Outside counsel advising on the acquisition of a global Tier 1 automotive components supplier flagged transactional anomalies discovered during financial due diligence: a pattern of sales routed through third-country distribution intermediaries that appeared inconsistent with the stated end markets. Preliminary review raised the concern that some intermediaries may have been acting as conduit resellers to customers in OFAC-sanctioned jurisdictions, and that certain exported components — classified as dual-use items under the Export Administration Regulations — may have been shipped without required licenses. The acquirer engaged Law & Forensics to conduct a forensic investigation before the acquisition closed.
The Situation
Sanctions and export-controls investigations in the automotive supply chain present a particular analytical challenge: the industry's standard multi-tier distribution model — in which components move from manufacturer to Tier 1 supplier to regional distributor to OEM to end market — creates legitimate opacity that sophisticated bad actors exploit. Identifying whether a given transaction crosses a sanctions or export-controls threshold requires not merely matching transaction records to sanctions lists, but reconstructing the full chain of distribution to identify ultimate end customers and tracing component specifications to applicable Export Control Classification Numbers (ECCNs).
The target company's records were distributed across ERP systems in five countries, with transaction documentation in four languages and inconsistent data structures across legacy and current systems.
Our Approach
Law & Forensics designed an investigation that integrated financial forensics, trade-documentation analysis, and digital evidence review into a single, privilege-protected workstream.
Financial Forensics and Transaction Mapping. The team extracted and normalized six years of transaction records from the target company's ERP systems, applying entity resolution and counterparty analytics to identify transactions routed through intermediary structures. SDN list screening, secondary-sanctions analysis, and geographic risk scoring were applied to identify transactions warranting further investigation.
Trade Documentation Forensics. For flagged transactions, the team forensically analyzed the underlying shipping documentation, letters of credit, export declarations, and end-user certificates. Digital metadata analysis of trade documents identified instances of document modification — a key indicator of deliberate re-routing to conceal ultimate end customers.
EAR Classification Review. Law & Forensics' export-controls specialists reviewed the component specifications for the product lines implicated in the flagged transactions, applying ECCN classification methodology to identify items subject to EAR licensing requirements and assessing whether the applicable license exceptions were available for the transactions at issue.
Voluntary Self-Disclosure Preparation. Working with outside regulatory counsel, the firm prepared the factual and evidentiary submissions for voluntary self-disclosures to OFAC and BIS, structuring the disclosures to present the findings in the most favorable legally defensible light and to demonstrate the thoroughness of the remediation program implemented in advance of filing.
The Impact
The investigation produced a complete, auditable accounting of the target company's sanctions and export-controls exposure across the six-year look-back period. The voluntary self-disclosures to OFAC and BIS were accepted by both agencies. Civil penalties were resolved at approximately 34 percent of the applicable statutory maximum — a result that acquisition counsel attributed in significant part to the thoroughness and transparency of the self-disclosure, as well as the pre-disclosure remediation measures the acquirer had already implemented based on Law & Forensics' interim findings.
The matter was resolved without criminal referral. The acquisition closed, and the combined entity implemented a redesigned sanctions and export-controls compliance program developed with Law & Forensics' guidance.
Related Practice Area
Investigations Services — Sanctions and Export Controls Investigations; Anti-Bribery, AML, and Corruption; Forensic Accounting and Fraud; Financial Regulatory Enforcement and Compliance Response
