Suppose you go into the office in Lujiazui, Shanghai on Monday morning with a cup of coffee in your hand. Your legal counsel runs in with a serious look: the company and you have received a subpoena from the U.S. and an email requesting you to collaborate with U.S. investigations — what should you do?
Since the Trump administration, a growing inclination among U.S. criminal investigators to look into Chinese entities and individuals has seen case numbers increase. On October 28, U.S. Deputy Attorney General Lisa O. Monaco delivered a keynote speech highlighting a more aggressive approach to corporate crime enforcement. Chinese individuals and companies are increasingly likely to become targets of U.S. criminal investigations and enforcement.
The serving of a subpoena is just one part of a U.S. criminal investigation but it is often used when it comes to cross-border investigations. Receiving a criminal subpoena indicates that either you are a witness (known as a “subject”) to the investigation, or a target.
In an investigation initiated by the U.S., subpoenas are issued to command and compel individuals and entities to produce evidence and records. Types of subpoenas include the Grand Jury Subpoena, Administrative Subpoena, Bank of Nova Scotia Subpoenas, and Patriot Act Subpoena.
In addition to subpoenas, the Department of Justice (DOJ) may deploy a wide range of investigative tools and measures, including, among others, search and seizure warrants, target letters, cross-border legal assistance, and extradition requests. A U.S. criminal investigation normally leads to one of six results: declination, non-prosecution agreement (NPA), deferred prosecution agreement (DPA), guilty plea, guilty verdict, or non-guilty verdict.
Upon receiving a subpoena or some other indication of a U.S. investigation, it is important for Chinese individuals and entities to know whether they should respond to the investigation at all, as they could possibly take other measures first.
Subpoenas, warrant, and similar documents from the United States have extraterritorial effect under U.S. Law and must meet procedural requirements set forth by the Federal Rules of Criminal Procedure and international agreements such as the Hague Convention. Prior to 2016, U.S. law required summons be mailed to a corporation’s last known U.S. address. The 2016 amendment to the Federal Rules of Criminal Procedure removed the mailing requirement and expanded the subject of service to foreign entities.
More importantly, whether the U.S. government can enforce a subpoena issued as part of a criminal investigation (and how they can do so) remains a decisive factor in determining a response.
In the case of a Chinese company with all its operations and employees domiciled in China or a Chinese national who only does business in China, a preliminary assessment to determine the risk may be sufficient. The DOJ will, however, look for pressure points for enforcement.
Regarding targeted individuals, the DOJ may collaborate with Interpol or request extradition when the individual travels to countries where extradition treaties with the U.S. exist, if there is sufficient evidence for them to do so. Regarding targeted companies, the DOJ may exert pressure on their U.S. assets and U.S.-related transactions and business, including exports, imports, procurements, listings, and bank transactions.
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In addition, the Anti-Money Laundering Act of 2020 (ALMA), as part of the National Defense Authorization Act for Fiscal Year 2021, expands the U.S. government’s authority to pressure banks to provide information broadly about the targeted bank accounts, even in cases where the accounts are not directly linked to the correspondent account.
A full risk assessment, as a result, should not only identify and analyze potential pressure points on individuals and companies, but also keep you abreast of legislative trends in the U.S. so that you can assess the risk exposure of relevant bank accounts and transactions accordingly.
If you and your company decide to react after a thorough risk assessment, a defense team may deploy several responsive measures to contest potential U.S. criminal investigations. First, the team can utilize the procedural requirements regarding the service on a party outside the U.S. pursuant to the Federal Rules of Criminal Procedure. Once the targeted entities or individual is served, preparation to fight against the investigation should be immediately triggered. In addition, the defense team can leverage PRC laws to contest U.S. laws and regulations, including the International Criminal Judicial Assistant Law, Data Security Law, and Personal Information Protection Law.
To avoid any risks arising from extradition, the defense team should deploy knowledge and experience in cross-border legal analysis to identify discrepancies between U.S. laws and those of the country of arrest, or to demonstrate that U.S. charges are politically motivated. Most importantly, any interactions with the DOJ or any U.S. government agencies should require advice and assistance from a legal counsel. Acting without a lawyer may severely damage your interests or those of your company.
If you suspect that you or your company may be subject to U.S. criminal investigation, there are several steps you could undertake to identify, assess, and mitigate the risks by avoiding unwanted attention from U.S. investigators.
The first step is to develop a secure travel plan to mitigate risks arising from extradition requests from the United States. Risk analysis and travel arrangement tailored to the extradition risk profiles in each country and region of your concern, based on the local laws, regulations, and extradition treaties with the U.S. will mitigate travel risks to the greatest extent.
As for step two, you should conduct a stress test on any global assets or classes of assets that may be subject to U.S. criminal investigation and enforcement, as well as an examination of potential claims and a global defenses strategy thereof. The stress test should identify vulnerable assets that may be subject to U.S. pressure, or buy time for you and your company prior to enforcement.
For step three, a stress test on the company data shall be conducted. A comprehensive risk assessment will include technical and physical security controls, security and bug scans, and securement of locations used to host sensitive client meetings. As law enforcement agencies increasingly emphasize data analytics in corporate criminal investigations, companies should be aware of potential pressure points within company data in defense of pending investigations. A global law firm specialized in U.S. criminal defense can provide the above-mentioned services to affected companies and senior management.
Under the new enforcement landscape and an evolving sanctions regime, the U.S. government and law enforcement agencies seek to deploy and explore more aggressive approaches, measures, and tools. As investigative technologies and sanctions infrastructure develop and advance, it is important for Chinese nationals and companies to get to grips with strategies that will help them avoid unwanted attention, and if necessary, respond to U.S. criminal investigations.
Wade Weems, a former prosecutor and trial lawyer with the U.S. Department of Justice, and Joshua Huang, a former Shanghai prosecutor, are both lawyers specializing in government enforcement defense from Kobre & Kim LLP, a global law firm exclusively focus on disputes and investigations.
The views and opinions expressed in this opinion section are those of the authors and do not necessarily reflect the editorial positions of Caixin Media.
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