Red Flags Rising

Mike and Brent welcome author and compliance professional Severin Wirz to the pod to discuss his first book, Bribery Beyond Borders: The Story of the Foreign Corrupt Practices Act. They discuss with Severin his inspiration for writing the book (02:44), the book’s focus on the people and personalities involved in the events between 1975 and the 1977 passage of the FCPA (05:50), the political and geopolitical scandals that kept up the momentum for a law banning overseas bribery (06:59), what his research uncovered beyond the traditional FCPA origin story (10:49), the relevance of the Cold War to the FCPA’s passage—specifically how corruption by capitalists fed into Communist propaganda (12:39), how the political “sausage” was made (16:33), stories of personal courage and risk-taking that made the FCPA possible (18:27), the use of the phrase “post-Watergate morality” as a critique of the FCPA and other reform efforts (21:48), how anti-corruption laws actually help American companies competing for business overseas (29:21), where the FCPA stands today (31:17), and how corruption is a social construct that, to paraphrase former federal appellate judge and author himself John Noonan, to exist as a legal concept must first exist in the minds of everyday people (35:40).Mike and Brent then conclude with another installment of Brent Carlson’s “Managing Up” (38:14).Bribery Beyond Borders: The Story of the Foreign Corrupt Practices Act—Learn more at Corporate Compliance Insights here: https://www.corporatecomplianceinsights.com/bribery-beyond-borders-fcpa-severin-wirz/Available at Amazon here: https://www.amazon.com/Bribery-Beyond-Borders-Foreign-Practices/dp/1735028592 More about Severin here: https://www.linkedin.com/in/severin-wirz-3574b574/Contact Brent: brent@redflagsrising.comContact Mike: michael.huneke@morganlewis.com

Mike & Brent explore the classic “Fraud Triangle” of pressure, opportunity, and rationalization and discuss Brent’s creation of a new “Fraud Diamond Framework” (SM) to help trade compliance (and other) professionals who are looking not to explain past misconduct but instead to prevent future misconduct. They discuss recent news and developments in the export controls world (00:55), how seemingly inconsistent headlines are actually consistent with each other (04:05), and how Edward Fishman’s “impossible triad” concept continues to be a useful tool for understanding what’s happening in geopolitics and trade competition (06:22), and then they launch into their discussion of Brent’s Fraud Diamond Framework (SM) (08:05).Regarding the Fraud Diamond Framework (SM), they discuss the classic fraud triangle and the backward-looking perspective from which it was derived (09:18), and then explain the Fraud Diamond Framwork’s four elements of pressure (12:08), opportunity (13:06), something that’s too good to be true that comes at a critical time for the business (14:06), and signs of concealment (15:48). Brent next explains the Fraud Diamond Framework (SM) through a historical case study pulled from his own prior experience helping a client with a compliance commercial fraud dispute involving the acquisition of a business in China (17:35), after which they explain how the Fraud Diamond Framework (SM) can help trade compliance teams today (23:02).They conclude with another installment of Brent’s always popular “Managing Up” segment (24:43).Contact Brent: brent@redflagsrising.comContact Mike: michael.huneke@morganlewis.com“Chokepoints: American Power in the Age of Economic Warfare” by Edward Fishman: https://a.co/d/3PhvprsBrent’s original NYU PCCE post, “When Loopholes Create Liability Pitfalls: A Fresh Look at Export Controls” (Aug. 25, 2023): https://wp.nyu.edu/compliance_enforcement/2023/08/25/29814/

As the geopolitical and national political winds continue to swirl, Mike & Brent go back to basics to level-set and provide some foundational first principles of export controls compliance. They discuss the roller-coaster of the Affiliates Rule suspension (01:44); why the real risks from a compliance and enforcement perspective lay just outside of the Rule (02:37); how General Prohibition 10, the full definition of “knowledge” to include “an awareness of a high probability,” and the various inchoate provisions (i.e., causing, aiding and abetting, solicitation and attempt, conspiracy, acting with knowledge, misrepresentation and concealment, intent to evade, and failure to comply with recordkeeping requirements) are the foundational anti-diversion provisions under the U.S. Export Administration Regulations (EAR) (03:02); great listener feedback about how the Affiliates Rule shaped the in-house discussion of diversion risk (05:23); developing and implementing a high probability protocol as the only way to stay grounded in dynamic and challenging times (08:33); recent legislative proposals and hearings, including a recent hearing by a subcommittee of the House Foreign Affairs Committee focused on export controls loopholes, and the dangers of a dissatisfied U.S. Congress (09:42); why the definition of “knowledge” under the EAR is not mere legalese to be lost in the 1,467 pages (as of January 1, 2025) of the EAR but is instead the path forward for both government and industry (14:18); the details and implications of General Prohibition 10 (17:11); the details of the full definition of “knowledge,” including what we can learn from its history in the U.S. Foreign Corrupt Practices Act and, before then, the Model Penal Code (18:48); and recent enforcement activity by DOJ and BIS, and what the activity signals about the government’s next enforcement moves (22:30).They then conclude with the latest installment of Brent’s increasingly popular “Managing Up” segment (27:14).Contact Brent: brent@redflagsrising.comContact Mike: michael.huneke@morganlewis.comBrent’s latest NYU Program on Corporate Compliance & Enforcement (PCCE) post, “From Peanuts to Elephant-Sized Penalties: A Fresh Look at Recent U.S. Export Controls Enforcement Developments & Future Trends” (Oct. 31, 2025): https://wp.nyu.edu/compliance_enforcement/2025/10/31/from-peanuts-to-elephant-sized-penalties-a-fresh-look-at-recent-u-s-export-controls-enforcement-developments-future-trends/

