As individual jail terms and corporate fines continue to increase, many companies and executives outside the United States are left wondering: How are US laws able to reach so far outside US borders? The United States has some fundamental legal principles that can allow its enforcement authorities to apply its laws well beyond US borders. White & Case's White Collar team explains.
In recent years, the press has been full of reports of non-US companies being investigated and, at times, prosecuted by enforcement authorities in the United States for a host of alleged violations of US law. Individuals, too, have been charged, extradited and gone to jail in the United States, all without ever setting foot in the United States during the alleged misconduct.
US enforcement authorities know no borders in their pursuit of illegally obtained funds.
US enforcement authorities are aggressively interpreting and applying US criminal laws to companies and individuals outside the United States, including for conduct with little apparent nexus with the United States. Exposure to potential violations of US law can arise from a number of circumstances, and it is more critical than ever to identify and mitigate those risks. For example, US regulatory and enforcement officials often take the position that the mere transit of emails through the United States — sent from one person outside the United States to another outside the United States — is enough to reach the conduct required under US criminal law.
Similarly, US authorities may assert that transit of money through the United States on its way from one non-US location to another non-US location is enough to create US criminal jurisdiction. This application of US criminal law can result in significant fines and penalties, including imprisonment.
Given the potentially long reach of US law, non-US companies and individuals should manage their legal risk in advance of any potential issues. One of the best ways to address these risks is regularly undertaking risk assessments to determine where there may be exposure to US laws. Another is to create and implement appropriate compliance policies and procedures to conduct transactions in accordance with all applicable laws. Once appropriate policies and procedures are in place, relevant personnel should be trained on a regular basis, including on changes in the law and emerging risk areas.
Reading the signals: The reach of US law
- Any communication or movement of funds in the US may be sufficient to create US jurisdiction
- Money transiting through the US may be sufficient to create jurisdiction
- US law may apply to the conduct of US citizens outside of the US
- A parent company can potentially be liable for the acts of its subsidiary if the latter acted on its behalf
- US law may apply to acts outside the US of a non-US agent of a company or individual subject to US jurisdiction
- A coconspirator may be liable for the acts of its conspirator
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