Companies seeking credit for voluntarily self-disclosing potential violations of sanctions or export control laws must be mindful of the multiple regimes at play and their differing expectations.
A compliance note released by the Department of Justice (DOJ), Department of Commerce’s Bureau of Industry and Security (BIS), and Treasury Department’s Office of Foreign Assets Control (OFAC) on Wednesday explains how each agency assesses voluntary self-disclosure when determining whether reporting companies qualify for potential reductions in penalties. The guidance follows policy updates by the DOJ and BIS in recent months designed to incentivize self-reporting before the government initiates an investigation.
At the DOJ, companies can reduce—or avoid altogether—the potential for criminal liability through prompt voluntary self-disclosure of apparent violations of sanctions and export control laws.
“[W]here a company voluntarily self-discloses potentially criminal violations, fully cooperates, and timely and appropriately remediates the violations, [the National Security Division] generally will not seek a guilty plea, and there will be a presumption that the company will receive a nonprosecution agreement and will not pay a fine,” the DOJ explained in the note.
Aggravating factors 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 significant company profits from the misconduct, according to the DOJ. The agency added disclosures made only to OFAC or BIS do not qualify for its policy.
OFAC’s policy provides more leeway, in that voluntary self-disclosures regarding apparent sanctions violations to another agency could qualify as a disclosure to OFAC in certain cases, according to the guidance. Situations where self-disclosures do not qualify as voluntary include when a third party notifies OFAC of the apparent violation or when the disclosure is deemed to be initiated by outside factors, such as a government or state agency’s suggestion.
At BIS, new guidance released in April puts pressure on businesses that uncover potential export control violations but don’t come forward.
“Additionally, 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,” the agency stated in the note. “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.”
Regardless of the potential for penalty reductions each of the agencies offer through their respective voluntary self-disclosure processes, experts agree companies would be wise to remediate their apparent issues before reporting.