Mike & Brent draw inspiration from the current Broadway run of Waiting for Godot starring Keanu Reeves and Alex Winter to suggest some first principals of risk-based export controls compliance to trade compliance teams. They discuss the futility of the oft-reported sentiment in the trade compliance press of wanting more or clearer guidance from the U.S. government about export controls risk management is not necessary, because the guidance is already here and the “high probability” standard offers a path forward (01:03); how the “high probability” standard and a return to anti-diversion first principles is a way to avoid a repeat of the compliance whipsaw effect occasioned by the announcement, then suspension, of the Affiliates Rule (a/k/a the 50% Rule) (03:47); how an example of this is focusing on your compliance and enforcement risks under General Prohibition 10 and the inchoate provisions of U.S. export controls (07:10); how neither the Affiliates Rule’s adoption nor its suspension changed GP10 or the other anti-diversion regulations under U.S. export controls (12:03); why efforts to comply with the Affiliates Rule were not wasted (14:23); how to deal with and overcome “compliance fatigue” in organizations (16:04); Brent’s latest NYU PCCE post (17:59); and why there was an over-focus on item-based classifications relative to knowledge-based end-use and end-user catch-all provisions and GP10 (19:17).They then conclude with a righteous installment of Brent Carlson’s “Managing Up” (21:36).“Waiting for Godot” starring Keanu Reeves and Alex Winter is currently playing at the Hudson Theater in New York City until January 4, 2026. For tickets: https://boxoffice.nyc.com/waiting-for-godot/13147/calendar/Brent’s latest NYU Law School Program on Corporate Compliance & Enforcement post, from October 31, 2025: https://wp.nyu.edu/compliance_enforcement/2025/10/31/from-peanuts-to-elephant-sized-penalties-a-fresh-look-at-recent-u-s-export-controls-enforcement-developments-future-trends/Brent’s email: brent@redflagsrising.comMike’s email: michael.huneke@morganlewis.com

Mike and Brent take a break from Affiliates Rule (delayed) suspension news to focus on practical advice for companies that might be in the middle of U.S. government investigations into alleged export controls violations. They discuss the importance of engaging with the government with an awareness and an appreciation for the latest enforcement trends and signals, particularly regarding the government’s emphasis on the full definition of “knowledge” to include “an awareness of a high probability” (00:49); the importance of not being surprised by these trends in the middle of an investigation (02:52); the dangers to the cost, delay, and outcome of any investigation for failing to perceive the signals through the noise (04:08); the particular relevance of these strategies in defending against allegations of entity-shifting (09:48); the need to consider waiving privilege over prior bad legal advice—especially to avoid paying more to defend an investigation that was triggered by adhering to the prior advice (11:52); what to look for in the terms of a proposed settlement agreement, including whether and how the company will be “covered” if there are post-resolution reports of additional, previously undisclosed pre-resolution misconduct (13:22) and executive officer certification requirements (16:51); and the importance in national security resolutions, where they are imposed, of having post-resolution independent monitors or independent compliance consultants commit to focused, risk-based post-resolution monitoring that direct addresses the root causes of the violations, to avoid “industrial tourism” and to best promote the national security objectives of the United States (19:34).Then then conclude with the next installment of Brent Carlson’s “Managing Up” segment (23:37).Brent’s latest NYU Program on Corporate Compliance & Enforcement (PCCE) post, “From Peanuts to Elephant-Sized Penalties: A Fresh Look at Recent U.S. Export Controls Enforcement Developments & Future Trends” (Oct. 31, 2025), https://wp.nyu.edu/compliance_enforcement/2025/10/31/from-peanuts-to-elephant-sized-penalties-a-fresh-look-at-recent-u-s-export-controls-enforcement-developments-future-trends/Mike & Brent’s prior NYU PCCE post, “Monitoring What Matters: A Fresh Look Proposal to Government and Industry for How Post-Resolution Oversight Can Best Deny Hostile Actors the Means to Cause Deadly Harm” (Mar. 28, 2024), https://wp.nyu.edu/compliance_enforcement/2024/03/28/monitoring-what-matters-a-fresh-look-proposal-to-government-and-industry-for-how-post-resolution-oversight-can-best-deny-hostile-actors-the-means-to-cause-deadly-harm/Contact Brent: brent@redflagsrising.comContact Mike: michael.huneke@morganlewis.com

