The Commerce Department’s Bureau of Industry and Security (BIS) updated its guidelines to further clarify the advantages of voluntary self-disclosure (VSD) to the agency when export control violations are uncovered.
The policy changes, revealed in a memo from Assistant Secretary for Export Enforcement Matthew Axelrod shared Tuesday, most notably put pressure on businesses that uncover “significant” potential violations but don’t come forward. Firms found to be in such a situation will now have their actions held against them as an aggravating factor in BIS enforcement decisions.
“In other words, when someone submits a VSD, they receive concrete and identifiable benefits under our guidelines,” wrote Axelrod. “By the same token, however, when someone uncovers a significant possible violation but then affirmatively chooses not to file a VSD, they are running a substantial risk because if it does come to our attention, the decision not to disclose will be considered an aggravating factor under our existing guidelines.”
BIS guidelines allow for base penalties to be reduced by as much as half the maximum penalty applicable in cases of egregious misconduct when the issues at hand are self-disclosed.
The new approach from the BIS intentionally mirrors similar actions recently undertaken by the Department of Justice (DOJ) to encourage firms to self-disclose corporate misconduct before the start of a government investigation. The DOJ’s policy change allows for greater reductions to criminal penalties (and sometimes no penalty at all), not requiring a guilty plea, and/or not imposing a compliance monitor in VSD cases.
“We want to do everything in our power to encourage parties to invest in strong compliance programs and comply with our rules.”
Matthew Axelrod, Assistant Secretary for Export Enforcement, Bureau of Industry and Security
“As Deputy Attorney General Lisa Monaco said in [the Monaco Memo], commitment to fostering a strong culture of compliance at all levels of a corporation—and not just within the compliance department—is a key aspect of an effective compliance program and ethical corporate culture. We agree,” said Axelrod.
Axelrod added VSDs are viewed by the BIS as a positive reflection of a company’s compliance program because it shows the program is capable of properly detecting violations, which is considered by the agency to be a mitigating factor.
Specifically of interest to the BIS with its new policy is “significant” potential export control violations. Axelrod noted the agency does not want to be overwhelmed with minor technical violations—the BIS last year instituted a new system for self-reporting smaller infractions that provides companies with warnings or no-action letters within 60 days.
The policy changes also newly incentivize companies to come forward regarding another party’s potential export control violations by considering the reporting company’s action as a mitigating factor in any future, unrelated case the agency might bring against that company.
“We want to do everything in our power to encourage parties to invest in strong compliance programs and comply with our rules,” said Axelrod. “… Because protecting sensitive U.S. technology is a shared endeavor, we need everyone’s assistance in bringing potential [export control] violations to our attention.”