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White Collar + Fraud + Investigations + Compliance
On July 26, 2023, the U.S. Department of Justice, National Security Division (“DOJ NSD”), the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), and the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued the second-ever Tri-Seal Compliance Note (the “Note”). This Note discusses Voluntary Self-Disclosure of Potential Violations and discusses each agency’s aligned expectations for companies that discover potential violations of any administrative or criminal violations of sanctions and export controls, including expectations for prompt disclosure and remediation of such violations. The agencies collectively stress the important role that private sector businesses play in identifying threats from malicious actors and foreign adversaries seeking to subvert the U.S. financial system or access sensitive U.S. technologies or goods.
Companies evaluating whether to disclose a potential violation to any U.S. governmental authority should consider the specific guidance applicable to the agency with jurisdiction over the potential violation, and key distinctions are described below. Certain collective standards apply generally:
- Companies should consider that agencies evaluate each disclosure on a case by case basis.
- When deciding to disclose, companies should be aware that disclosure to one agency does not equal disclosure to all aligned entities.
- Voluntary disclosures should be timely made, in good faith, and complete.
- As with most self-disclosure guidance, each agency will look to the maturity of a company’s compliance program and any remediation efforts taken in response to the violation.
Department of Treasury: OFAC evaluates disclosures of potential sanctions violations, and such disclosures are highly encouraged. Existing enforcement guidelines from OFAC remain applicable. A party’s voluntary self-disclosure will be viewed as a mitigating factor in determining what enforcement action will be taken for a particular case. Companies evaluating a disclosure should note that not every disclosure may be deemed a “qualifying” disclosure for potential penalty mitigation. That said, qualifying disclosures can result in as much as 50% reduction of the baseline proposed civil penalty amounts, if OFAC deems a penalty is owed for a sanctioned transaction.
Department of Commerce: The BIS evaluates disclosures of export violations, including violations of any license or other export order issued under U.S. export control laws. The BIS has established a multi-track system within the Office of Export Enforcement to streamline review of minor or technical infractions, which can be resolved in about 60 days without any financial penalties. Existing memoranda from the BIS regarding administrative enforcement and voluntary disclosures remain in place, including expectations that companies can disclose potentially others’ concerning exporting activities as a factor in future mitigation consideration.
Department of Justice: DOJ NSD is focused on potential criminal violations of export control and sanctions laws, and the standards here apply to all corporate criminal matters handled by DOJ NSD. Timely disclosures to DOJ NSD, with full cooperation, may preclude fines, guilty pleas and result in a non-prosecution agreement. Existing corporate compliance program guidelines from DOJ remain applicable here.
Companies engaging in international business should carefully evaluate internal compliance programs and processes that control supply chain and distribution chains to timely detect potential violations of U.S. export control or sanctions laws. Multiple contacts may be required to assure that each agency’s voluntary disclosure process is properly initiated. When an investigation may be ongoing, agencies should be kept reasonably informed of developments related to the potential violation. Experienced legal counsel can support corporate compliance needs.
A link to a press release announcing the note is available here.