Fresh off the October 15, 2025, WIT-NC/PAEI/TTRA “Global Trade Compliance Best Practices Conference” in Santa Clara, California, Mike and Brent discuss the practical takeaways of several recent media reports and statements from the U.S. Congress, including how compliance programs that incorporate the high-probability standard give executives and spokespersons the most options. Specifically, they discuss the conference (00:49); the recent Affiliates Rule (01:27); why straightforward statements that a company “complies with the law” might generate cynicism from the public and inquiries as to how from the government (02:59); why it’s important for companies to consider the context in which their public statements will appear, even where they might not agree with the facts asserted in that context (04:06); how delegitimizing the laws in the eyes of the public might be one of the smugglers’ objectives (05:47); how thinking about compliance as never being a one-and-done solution can help avoid pitfalls in public statements (06:54); why it’s dangerous to rely upon assertions by anonymous “legal experts” reported in articles about the existence of loopholes, including because those loopholes do not actually exist (08:49); the importance of keeping in mind, in the context of the Entity List and the Affiliates Rule, that the List is but one part of U.S. export controls and statements that fixate on the Entity List’s applicability expose corporations to questions about their compliance with other catch-all provisions, with General Prohibition 10, and with the various inchoate provisions (10:27); the importance of appreciating that U.S. regulators read the news too (11:40); how the “high probability” standard can help companies in making enhancements to their compliance programs to better support broader public statements as to their compliance with the law (14:41); recent reports about U.S. items being sold for crime control purposes and attention from the U.S. Congress on those reports (15:03); similar risks related to the recent report by the U.S. House of Representatives’ Select Committee on the Chinese Communist Party (17:23); keeping in mind that your own disagreement with U.S. national security policy is not a defense to export controls promulgated in support of that policy (19:02); and the importance of having advisors who are viewed by the government as honest brokers that are not clinging to legacy views about the government’s intentions or authorities (21:07).Mike and Brent then conclude with another installment of Brent Carlson’s “Managing Up” (23:29).Contact Brent: brent@redflagsrising.comContact Mike: michael.huneke@morganlewis.comLearn more about the conference’s organizing associations:Women in International Trade – Northern California (WIT-NC): https://wit-nc.com/ Professional Association of Exporters & Importers (PAEI): https://www.paei.org/Technology Trade Regulation Alliance (TTRA): https://ttralliance.org/

Mike and Brent take an even deeper dive into the “Affiliates” or “50%” Rule announced by the Bureau of Industry & Security (BIS) on September 29, 2025. They identify several misperceptions in the public discussion, explain why they are misperceptions, and identify the pitfalls of operating under those misperceptions—especially in response to inquiries by BIS about pre-rule due diligence on affiliates of entities on the entity list. Specifically, they discuss why the Affiliates Rule is a close cousin to the Office of Foreign Assets Control’s own 50% rule, but why and how BIS’s Affiliates Rule serves different national security objectives and operates a bit differently (02:42); whether the Affiliates Rule brings new compliance burdens and, if so, risk-based due diligence strategies and likely questions from BIS regarding why (10:26); why in the current geopolitical context the benefit of local, boots-on-the-ground compliance might be overstated—or significantly discounted by the U.S. government—and what to do about it (16:18); why it would be a mistake to think that BIS is not today able to bring enforcement actions based on the Affiliate Rule, especially given their ability to bring enforcement actions on the “full” definition of knowledge to include “an awareness of a high probability” (19:26); and why it is dangerous to think of “knowledge” as only “actual knowledge,” and thereby misperceiving that the new Affiliates Rule—by reminding everyone that the catch-all provision under which the Entity List is promulgated is a strict-liability regulation, even as to awareness—has someone taken away a previously available “absence of actual knowledge” defense (23:00).Mike and Brent then offer practical tips for applying for the license available under the Affiliates Rule for situations where the exporter, reexporter, or transferor is aware of “red flags” as to ownership that it cannot resolve through risk-based due diligence (28:20).Mike and Brent then conclude with a special edition of Brent Carlson’s “Managing Up,” in which Brent offers some valuable self-reflection (34:58).More about Brent: www.redflagsrising.comContact Brent: brent@redflagsrising.comMore about Mike: https://www.linkedin.com/in/mhuneke/, https://www.morganlewis.com/bios/michaelhunekeContact Mike: michael.huneke@morganlewis.comBIS’s “Export Control Decision Tree”: https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-732/appendix-Supplement%20No.%201%20to%20Part%20732

