[1] Section 6110(c) of the AMLA also requires the Secretary of the Treasury, in coordination with the Director of the Federal Bureau of Investigation, the Attorney General, and the Secretary of Homeland Security, to perform a study of the facilitation of money laundering and the financing of terrorism (“ML/TF”) through the trade in works of art. The Department of the Treasury released its report in February 2022, containing the findings and determinations made in carrying out the required study.

President Biden Issues Executive Order Directing Agencies to Develop Policy Recommendations on Digital Assets

By Kevin McCart, Kyle Fath and Nathan Leber on March 11, 2022 Posted in bitcoin, Cryptocurrency, Department of Justice, US Treasury

President Biden has signed his long-awaited Executive Order on digital assets (“Executive Order”). The Executive Order, titled Ensuring Responsible Development of Digital Assets, does not announce any new regulations for the digital asset industry. Instead, the Executive Order mandates federal agencies to take a unified approach to developing specific policy recommendations for a comprehensive regulatory framework for digital assets. The mandates also include a directive to the Secretary of the Treasury to lead an effort to explore the United States issuing its own Central Bank Digital Currency (“CBDC”), often referred to as the “digital dollar.” While some commentators have suggested that the EO is “ground that has been trod before”—cross-agency cooperation and the exploration of a CBDC—Senior Administration Officials were quick to point that while it is true that these issues have been explored at length, the EO is “a way to organize [the government] with urgency so that [the government has] a coherent and coordinated view on digital assets and that it’s articulated at the very highest level of our government.” Industry executives and other commentators have called the EO a “watershed moment” due to its breadth and effort to address the digital asset market as a whole.
Continue Reading

DOJ FCPA Opinion Encourages Corporate Disclosure

By Sanaa Bayyari and Benjamin Glassman on March 1, 2022 Posted in Department of Justice, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA)

On January 21, 2022, the Department of Justice issued an opinion applying the Foreign Corrupt Practices Act to a Hollywood movie-like factual scenario relating to extortion and duress. The opinion is one of two FCPA opinions published within the last two years. Before those two opinions, DOJ had not published one since 2014. Publication of the opinion shows that DOJ’s FCPA Unit is ready to act, and it also signals benefits for proactive disclosure—a broader DOJ theme.

The January 2022 opinion was in response to a request by a U.S. Requestor, whose vessel was seized in international waters and its captain and crew detained by an unnamed country’s naval forces. Initially, the vessel was supposed to anchor at another country’s port, but due to the port reaching maximum capacity, the captain was advised to anchor in another location until the port became available. The captain was given incorrect coordinates by a shipping agent, and those coordinates inadvertently led the vessel into the unnamed country’s territorial waters. The unnamed country intercepted the vessel and directed the captain and crew into its harbor. Thereafter, the vessel’s documents were confiscated; the captain was jailed without questioning or apparent legal reason; and the crewmembers and officers were ordered to remain on the ship. At the time of his detention, the captain was suffering from serious medical conditions that “would be significantly exacerbated by his detention,” which “created a significant risk to his life and well-being.”

DOJ Ends “China Initiative” Targeting Economic Espionage

By Nic Gunton, Ally Rich and Colin Jennings on February 27, 2022 Posted in China, Department of Justice

Chinese flag on China map.

On February 23, 2022, the U.S. Department of Justice (“DOJ”) announced the end of an initiative to prioritize suspected Chinese economic espionage. The intent of the initiative was to prevent China’s intelligence apparatus from stealing U.S. technology, specifically from research institutions and universities. However, DOJ National Security Division Chief Matthew Olsen stated the initiative “fueled a narrative of intolerance and bias” and had a chilling effect on scientific collaboration and recruitment by U.S. research institutions. Olsen’s comments and the policy change concludes a review that Olsen ordered shortly after his confirmation by the Senate.

Since the initiative’s inception, the DOJ’s enforcement efforts were mixed. While the DOJ has credited the initiative with some major prosecutorial victories, one study found that cases against academics more often resulted in dismissals rather than convictions. Many prosecutions under the initiative involved alleged grant fraud by researchers working at U.S. universities stemming from alleged failures to disclose ties to the Chinese government. Critics cited the lack of success as proof of racial bias and government overreach. As a result of the policy change, the DOJ’s national security prosecutors are expected to more closely supervise grant fraud cases, and the DOJ may seek civil or administrative sanctions instead of criminal prosecutions.

Although the DOJ will likely remain vigilant in monitoring threats posed by China, Olsen indicated the DOJ will also expand its focus to include threats posed by North Korea, Iran, and Russia. In light of the new conflict in Ukraine, Russia specifically may find itself under increased scrutiny. Nevertheless, individuals and companies with connections to China and other foreign governments should remain diligent in their disclosures and expect the DOJ to continue to scrutinize their activities for possible economic espionage.

Series: Economic Espionage and Theft of Trade Secrets

By Benjamin Glassman, Matthew Wagner and Colin Jennings on February 24, 2022 Posted in China, corruption, Department of Justice, Government Investigation, Russia, United States, US Department of Justice

In 1996, President Clinton signed the Economic Espionage Act (the “Act”). At the time, the principal proponents of the law included business leaders from the then burgeoning Silicon Valley as well as from the aerospace industry. Proponents of the Act claimed foreign entities were actively attempting to steal trade secrets and that the existing laws at the time did not adequately protect their interests. The Act, among other things, criminalized the theft of trade secrets intended to benefit “any foreign government, foreign instrumentality, or foreign agent.” Steep penalties for violations of the Act demonstrated that the United States would take economic espionage extremely seriously. Since its passage, the U.S. Government has aggressively enforced the Act against those who have sought to steal trade secrets from companies for the benefit of foreign adversaries.

Convictions for economic espionage in violation of 18 U.S.C. § 1831 can result in a prison sentence of up to 15 years. Since the Act’s initial passage, Congress has increased the potential monetary penalties for violations to $5 million. For organizations, the maximum possible fine was increased to “the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization.” Between 1996 and 2020, there were no fewer than 190 cases against 276 individual defendants for violation sunder the Act. Of these individual defendants, 31 were convicted of economic espionage under § 1831 of the Act; the remainder were convicted for theft of trade secrets under § 1832.

What is economic espionage?