Three federal agencies are again calling on U.S. businesses to self-report potential violations of export control, sanctions, and other laws, this time emphasizing that “responsible companies” that do so “help not only themselves” by qualifying for significant penalty mitigation “but also the interests of the U.S. government and the American people” by alerting authorities to potential threats to U.S. national security and foreign policy objectives.
For more information on whether a voluntary self-disclosure is right for your company, please contact attorney Kristine Pirnia via email.
Earlier this year the Bureau of Industry and Security announced policy changes designed to incentivize the submission of voluntary self-disclosures when businesses uncover significant possible violations of the Export Administration Regulations. Those changes followed others announced in 2022 that promised quicker resolution of VSDs involving minor or technical infractions
In a “tri-seal compliance note” issued in conjunction with the Department of Justice and the Office of Foreign Assets Control, BIS is now further clarifying that “companies cannot sidestep the ‘should we voluntarily self-disclose or not’ decision by self-blinding and choosing not to do an internal investigation in the first place.” BIS adds that “the existence, nature, and adequacy of a company’s compliance program, including its success at self-identifying and rectifying compliance gaps, is itself considered a factor under the settlement guidelines.”
This note also sets forth OFAC’s VSD policy, which does not appear to include any revisions. Among other things, OFAC considers VSDs to be a mitigating factor when determining appropriate enforcement action, and in cases where a civil monetary penalty is warranted a qualifying VSD can result in a 50 percent reduction in the base amount of a proposed civil penalty. OFAC adds that in reviewing the underlying conduct in a VSD it considers the totality of the circumstances surrounding the apparent violation, including the existence, nature, and adequacy of the subject’s compliance program at the time of the apparent violation and the corrective actions taken in response.
Finally, the note indicates that on March 1 the Department of Justice issued an updated VSD policy covering potential criminal violations of export control and sanctions laws. This policy provides that when a company voluntarily self-discloses potentially criminal violations, fully cooperates, and timely and appropriately remediates the violations, DOJ’s National Security Division generally will not seek a guilty plea and there will be a presumption that the company will receive a non-prosecution agreement and not pay a fine. However, that presumption does not apply when there are aggravating factors, which include egregious or pervasive criminal misconduct within the company, concealment or involvement by upper management, repeated administrative and/or criminal violations of national security laws, the export of items that are particularly sensitive or to end-users of heightened concern, and a significant profit to the company from the misconduct. NSD’s analysis will also consider whether a company has implemented an effective and sufficiently resourced compliance and ethics program and has imposed appropriate disciplinary measures.
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