Mike and Brent return with their take on a hotter-than-hot topic, the Bureau of Industry & Security’s new “50% Rule,” effective yesterday, September 29, 2025. Mike and Brent discuss the news of the rule’s announcement and the basics of what it does (00:46); the fact that the rule was effective immediately upon filing for public review, i.e., on September 29, 2025 (02:24); the fact that 50% is not some threshold under which risk goes away (06:19); how commentary suggesting that a “loophole” has been closed is not entirely accurate because such a loophole never existed in the first place (08:12); the requirements (including a description of due diligence performed) under a new, unique license application process (09:45); what enforcement risks are likely to arise in the government’s implementation of the new rule, especially if the government compares pre-rule trade flows to post-rule trade flows (10:43); the importance of not making a quick decision in how to respond to the new rule that you might later regret (12:23); the dangers of misreading the new rule to permit entity-shifting as an appropriate response (15:53); BIS’s caution that the rest of the U.S. Export Administration Regulations (EAR) still apply, separately from the Entity List (18:43); the admonition by BIS that “exporters, reexporters, and transferors have an affirmative responsibility to know the ownership of the foreign companies that are parties to a transaction” (19:45); the statement in the rule that those same actors “must adopt a risk-based compliance program to assist them in complying with these requirements” (20:14); the new “Red Flag 29” added to the BIS Know-Your-Customer (KYC) Guidance (21:05); and the importance of the explanatory text’s reference to “control” (irrespective of ownership) by a listed entity as a “red flag” requiring further due diligence (21:59).Mike and Brent conclude with another installment, back by popular demand, of Brent Carlson’s “Managing Up” segment (24:57).Brent’s new contact information: brent@redflagsrising.comBrent's original NYU PCCE blog post, "When Loopholes Create Liability Pitfalls: A Fresh Look at Export Controls" (Aug. 25, 2023): https://wp.nyu.edu/compliance_enforcement/2023/08/25/29814/Mike’s new contact information: michael.huneke@morganlewis.comMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/The U.S. export controls “Country List” (Supplement No. 1 to Part 740): https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-740/appendix-Supplement%20No.%201%20to%20Part%20740The BIS Press Release (with a link to the new rule): https://www.bis.gov/press-release/department-commerce-expands-entity-list-cover-affiliates-listed-entities

Mike & Brent break down the investigative report by the Editor-in-Chief of Gamers Nexus, Steve Burke, and his colleagues into GPU smuggling into China, which was recently featured on the ChinaTalk podcast with Jordan Schneider.Mike & Brent discuss the context for the report (00:51), its key takeaways (03:14), what it means and what it doesn’t mean for U.S. design companies and anyone subject to U.S. export laws (05:47), and why the “high probability” standard provides a path forward for companies facing reports such as this (12:30).They conclude with another installment of Brent Carlson’s ever-popular “Managing Up” (16:03).Steve Burke & Gamers Nexus’ report can currently be found here: https://rumble.com/v6xro9o--the-nvidia-ai-gpu-black-market-smuggling-corruption-and-global-scandal-.html?utm_source=substack&utm_medium=emailMore about Gamers Nexus: https://gamersnexus.net/Check out Jordan Schneider’s ChinaTalk episode on the report here: https://podcasts.apple.com/us/podcast/nvidia-gpu-black-market-smuggling/id1289062927?i=1000723081399More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Everything you ever wanted to know about the “high probability” standard: https://www.hugheshubbard.com/fresh-looks

Mike and Brent pick up the discussion from Episode 25 with some further thoughts on the proposed revenue-sharing arrangement between the U.S. government and certain exporters, including what should be anticipated from the U.S. government in terms of increased transparency (01:36), give their take on the Maintaining American Superiority by Improving Export Controls Transparency Act signed into law by the President, including both what it does do and what it doesn’t do (10:27), and provide their takes on the long-running media speculation about a so-called “50% rule” that would extend the Entity List maintained by the U.S. Bureau of Industry & Security (BIS) automatically to subsidiaries or affiliates owned 50% or more by a listed entity (18:53), including questions that the debate raises about what due diligence is being done now on subsidiaries and affiliates of listed entities, and important distinctions between U.S. economic sanctions—from where the 50% rule concept is being borrowed—and U.S. export controls that suggest the rule is better suited for the former than the latter.They conclude with another installment of Brent Carlson’s “Managing Up” (26:25).More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Everything you ever wanted to know about the “high probability” standard: https://www.hugheshubbard.com/fresh-looks

Mike & Brent dive into the latest geopolitical developments surrounding technology exports and the interplay between leading tech companies and the U.S. Administration.Specifically, they discuss the latest news regarding U.S. conditions for licensing the export of Nvidia’s H20 chip to China (00:38), the impact of the deal on trade negotiations between the U.S. and the People’s Republic of China (and vice-versa) (04:59), the difficult position companies generally are in regarding export controls due diligence and the multiple potential meanings and consequences regarding public officials’ statements around export controls (16:01), the latest news regarding Intel’s CEO’s interactions with the U.S. Administration and how they illustrate vividly the “whipsaw” effect companies and executives face as geopolitical winds swirl (20:09), the relevance of the “pretend mistake” tactic in dealmaking—or, as Mike referred to it in the context of U.S. export controls, the “revoked forgiveness” tactic (22:40), and, practically speaking, how companies can best anchor themselves amidst the geopolitical storm by designing and implementing a “high probability protocol” to best anticipate core trends in U.S. export controls enforcement and serve as an important compliance backstop (25:36).They then conclude with another installment of Brent Carlson’s “Managing Up” (26:59).More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Everything you ever wanted to know about the “high probability” standard: www.hugheshubbard.com/fresh-looks

