On April 24, 2024, the U.S. Congress passed the 21st Century Peace Through Strength Act (the "Act"), a part of the Foreign Aid Package (the "Package"), which includes various provisions concerning U.S. sanctions and national security.
One of the most significant changes introduced by the Act is the extension of the statute of limitations from five to ten years for civil and criminal violations of the regulations issued under the International Emergency Economic Powers Act ("IEEPA"), which governs most U.S. financial sanctions programs issued by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), and the Trading with the Enemy Act ("TWEA"), which gives the U.S. President the power to oversee or restrict trade between the U.S. and its enemies in times of war. The new ten-year statute of limitations applies to both civil and criminal violations of these financial sanctions programs.
The new provisions governing the statute of limitations for civil and criminal violations, which will become effective 60 days after enactment, now read as follows:
An action, suit, or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, under this section shall not be entertained unless commenced within 10 years after the latest date of the violation upon which the civil fine, penalty, or forfeiture is based.
No person shall be prosecuted, tried, or punished for any offense under subsection (c) unless the indictment is found or the information is instituted within 10 years after the latest date of the violation upon which the indictment or information is based.
Impact on Businesses and Legal Practitioners
The extension of the statute of limitations to ten years gives OFAC more time to investigate and detect violations, and may therefore reduce the incentive for OFAC to enter into tolling agreements with parties under investigation (where a party under investigation agrees to pause a statute of limitations during the investigation). As a result, defendants could be deprived of the ability to demonstrate that they are cooperating with OFAC by entering into a tolling agreement, which, alongside prompt and effective remedial responses and voluntary self-disclosures, is typically considered a mitigating factor in OFAC's enforcement actions. This, in turn, can lead to more severe penalties imposed upon conviction.
The extended statute of limitations also has implications for compliance programs and business transactions. Internal compliance programs will likely require reform, including changes to recordkeeping policies as well as internal and external auditing programs. Intercorporate activities, such as mergers and acquisitions and know-your-customer screening procedures for everyday transactions, will require more expansive due diligence, covering longer periods. In addition, in their agreements, parties should review the look-back periods for representations and warranties covering sanctions compliance.
Potential Issues with Retroactive Application and the Ex Post Facto Clause
A question remains with respect to the constitutionality of the extended statute of limitations if it is applied retroactively. If OFAC decides to apply the statute of limitations retroactively, it will raise a question regarding its constitutionality. The prohibition of ex post facto laws is a fundamental precept of international human rights law. Article 15.1 of the International Covenant on Civil and Political Rights, to which the U.S. is a state party, prohibits the conviction of any criminal offence "on account of any act or omission which did not constitute a criminal offence, under national or international law, at the time when it was committed". Article 15.1 also prohibits a heavier penalty than the one that was applicable at the time when the criminal offence was committed from being imposed. This prohibition on ex post facto laws is also enshrined in Article I of Section 9 of the U.S. Constitution, which states that "[n]o Bill of Attainder or ex post facto Law shall be passed".
Case law indicates that once a statutory period for a criminal offense has expired and a statute of limitations has imposed a bar, future legislation cannot extend the statute of limitations for past offenses that are already time-barred. In Moore v. State, the N.J. Court of Appeals, characterized a statute extending a criminal statute of limitations as an ex post facto law. The court held that the expiration of the statute had the same legal effect as if the law prescribing the punishment had been repealed.
With this background, the ex post facto clause of the U.S. Constitution would bar criminal enforcement for conduct that took place more than five years ago, but civil enforcement by OFAC remains an option.
Potential Implications for Other Areas of National Security Legislation
While IEEPA is primarily known as the governing statutory authority for sanctions programs, it also underlies a broader range of regulations concerning national security. For example, the Information and Communications Technology and Services ("ICTS") Program of the Commerce Department's Bureau of Industry and Security ("BIS"), established to prevent national security and economic risks in transactions involving ICTS, is maintained by IEEPA. Even U.S. export controls, which are now governed by the Export Control Reform Act of 2018 ("ECRA"), were under IEEPA's governance for more than two decades under the Export Administration Act of 1979 until 2018.
The U.S. government has recently demonstrated a policy shift towards enhancing the alignment of export controls and financial sanctions. On March 21, 2024, BIS published a final rule that imposed stricter export controls on individuals sanctioned under fourteen sanctions programs administered by OFAC. This rule imposes export license requirement on individuals and entities exporting, reexporting and transferring in country items subject to the Export Administration Regulations ("EAR") to end-users designated under certain sanctions programs.
Today, the statute of limitations for export controls remains five years under the ECRA. However, the extension of the statute of limitations applicable to IEEPA and TWEA raises questions about possible extensions of statutes of limitations and related developments in other areas of national security-related legislation in the near term.
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