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Crackdown on Mainland Chinese Companies for Sanctions Violations, Trade Secret Theft Continues

The U.S. Department of Justice reports that the world’s largest telecommunications equipment manufacturer, Huawei Technologies Co. Ltd., has been charged with violating and conspiring to violate the International Emergency Economic Powers Act, conspiracy to commit money laundering, bank fraud and wire fraud. A separate indictment charged two of Huawei’s subsidiaries with conspiring and attempting to steal trade secrets as well as wire fraud and obstruction of justice.

According to a DOJ press release, the first indictment relates to a long-running scheme to deceive numerous global financial institutions and the U.S. government regarding the company’s business activities in Iran. Based on the company’s misrepresentations that all of its Iran business was in compliance with U.S. sanctions, banks continued their banking relationships with the company and cleared millions of dollars’ worth of Iran-related transactions through the United States despite a general prohibition on such actions under U.S. laws and regulations.

The second indictment alleges a concerted, company-wide effort to steal trade secrets from a U.S. competitor. The DOJ notes that these charges are punishable by a fine of up to US$5 million or three times the value of the stolen trade secret, whichever is greater.

The indictments follow the DOJ’s November 2018 launch of an initiative to identify priority mainland Chinese theft cases, ensure that the department has sufficient resources dedicated to those cases, and make sure the cases are brought to an appropriate conclusion quickly and effectively. Then-Attorney General Jeff Sessions said this initiative would focus on the fact that mainland Chinese espionage is being directed against not only traditional targets like U.S. defence and intelligence agencies but also research labs and universities.

Huawei and another mainland Chinese telecom company, ZTE, are also the target of several legislative measures introduced earlier this month in Congress. One would require the denial of exports of U.S. parts and components to mainland Chinese companies found to be in violation of U.S. export control or sanctions laws. Another would create a new White House office charged with co-ordinating efforts to curb U.S. reliance on foreign products that have been identified as national security risks, such as those produced by these companies.

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