Mike and Brent break down the key takeaways from an affidavit by a Bureau of Industry & Security Special Agent in Los Angeles, which was unsealed on August 5, 2025, and is a masterclass in how BIS is identifying and analyzing “red flags” indicating potential export controls violations.Mike and Brent discuss the basics of the case (00:58), the value of the detailed affidavit prepared by the BIS Special Agent in support of the arrests (02:19), the value of the case to those making broader strategic decisions for companies in illustrating the competitive advantages—and ability to maximize the benefits of America’s AI Action Plan—through effective export controls compliance (03:00), the most-relevant details of the allegations (04:20), the dangers of doing business with “fly-by-night” operations of any type (05:45), how these allegations underscore the importance of dynamic risk assessments, i.e., those that focus on changes in customers or orders around significant changes to U.S. export controls (06:14), what the affidavit signals for corporate enforcement (07:21), what we can learn about diversion risks from Brent’s studies of the Qing dynasty and frozen meats (07:40), what seized text messages revealed about the smugglers’ view of the current U.S. Administration (08:57), what the affidavit indicates that trade compliance teams realistically, at the front end, could or should have known (10:31), how to respond to BIS requests for information or outreach visits (13:58), Mike’s leaky dishwasher analogy for diversion (and why you need to fix both) (14:15), how the affidavit shows that BIS agents are applying a high probability mindset in their investigations (18:27), how not to “kick the hornet’s nest” when BIS visits or requests information (20:29), the expectations of U.S. regulators generally that companies that become aware of potential violations, whether or not they voluntarily disclose anything, at least do a “root cause” analysis and consider whether compliance program enhancements are necessary (22:17), and the relevance of General Prohibition 10 and the several inchoate provisions under 15 C.F.R. § 764.2 (23:10).They then conclude with the ever-popular segment, Brent Carlson’s “Managing Up” (26:03).Edvard Pettersson’s article, with a link to the BIS Special Agent’s affidavit, “Chinese nationals charged with illegal exports of Nvidia chips” (Courthouse News, Aug. 5, 2025): https://www.courthousenews.com/chinese-nationals-charged-with-illegal-exports-of-nvidia-chips/The DOJ press release: https://www.justice.gov/opa/pr/two-chinese-nationals-arrested-complaint-alleging-they-illegally-shipped-china-sensitiveMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Everything you ever wanted to know about the “high probability” standard: www.hugheshubbard.com/fresh-looks

Mike and Brent breakdown the $140 million corporate resolution announced on Monday, July 28, 2025, by the U.S. Department of Commerce’s Bureau of Industry & Security (BIS) and the U.S. Department of Justice’s National Security Division (NSD). Of this amount, $95 million was imposed by BIS alone, which is the largest stand-alone BIS penalty since April 2023.Mike and Brent discuss the geopolitical context (00:39), how the resolution responds to December 2024 criticism from the then-majority staff of the U.S. Senate’s Permanent Subcommittee on Investigations (01:58), why this is “where the juice is” for future BIS and NSD enforcement (03:05), how the settlement underscores that sustained compliance with national security-driven regulations requires a substance-over-form approach (04:45), the relevant facts related to the resolving company’s China subsidiary and customers (06:36), the relevant facts related to the parent company (08:59), why a letter of assurance and end-use/end-user certifications were not sufficient to respond to the “red flags” identified (10:38), how U.S. parent companies should be thinking holistically about export controls risk and strategies for mitigating that risk, including in responding to BIS outreach visits or queries to hopefully avoid administrative subpoenas or, worse, referrals to criminal authorities (12:37), the signals BIS and NSD expect companies subject to U.S. export controls to perceive from the public documents (16:37), the significance of BIS’s reference to General Prohibition 10 and to attempted violations of U.S. export controls (16:37), and the key takeaways for legal and trade compliance professionals (19:09).Mike and Brent then conclude with the still-back-by-popular-demand segment, Brent Carlson’s “Managing Up” (19:52).The BIS Press Release, with links to the settlement documents: https://www.bis.gov/press-release/cadence-design-systems-pay-95-million-penalty-bis-unauthorized-exports-chinese-entities-tied-developmentThe NSD Press Release, with links to the corporate guilty plea and criminal information: https://www.justice.gov/opa/pr/cadence-design-systems-agrees-plead-guilty-and-pay-over-140-million-unlawfully-exportingFor everything you ever wanted to know about the “high probability” standard, check out Mike & Brent’s “Fresh Looks” series at www.hugheshubbard.com/fresh-looksMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/

