Companies often must decide whether to conduct internal investigations after receiving information that could indicate ongoing violations of export control or economic sanction laws and regulations. It is important that they take adequate steps to preserve attorney-client privilege, immediately stop ongoing violations, and ensure resources and personnel are assigned to the investigative team. Deciding whether to conduct an investigation will ultimately depend on a variety of factors, and there are a number of decisions to be made at the outset of the investigation as outlined below.

When to Conduct an Internal Investigation

Initiation of an internal investigation can be triggered by a number of events, including:

• A report of a potential violation to a compliance hotline by an employee or 3^rd party
• Post-shipment verification requests regarding Automated Export System (AES) filing/AES warning messages (Compliance Alert, Fatal Error, etc.)
• Administrative subpoenas or government requests
• Audit or monitoring findings regarding potential legal violations or compliance risks such as findings regarding transactions involving embargoed countries, sanctioned or denied parties, or exports of controlled items or services without evidence of government authorization

Key Steps in an Internal Investigation

1. Initial Considerations

If there appear to be ongoing violations of law occurring, a critical first step is to identify and stop those potential violations.

Identifying stakeholders and establishing effective communications regarding the need for an investigation, resource requirements, timelines, etc. is also an important early step.

2. Identifying an Investigator and Investigations Team

Internal counsel should always be involved in selecting an investigator and investigations team. It is often advantageous for internal counsel to use external counsel to conduct the investigation to maintain privilege and independence. Involvement of subject matter experts (e.g. engineers for export controls classification issues) is also recommended.

3. Developing an Investigation Plan

An investigation plan should be prepared by counsel, or at the direction of counsel, and should:

• Identify responsibilities for document gathering, interviewing, report writing, communications, etc.
• Ascertain and clarify the issue to be investigated
• State the roles and responsibilities of the investigator and investigations team
• Provide a timeline for completion of the investigation, including any government-mandated timelines
• Identify relevant document custodians and interview targets

4. Identifying and Preserving Relevant Documents

Counsel should immediately issue a document hold memorandum to employees who may have custody or control of relevant documents. Relevant document sources to review may include email and file servers; paper documents; employee laptops, tablets, and phones; and text and social media messages.

The investigator should document and execute a plan to gather relevant documents (including those held by 3^rd parties), considering applicable government requirements (e.g. required review of documents during a five-year “lookback” period from export control or sanctions violations).

Investigators should work closely with their Information Technology personnel to identify all relevant systems and custodians in order to conduct a productive document review, including developing effective, tailored search terms for electronic documents based on interviews and document review.

Investigators should also be alert for the potential need for non-English language document review as well as data privacy requirements and limitations in certain jurisdictions (e.g. E.U., Russia, China, etc.)

5. Conducting Interviews

A clear plan will maximize the effectiveness of interviews. For example, the timing of the interview should be considered to maximize interviewee recall and minimize the possibility of coordination amongst interviewees. Investigators should also consider the benefits of in-person vs. telephone or video interviews and identify any necessary local language resources.

When conducting interviews, it is critical that investigators provide Upjohn[1] warnings and confidentiality requirements to employees. Investigators should also follow interview best practices including:

• Review relevant documents prior to interviews
• Use open-ended questions during the interview (to avoid “yes” or “no” responses)
• Plan follow-up interviews to address inconsistencies in statements or in relation to documents
• Use interviews to identify additional relevant documents or witnesses

It is also highly recommended that interview notes be prepared contemporaneously or as soon as possible after the conclusion of an interview.

6. Preparing the Investigation Report

An investigation report should be prepared promptly upon completion of the investigation (and under privilege). It should provide clear findings of fact and isolate the policy, process, controls, or training gaps identified as the root cause of any potential violations of law or company policy.

The report should also identify recommended remediation and be aligned with any external timelines, including with respect to any government disclosure requirements.

7. Implementing a Remediation Plan

In conjunction with the investigation report, a remediation plan should be prepared (again under privilege) that identifies potential remedial actions, investigation stakeholders, and implementation timetables. Some areas of potential remediation may include:

• Employee discipline – note that this must not be retaliatory, and should be aligned with local employment law and possible whistleblower considerations
• Enhanced policies, procedures, and internal controls
• Enhanced governance and oversight, including audit and monitoring
• Training

8. Voluntary Disclosures

If a decision is made to voluntarily disclose the results of an internal investigation to the Department of State, Department of Commerce, or Department of Treasury, it is critical that the investigation findings provide sufficient detail regarding:

• The types of potential violations and description, quantity, value, and export control classification of any items/technology/services involved (covering the recommended five-year “look-back” period)
• When and how the potential violations occurred
• The identities of all individuals and organizations involved
• Mitigating circumstances surrounding the potential violations

Review the Torres Law Voluntary Self-Disclosure Handbook for more details regarding the preparation of disclosures.

If you have any questions or need assistance with a corporate investigation, do not hesitate to contact us. Torres Law’s network includes forensic accountants, technology experts, and other specialized consultants who work in tandem with our attorneys and trade advisors in the fact-finding and analysis of data.