BIS, DOJ, OFAC Stress Voluntary Disclosures in New 'Compliance Note'

The U.S. this week issued new guidance on its various voluntary self-disclosure policies for sanctions and export control violations, urging companies to disclose offenses and stressing the importance of “robust” compliance programs. The six-page “compliance note,” the second jointly issued by the Commerce, Treasury and Justice departments (see 2303020054), outlines DOJ’s recently updated disclosure policies for criminal export and sanctions violations, the raft of changes made to the Bureau of Industry and Security's administrative enforcement policies over the past year, and the Office of Foreign Assets Control’s procedures for assessing voluntary disclosures. The notice also describes the Financial Crimes Enforcement Network’s whistleblower program.

The three agencies said companies that discover potential violations “must promptly disclose and remediate.” A disclosure may not only mitigate penalties, they said in a July 26 news release, but also “alerts national security agencies to activities that may pose a threat to the national security and foreign policy objectives of the U.S. government.”

Matthew Axelrod, the top BIS export enforcement official, called industry the “first line of defense” for the U.S. It’s becoming “more important than ever” for companies to “maintain open communication” with the government, said former OFAC Director Andrea Gacki, now the head of FinCEN (see 2307130066). She added that foreign “adversaries” are using “increasingly sophisticated efforts to evade international sanctions and export controls.”

“As this joint compliance note makes clear,” Axelrod said, “we need companies to tell us when they have potentially violated our rules and offer them concrete benefits for doing so.”

The compliance note points to DOJ’s March update to its voluntary disclosure policies, which said the agency generally won’t seek prosecution and won’t levy a fine in cases where a company discloses a violation, cooperates with the government and remediates. This applies unless there are other “aggravating factors,” the note said, such as “pervasive criminal misconduct within the company,” efforts by upper management to hide the violations, a pattern of repeated violations, illegally exported items that “are particularly sensitive or to end users of heightened concern,” and if the company earned “significant profit” from the violations.

DOJ stressed in the compliance note that the policy applies only to companies that voluntarily disclose their violations directly to the agency. “Disclosures made only to regulatory agencies such as OFAC or BIS do not qualify,” the note said. Lawyers have said this condition may present a difficult choice for U.S. companies that are unsure where to submit their voluntary disclosure, because if they believe they should be submitting it to one agency, but that agency then refers the case to DOJ, DOJ may not recognize it was voluntarily disclosed (see 2008180043).

The compliance note also described recent BIS updates to its disclosure policies, including plans to increase penalties on companies that fail to disclose a “significant” potential violation (see 2304180071). 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 guidance said. BIS will consider “the existence, nature, and adequacy of a company’s compliance program, including its success at self-identifying and rectifying compliance gaps,” when crafting settlements.

The notice also touches on FinCEN’s whistleblower program, which can award tipsters 10% to 30% from the money collected in cases in which the tip led to a “successful enforcement action.” The agency may also pay awards to whistleblowers whose information also led to the successful enforcement of a “related action” -- including penalties for export violations under the Export Control Reform Act. Whistleblowers that wish to remain anonymous must be represented by a lawyer.