Mike and Brent go All-In regarding America’s AI Action Plan, unveiled by the White House on Wednesday, July 23, 2025, and discussed in detail at a forum the same day co-sponsored by the All-In Podcast and the Hill & Valley Forum.Mike and Brent discuss how these developments relate to the “Moment of Truth” discussed in Episode 20 (00:31), the Three Pillars of America’s AI Action Plan (01:07), how the Three Pillars relate to their recent BRG ThinkSet magazine article (01:45), the commercial opportunity presented by full-stack AI export privileges under the AI Action Plan and how the “stack sweeps” previewed on Episode 19 are the compliance corollary to this commercial opportunity (02:32), Secretary of Commerce Howard Lutnick’s remarks about where to draw the line between sensitive and non-sensitive exports from a national security perspective and how this relates back to their recent ThinkSet article (05:00), how Pillar Three—Lead in International AI Diplomacy & Security—relates to many ongoing bilateral trade negotiations (07:23), the importance of not making anyone look like a sucker or a fool (08:34), the AI Action Plan’s reference to secondary tariffs as a means to make sure other countries don’t “backfill” where U.S. export controls create opportunities (08:53), the potential impact of the Maintaining American Superiority by Improving Export Control Transparency Act that is on the President’s desk for signature into law (11:20), the continuing relevance of end-user and end-use controls and the “high probability” standard (14:10), how Pillar Three also focuses on strengthening AI compute export controls enforcement by the Department of Commerce with support from the U.S. intelligence community (15:23), updates on Department of Commerce political employees’ confirmation process and reference therein to the Bureau of Industry & Security's “red flag” guidance to industry (16:21), and the fundamental “deal” between the U.S. government and the U.S. tech sector evident in the AI Action Plan (18:42). Mike and Brent then conclude with an “all-in” version of Brent Carlson’s “Managing Up” segment (24:46).America’s AI Action Plan: https://www.whitehouse.gov/wp-content/uploads/2025/07/Americas-AI-Action-Plan.pdfThe White House’s Announcement of America’s AI Action Plan: https://www.whitehouse.gov/articles/2025/07/white-house-unveils-americas-ai-action-plan/The All-In Podcast: https://allin.com/The Hill & Valley Forum: https://www.thehillandvalleyforum.com/More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Mike & Brent’s “Fresh Looks” series: https://www.hugheshubbard.com/fresh-looks

Mike and Brent were honored guests on the FCPA Compliance Report podcast with their podfather, Tom Fox, the Voice of Compliance and founder of the Compliance Podcast Network. They discuss the concept of “secondary tariffs” recently threatened by the U.S. as to Russia’s trading partners (00:44), what would such secondary tariffs as to Russia really mean, and for whom (03:21), how multinational companies should start thinking through the impact of these potential tariffs (04:37), the need to be very, very, very careful about schemes that seem too good to be true (because they are) (06:03), how risk-based compliance can help multinationals evaluate proposed reconfigurations of procurement flows (09:36), where self-certifications by suppliers might not be sufficient (10:22), and then conclude with a deep dive into what False Claims Act enforcement for tariff evasion might look like and how to mitigate enforcement risks by understanding and leveraging the False Claims Act’s “knowledge” element (13:52).The Compliance Podcast Network: https://compliancepodcastnetwork.net/The FCPA Compliance Report podcast: https://compliancepodcastnetwork.net/category/fcpa-compliance-report/More about Tom Fox: https://compliancepodcastnetwork.net/about/Tom Fox on LinkedIn: https://www.linkedin.com/in/thomasfox13/More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/

Mike and Brent follow-up on Episode 19’s discussion of “stack sweeps” with a discussion of the current “moment of truth” facing trade compliance teams dealing with high-probability, catch-all enforcement risks as explained in their recent WorldECR (Issue No. 141, July/August 2025) and Dow Jones Risk Journal article, “Anticipating the moment of truth: how to prepare for ‘high probability’ catch-all enforcement.” Specifically, they discuss the recent decision by the U.S. to allow (licensed) sales of certain advanced integrated circuits to China (00:42), their WorldECR/DJRJ article and how the Bureau of Industry & Security (BIS) guidance of May 13, 2025, which emphasized the “high probability” standard and catch-all provisions of the U.S. Export Administration Regulations (EAR), inspired the article (or at least inspired Tom Blass of WorldECR to ask us for an article) (07:10), how the underlying catch-all provisions are not “new” as of May 13, 2025 (10:26), how compliance teams can’t “zero-risk” export controls risk and need to adopt risk-based approaches (12:17), the relevance of the “inchoate” offenses under the EAR, i.e., aiding, abetting, conspiracy, evasion, acting with knowledge, and misrepresentations (13:21), the limitations of end-use and end-user certificates under the May 13, 2025 policy and guidance documents (14:47), their thoughts on the reportedly pending “50% rule” for the Entity List (18:32), the impact of the ability of malign actors, political parties, and military-intelligence actors to exercise influence even without shareholdings (19:25), why the most risky counterparties are those not on the Entity List (20:49), and the three key takeaways in their WorldECR/DJRJ article (24:09). They conclude with another installment of Brent Carlson’s “Managing Up” segment (30:28).WorldECR: https://www.worldecr.com/More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Mike & Brent’s “Fresh Looks” series: https://www.hugheshubbard.com/fresh-looks

