Red Flags Rising

• All-In on America's AI Action Plan

  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

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• "Secondary Tariffs" with Tom Fox

  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/

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• China, AI, and Export Controls - Facing a Moment of Truth

  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

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• Stack Sweeps, Successor Liability, and “Knowledge” – Emerging Signals from Recent Enforcement Actions

  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/

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• FRESH LOOKS - Monitoring What Matters

  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/

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