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Are you a Latin American individual or run a company in the region and would like to learn how you could benefit from conducting an internal investigation?

Individuals and corporate entities in Latin America face significant, and sometimes unexpected, risks stemming from U.S. sanctions regimes that are directed at Latin American countries. If a potential sanctions risk is not identified in time, it could result in an individual or company being added to the U.S. sanctions list, which has significant repercussions including the freezing of U.S. bank accounts and being effectively shut out of the U.S. banking sector.  Conducting internal investigations proactively can help identify and mitigate sanctions risks both: (1) before entering a business relationship or transaction to identify any potential triggers; and (2) after entering a business relationship or transaction to identify the scope of any potential risk and respond effectively if any enforcement action by the U.S. government results.

The U.S. Government currently operates three country-specific sanctions programs in Latin America: (1) Venezuela; (2) Cuba; and (3) Nicaragua; with the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) responsible for sanctions implementation and enforcement.  Many countries in Latin America operate state-controlled commercial enterprises, and as a result, it becomes more likely that individuals directly or indirectly—and intentionally or unintentionally—may conduct business with the regional government and/or state-owned entities through what would otherwise be ordinary commercial business conduct. Individuals and companies may also increase the risk of subjecting themselves to U.S. jurisdiction and sanctions enforcement by transacting in USD or transmitting data via / services through U.S. web servers. U.S. sectoral-wide sanctions imposed on countries like Russia pose additional risks for individuals doing business with sanctioned individuals, companies and government entities.

Sanctions screening databases such as World Check, Lexis WorldCompliance, Dow Jones, and Accuity are becoming increasingly prominent compliance tools for global companies and financial institutions. Being listed on a sanctions screening database affects an individual’s standing in the international markets when third parties or counterparties perform due diligence on them in the context of an existing or new business transaction or banking relationship.

Conducting an effective internal investigation helps both: (1) before a transaction to mitigate sanctions risks in advance; or (2) after a transaction is completed to identify any potential risks, establish the facts, consider voluntary self-disclosure of relevant issues to the DOJ or OFAC, and otherwise respond appropriately to any resulting enforcement action by the U.S. government.  Any internal investigation should be conducted by a qualified law firm that can carry out a comprehensive, risk-based, and solutions-oriented analysis.

Internal investigations can identify sanctions risks before any potential liability results and before the individual or company requesting the internal investigation learns of any issues from a third-party conducting due diligence.  Appropriate investigative strategies include searches of diligence databases, reviewing and analyzing relevant documents, conducting interviews of key stake holders, looking at the relevant entity’s and counterparties ultimate beneficial owners and quantifying their ownership interest, investigating connections with individuals or companies on OFAC’s Specially Designated Nationals (“SDN”) List, and applying the relevant sanctions regulations against the facts. These investigative findings will allow the individual or company requesting the internal investigation to make informed decisions in light of the known risks.

Internal investigations can identify and help mitigate any sanctions liability post-transaction.  Sanctions risks in the region may include DOJ or OFAC instituting an enforcement action carrying steep civil and criminal penalties.  Both DOJ’s National Security Division and OFAC operate a voluntary self-disclosure program of any potential sanctions violations to mitigate any resulting penalties.  Using the same investigative strategies and findings to identify the existence and scope of any potential liability will best inform whether and how to present any corresponding findings to the U.S. Government.

If you are interested in understanding the sanctions risks that a potential business transaction may bring or if you have been approached by the U.S. government in connection with an inquiry or enforcement action and would like to learn how to manage related risks, please let us know! Our team includes former prosecutors and regulatory officials as well as lawyers admitted to practice law in multiple countries in Latin America who can assist.