Mike & Brent coin a new phrase in the context of white-collar corporate enforcement, “stack sweep,” to describe the potential enforcement risks--up and down the technology stack--that recent U.S. export controls settlements, policy statements, and guidance portend in focusing on broad end-use or end-user “catch-all” provisions that turn on “knowledge” defined to include “an awareness of a high probability.” Specifically, they discuss how two recent cases are short on facts but long on lessons (or, as Brent says, appear at first glance to be “dogs”) (01:07), discuss the Alpha & Omega Semiconductor (AOS) settlement announced July 2, 2025 (03:19), how reliance on the advice of counsel is as useful as the extent of facts disclosed to counsel (06:09), discuss the Unicat Catalyst Technologies settlement announced by the Bureau of Industry & Security (BIS) on June 24, 2025 and parallel settlements announced by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Justice’s (DOJ’s) National Security Division (NSD) on June 16, 2025 (08:34), the lessons for pre-acquisition due diligence (11:03) including the importance to buyers of testing whether a target’s trade compliance program incorporates risks driving by the full definition of knowledge to include “high probability” awareness (for example, by specifically addressing risks under the catch-all provisions) (15:33), convergence across DOJ, Treasury, and Commerce regarding expectations for corporate compliance programs (17:50), and then Mike & Brent coin the phrase “stack sweep” to describe what would be the equivalent in corporate export controls enforcement to prior “industry sweeps” in corporate FCPA enforcement, in that catch-all, knowledge-driven end-use and end-user enforcement “sweeps” within the tech industry would be “sweeps” up and down the relevant technology stack (20:01). They then conclude with Brent’s back-by-popular-demand segment, “Managing Up” (25:52).The July 2, 2025 BIS settlement with Alpha & Omega Semiconductor: https://bis.gov/media/documents/e2995-alpha-omegaThe June 24, 2025 BIS settlement with Unicat Catalyst Technologies: https://www.bis.gov/media/documents/e2994-unicat-catalyst-technologies-final-order-12-20-2024The June 16, 2025 OFAC settlement with Unicat Catalyst Technologies: https://ofac.treasury.gov/recent-actions/20250616The June 16, 2025 DOJ NSD press release with the relevant declination letter (buyer), non-prosecution agreement (target) and criminal guilty plea (former CEO): https://www.justice.gov/opa/pr/justice-department-declines-prosecution-private-equity-firm-following-voluntary-disclosureFor everything you ever wanted to know about the “high probability” standard: www.hugheshubbard.com/fresh-looksMore about Brent: https://www.thinkbrg.com/people/brent-carlson/More about Mike: https://www.linkedin.com/in/mhuneke/

Mike and Brent propose a new framework for post-resolution third-party independent consultants imposed under corporate resolutions with the U.S. Bureau of Industry & Security (BIS) or monitors imposed under resolutions with the U.S. Department of Justice’s (DOJ’s) National Security Division (NSD) that best promotes underlying national security objectives while also minimizing the impact on the resolving company’s business. Their proposal is based on their prior “Fresh Looks” article with the NYU Law School’s Program on Corporate Compliance & Enforcement (PCCE), “Monitoring What Matters: A Fresh Look Proposal to Government and Industry for How Post-Resolution Oversight Can Best Deny Hostile Actors the Means to Cause Deadly Harm,” from March 28, 2024.Mike and Brent introduce their prior “Monitoring What Matters” article (00:37), contrast the needs of post-resolution oversight under U.S. export controls with those under the U.S. Foreign Corrupt Practices Act (FCPA) (01:52), and then explain why traditional concepts of what a post-resolution independent monitor or consultant should do miss the mark (02:38), how the compelling need to move quickly could justify imposing key milestones at just 3 and 6 months, with completion in one year (04:56), that this shortened timeframe can be achieved by leveraging the “awareness of a high probability” standard of knowledge under the U.S. Export Administration Regulations (EAR) (05:56), how battlefield risks should drive prioritization (09:28), how third-part independent consultants should be leveraging what is likely, for many companies already on the front lines of U.S. export controls (e.g., by being part of the leading-edge AI ecosystem), a robust compliance program that was likely further enhanced during the preceding government investigation (11:11), how companies and any post-resolution independent consultant or monitor should think about where and how to draw due diligence lines regarding multi-tier distributor and reseller networks (12:57), the importance in the national security context of thinking about third-party consultant and monitor independence not just in terms of independence from direct client relationships with the subject company but also in terms of independence from the relevant foreign country’s military or intelligence agencies, including prior engagements to lobby the U.S. government (16:38), and the three key takeaways from their prior article (22:04). They conclude with Brent’s ever-popular segment, “Managing Up” (28:08).The prior “Monitoring What Matters” article: https://wp.nyu.edu/compliance_enforcement/2024/03/28/monitoring-what-matters-a-fresh-look-proposal-to-government-and-industry-for-how-post-resolution-oversight-can-best-deny-hostile-actors-the-means-to-cause-deadly-harm/The rest of the “Fresh Looks” series with NYU: www.hugheshubbard.com/fresh-looksMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/

