On 24 April 2024, President Biden signed bill H.R. 815 into law, a legislative package that also includes the 21st Century Peace Through Strength Act. Although H.R. 815 is largely recognised as a $95.3 billion foreign aid package, with financial assistance for Ukraine, Israel, and Taiwan, the Peace Through Strength Act contains significant sanctions provisions, including measures for combatting the US’ fentanyl epidemic, and an extension to the legal statute of limitations for sanctions violations, which will significantly affect sanctions compliance.
The new sanctions regulations add to an already-complex risk landscape, and mean that firms in the US and beyond should review their screening approach. Let’s take a closer look at the contents of H.R. 815 and explore its implications for US sanctions compliance.
What Are The New Sanctions Regulations?
A product of a bipartisan legislative effort, H.R. 815 contains new sanctions laws aimed at a range of foreign threats. Its key sanctions measures include:
- Strengthened sanctions against China for transactions involving the purchase of Iranian oil.
- New sanctions against Iran targeting the country’s petroleum industry, and missile and drone development capabilities.
- New sanctions targeting financial support for terror groups Hamas and Hezbollah.
- A mandate for the US Treasury to introduce new sanctions against Mexican cartel members involved in the production and trafficking of fentanyl.
- An extension of the US’ statute of limitations, doubling potential investigation time from 5 to 10 years.
10 Year Statute of Limitations
While obligated entities should carefully consider each of the new sanctions measures, the extension of the statute of limitations is likely to have the greatest impact on regulatory compliance.
The regulatory change comes at a time when US firms face a high sanctions compliance burden. The US government has expanded its Russia sanctions programme dramatically since the invasion of Ukraine in 2022, along with the introduction of new sanctions against China and Iran. At the same time, the Office of Foreign Assets Control (OFAC) has increased its focus on enforcement, imposing significant penalties for compliance failures as a way to ensure the effectiveness of new sanctions. That shift has delivered results: in 2023 OFAC issued a record $1.5 billion in sanctions fines.
Coming as a surprise to many industry observers, the new 10 year statute of limitations represents a considerable statutory change for US firms and their compliance teams. Under the previous regime, firms that discovered a sanctions violation on their books often conducted a 5 year retrospective review to uncover further violations and identify potential systemic problems. The new law doubles that burden while, at the same time, reducing pressure on regulators and increasing the opportunity to discover additional violations and impose larger fines.
US Sanctions Law Changes: Key Considerations
The change in the statute of limitations means that US firms and obligated entities should review their sanctions compliance programmes, focusing on a number of key considerations:
- Risk adjustment: All firms now have an added 5 years of risk to factor into their approach to sanctions compliance. The change may require firms to adjust internal sanctions policy by, for example, maintaining records for at least 10 years.
- Retroactive risk: As of June 2024, it was unclear whether OFAC and the US Department of Justice would retroactively apply the 10 years statute of limitations to violations that remain within the previous 5 year limit.
- Russia focus: Given that the new statute of limitations was introduced to support the US’ Russia sanctions programme, it is likely that the US government will maintain a strong focus on the application and enforcement of Russia-related sanctions for the foreseeable future. Obviously this focus should not undermine firms’ treatment of other types of global sanctions risk.
- Due diligence: Firms that have not been retaining sanctions compliance data for longer than 5 years should adjust their approach to customer due diligence (CDD) to account for the extended risk period. Business data from the past 5 years should be reviewed as a priority.
- Global adjustment: The US’ position as a global sanctions leader suggests that other Western governments may now make similar changes to their own statute of limitations regulations.
Overcoming Sanctions Challenges
The US Justice Department recently hired 25 new prosecutors to support its investigations into Russia sanctions violations. The government’s emphasis on enforcement underlines the need for firms to tighten their sanctions compliance performance by putting the right customer due diligence and sanctions screening solutions in place.
Ripjar’s Labyrinth Screening platform helps firms meet the challenges of a constantly evolving risk landscape. Labyrinth gives compliance teams the ability to screen against thousands of risk data sources including global sanctions lists, in real time, across multiple languages. Now featuring the cutting-edge AI Risk Profiles and AI Summaries tools, Labyrinth Screening supercharges the screening process, harnessing the power of AI to extract only the most relevant customer data and build clear, concise summaries of each customer’s risk.
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