Two-Thirds of Companies Report OFAC Sanctions Led to Renegotiated or Terminated Deals

According to results of Deloitte’s annual “Look Before You Leap” survey of corporate executives, investment bankers, private equity executives and hedge fund managers, 63 percent of respondents reported that Foreign Corrupt Practices Act (FCPA) and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years.

Similarly, 62 percent of survey respondents pointed to issues related to potential violations of economic and trade sanctions, such as known or suspected dealings with Office of Foreign Assets Control (OFAC) sanctioned entities, as the cause for their companies to renegotiate or pull out of a deal over the past three years. The number of financial services industry respondents reporting economic and trade sanctions issues impacting a deal was higher at 64 percent.

Further data from the survey revealed that 21 percent of respondents identified a lack of transparency or unusual payment structures in contracts as reason for renegotiating or terminating deals, while 18 percent renegotiated or pulled out due to concerns regarding the target’s use of agents, consultants, distributors or third parties to obtain or facilitate business.

Clearly, the U.S. government is keeping a close eye on international financial dealings. However, the strict compliance standards regarding the FCPA and OFAC sanctions are causing significant hurdles for U.S. corporations and international business deals.

Due to the increase in renegotiated and terminated agreements, it could be argued U.S. restrictions are resulting in an overall detriment to U.S. business practices. Specifically, U.S. entities must ensure compliance with such regulations, otherwise they face civil and criminal consequences.

To review the survey in its entirety, please click here.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

Bookmark and Share

Comments are closed.