Mike & Brent welcome Erika Trujillo, Managing Director of SEIA (“say-a”), who with her company brings advanced data analytics solutions to solving trade compliance problems. Mike and Brent discuss Erika’s background and the services SEIA provides (00:14); how advanced data analytics can help with export controls risk assessments by, among other things, bringing to bear data from across multiple departments (which is particularly important under U.S. law’s collective knowledge doctrine and the “high probability” standard) (02:10); the importance of differentiating between your company’s “internal data” and the “external data” and of identifying and leveraging what internal data might be sitting within reach (05:03); the importance of contextualization, i.e., taking a holistic perspective at potentially interesting data points that only become informative in the context of other data points, for example data suggesting that EAR99 items that otherwise would not require an export license might be exported for prohibited end-uses or to prohibited end-users (06:53); the need for companies to have the courage to engage with their own data, especially since they are making statements to various governments in any case about their trade flows (09:21); how small- and medium-sized companies can start, step-by-step, to get a handle on their internal data (10:53); how to respond to reports or allegations (i.e., “red flags”) of potential export control violations (12:18); common data pitfalls to avoid (13:51); the importance of prioritization not just in terms of data cleanup projects (14:28); why praying to the accounting platform gods and hoping everything is OK is not sufficient (16:00); the full definition of knowledge (including an awareness of a high probability) and what opportunities that presents for risk-based approaches to trade compliance (16:35); how a data-driven approach to trade compliance can help improve relationships with colleagues in sales and operational functions (18:39); how to overcome the fear of what you might find by taking a deeper dive into your company’s data (19:28); and how a data-driven approach can help with c-suites and boards of directors (20:13). We conclude with a surprise twist in the ever-popular segment, Brent Carlson’s “Managing Up” in exploring Erika’s mission and purpose in co-founding SEIA.More about SEIA: https://www.seiatech.com/aboutseiaContact or Book a Demo with SEIA: https://www.seiatech.com/contactContact Erika: etrujillo@seiatech.comMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Mike & Brent’s “Fresh Looks” series: www.hugheshubbard.com/fresh-looks

Mike and Brent follow-up on Mike’s being quoted in Dow Jones Risk Journal regarding the unexpected export control consequences of the Israel-Iran conflict. They discuss the geopolitical context (00:39), the article by Richard Vanderford and Mengqi Sun (01:22), the risk that Iran tries to evade U.S. export controls (and sanctions) by procuring replacement parts and equipment through third-party intermediaries (02:12), the cautionary tale of an Alabama resident sentenced to five years in U.S. federal prison for diverting items to Iran (03:29), the need to be cognizant of “catch-all” U.S. export controls related to ballistic missiles and WMD programs (including nuclear) and those controls reliance on the full definition of “knowledge” to include “an awareness of a high probability” (04:42), increased tracking and investigative activity by the U.S. government (06:19), how companies need to think about responding to “red flags” (06:45), the likely impact of forensic review of battlefield recoveries on requests by Israel and NGOs to companies for assistance in tracing item or component flows to Iran (07:44), and the likelihood of increased, rather than decreased, activity by U.S. agencies as a result of the conflict (09:52). They conclude with another segment of Brent Carlson’s “Managing Up” (12:26).The Dow Jones Risk Journal article (June 13, 2025) (subscription req.): https://article.dowjones.com/djriskjournal/articles/israel-attack-could-bring-new-business-risks-even-if-not-followed-by-more-sanctions-9f0dab93?mod=risk-compliance_feat1_dow-jones-risk-journal_pos4&_gl=1*eca83t*_gcl_au*OTM2NjQxODc2LjE3NDI1ODkxNDI.*_ga*MTQ0NTg1NTk4LjE3NDI1ODkxNDI.*_ga_K2H7B9JRSS*czE3NTAyMTQ5MjgkbzMxJGcxJHQxNzUwMjE0OTQ4JGo0MCRsMSRoNTM5NTk0NjQxThe Wall Street Journal Morning Risk Report (June 16, 2025): https://createsend.com/t/d-3CAD0099A1F7C65A2540EF23F30FEDEDMore about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/More about Mike: https://www.linkedin.com/in/mhuneke/Brent & Mike’s “Fresh Looks” Series: www.hugheshubbard.com/fresh-looks