United States Government Doubles Statute of Limitations for Sanctions Violations

By Brett W. Johnson, T. Troy Galan, and Cole Craghan

Shrouded within the supplemental emergency appropriations bill for Israel, Ukraine, and Taiwan, the 21st Century Peace through Strength Act passed by Congress and signed into law significantly increases the statute of limitations for certain sanctions violations from five to ten years.¹ Signed into law on April 24, 2024, and effective immediately, this change considerably emboldened United States sanctions enforcement. Companies and individuals involved in any facet of international trade should consider updating applicable compliance programs, particularly record-keeping policies and procedures, and training about the importance of document retention and the commentary inserted into internal communications that may cause concern with government agents if an issue arises.

The extended statute of limitations affects two sanctions regimes: the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act (TWEA). These two acts cover a substantial portion of the sanctions enforced by the Office of Foreign Assets Control (OFAC) under the U.S. Department of the Treasury, as well as a significant portion of the sanctions-related export controls managed by the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce.

Though not retroactive, this change has already taken effect, and the new ten-year timer is ticking. Extending the period for enforcement actions allows OFAC, BIS, and the National Security Division of the U.S. Department of Justice (DOJ) to potentially intensify their already aggressive enforcement efforts.

This change necessitates immediate action. While OFAC’s regulations still stipulate a record-keeping period of only five years, we expect these regulations to soon reflect the updated statute of limitations. Additionally, considering the industry’s historically conservative approach to sanctions compliance, financial institutions may request updated record-keeping practices from their clients even before enforcement agencies do so. In any event, companies and individuals involved in international trade should take proactive steps to minimize the risk of enforcement actions stemming from the extended statute of limitations.

Companies should also address policies and procedures relating to third parties. With the extension of the statute of limitations, the risks of violations due to non-compliance by business partners also increased. Apart from revising internal record-keeping policies and procedures, existing agreements with business partners should undergo review to ensure compliance with this change. In the case of potential business partners, due diligence reviews should be updated and enhanced. Timely implementation of these revisions may yield significant benefits in the event of an internal or governmental investigation.

The strengthening of sanctions enforcement through the extension of the statute of limitations should come as no surprise. It represents another foreseeable step in the ongoing strengthening of sanctions and export controls, in response to the prevailing military and economic conflicts confronting the United States. As we await the release of OFAC’s updated regulations, other enforcement agencies are expected to follow. 

Companies and individuals involved in international trade should review policies and procedures, especially those dealing with document retention and e-discovery, to ensure compliance with the new requirements. Furthermore, companies should consider taking this opportunity to provide training on the appropriateness of company communications and ensure that miscommunications are not further misconstrued by governmental agents during any investigation.

Footnotes

1. 21st Century Peace through Strength Act, H.R. 815, 118th Cong. Sec. 3111. [Back]