Not So Fast: Congress Doubles Statute of Limitations Period for U.S. Sanctions Violations in Foreign Aid Bill

The extension applies to the two primary U.S. sanctions laws: the International Emergency Economic Powers Act (“IEEPA”)² and the Trading with the Enemy Act (“TWEA”).³ IEEPA is the foundational authority for most economic sanctions programs administered and enforced by the Treasury Department’s Office of Foreign Assets Control (“OFAC”), along with certain programs enforced by the Commerce Department’s Bureau of Industry and Security (“BIS”), while TWEA governs OFAC’s economic sanctions on Cuba. The statute of limitations period for both IEEPA and TWEA was previously five years. H.R. 815 doubled this period for civil and criminal sanctions violations to ten years after the latest date of a violation. The extension immediately became effective upon signing on April 24, 2024. While the bill’s text does not state whether the extension only applies prospectively, it is not expected to revive expired claims due to Supreme Court precedent barring ex post facto laws which criminalize previously time-barred offenses.⁴

This extended statute of limitations period follows efforts by the Department of Justice (“DOJ”) and OFAC to strengthen their sanctions enforcement authority, particularly in light of rising tensions with Russia and China and the inherent difficulty of detecting sanctions violations. For instance, Andrew Adams, the former head of a DOJ task force targeting Russian oligarchs’ assets, had proposed a ten-year statute of limitations in testimony before the U.S. Senate Judiciary Committee on July 19, 2022, which he characterized as “a critical tool to deprive criminals of their ill‑gotten gains.”⁵ The greater flexibility provided by the new extension will likely reduce OFAC’s need to negotiate and administer tolling agreements and will provide investigators greater latitude to thoroughly explore potential violations.

The new ten-year statute of limitations creates multiple new sources of potential liability for businesses. First, the extension allows companies to remain liable for violations that regulators would no longer have been able to prosecute after five years, and a longer time period will provide investigators with leeway to more deeply explore the scope and extent of known violations. Also, companies may face greater cumulative liability for a string of violations extending back more than five years. In addition, companies will likely face increased risks related to recordkeeping requirements, because the new legislation should allow OFAC to amend its recordkeeping regulations to match the ten-year statute of limitations.⁶ Moreover, even if no violations are ultimately established, the difficulty and cost of responding to government inquiries and conducting internal investigations is likely to rise.

The extension also creates new risks in the context of investments and transactions such as mergers and acquisitions. A longer statute of limitations period complicates deals and increases the risks of inheriting the consequences of sanctions violations. As the effective window of liability grows to ten years, acquirers, investors, and lenders may demand more comprehensive due diligence on economic sanctions issues. A ten-year statute of limitations will likely affect negotiations of contractual provisions. Selling companies may need to agree to longer lookback periods in their representations and warranties to account for expanded risks. And, of course, acquirers must now take this increased risk into account.

The European Union (the “EU”) is also focusing its efforts on sanctions enforcement. EU Regulations on sanctions allocate responsibility for penalties for sanctions violations to the individual EU Member States. This results in twenty-seven different approaches to enforcement. However, on 24 April 2024, the European Parliament adopted a new directive on the definition of criminal offences and penalties for the violation of EU restrictive measures which criminalizes the violation and circumvention of EU sanctions by introducing common standards of, and minimum penalties for, violations.⁷ The new directive criminalizes a number of EU sanctions violations, such as (i) making funds or economic resources available directly or indirectly to, or for the benefit of, a designated person, entity or body, the failure to freeze funds or economic resources belonging to or owned, held or controlled by a designated person, entity or body; (ii) enabling designated natural persons to enter into, or transit through, the territory of a Member State; and (iii) circumventing EU sanctions or inciting, and aiding as well as abetting the commission of a sanctions violation. In addition, the new directive includes Article 11 which provides for a limitation period of maximum five years for the “investigation, prosecution, trial and adjudication” of the criminalized EU sanctions violations. The EU Member States are at liberty to establish a limitation period shorter than five years, but not shorter than three years. In the United Kingdom, the Russia Sanctions Regulations 80 and 84 set out a number of sanctions violations which can be tried summarily, i.e., by the lower English courts. For these offences, there is a statute of limitation of three years. For all other offences/sanctions violations, there is no limitation period for bringing civil or criminal proceedings.

In summary, the extension of the statute of limitations for U.S. economic sanctions violations from five to ten years and enhancements to EU and UK sanctions laws should not go unnoticed. These changes will likely empower regulators to more aggressively pursue investigations and enforcement actions, expand companies’ potential liability in multiple dimensions, and complicate major transactions. With greater risks, compliance becomes ever more important, and companies should seek to respond promptly. Businesses should reexamine their internal controls and their sanctions and export control policies. When facing an actual or potential investigation, companies should account for higher potential liability when making critical decisions, such as whether to self-disclose misconduct. Businesses involved in major transactions should also expect to engage in more thorough due diligence and to adjust their expectations for agreement terms. As always, competent counsel can help companies navigate the complexities of this new and uncertain landscape.

¹ H.R. 8038, 118th Cong. § 3111 (2024).

² International Emergency Economic Powers Act, 50 U.S.C. § 1705.

³ Trading with the Enemy Act, 50 U.S.C. § 4315.

⁴ See, e.g., Stogner v. California, 539 U.S. 607 (2003).

⁵ “KleptoCapture: Aiding Ukraine Through Forfeiture of Russian Oligarchs’ Illicit Assets,” 117th Cong. (2022) (statement of Andrew Adams, Director, Task Force KleptoCapture),  https://www.judiciary.senate.gov/imo/media/doc/Testimony%20-%20Adams%20-%202022-07-19.pdf.

⁶ 31 C.F.R. § 501.601.

⁷ Directive (EU) 2024/1226 of the European Parliament and of the Council of 24 April 2024 on the definition of criminal offences and penalties for the violation of Union restrictive measures and amending Directive (EU) 2018/1673.