Jan 2020 - US Government Adds New Self-Disclosure Policy for Export Violations

The Department of Justice announced the release of a revised voluntary disclosures policy for export control violations.

The Department of Justice can prosecute wilful violations of the export laws, including:

  • The Arms Export Control Act (AECA), 22 U.S.C. § 2778,
  • The Export Control Reform Act (ECRA), 50 U.S.C. § 4801 et seq., and
  • The International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1705

The revised policy is meant to reward companies that engage in voluntary self-disclosure in situations that might otherwise lead to criminal prosecution. Assistant Attorney General for National Security John C. Demers explained:

“Protecting our nation’s sensitive technologies and preventing transactions with sanctioned entities are DOJ priorities, but we cannot succeed alone. We need the private sector to come forward and work with DOJ. The revised VSD Policy should reassure companies that, when they do report violations directly to DOJ, the benefits of their cooperation will be concrete and significant.”

The new voluntary disclosure policy includes three key changes. These changes are intended to promote voluntarily self-disclose to the DOJ.

    1. The Policy clarifies the benefits that are available to companies that voluntarily disclose a violation (“Self Disclossure”), fully cooperate with the Justice Department (“Full Cooperation”), and timely and appropriately correct the issues (“Timely and Appropriate Remediation”).
    2. The Policy was reformatted to more closely resemble other DOJ self-disclosure guidance. This was meant to better standardize the way that DOJ handles self-disclosures. Specifically, it harmonized the definitions of “Voluntary Self-Disclosure,” “Full Cooperation,” and “Timely and Appropriate Remediation” with the same terms in the Foreign Corrupt Practice Act Corporate Enforcement Policy.
    3. The Policy clarifies that disclosures of potentially willful conduct made to regulatory agencies, and not to DOJ, will not qualify for the benefits provided in the Policy.

The policy now clarifies that there is a presumption that the company will receive a non-prosecution agreement and will not be assessed a fine, in the absence of aggravating factors. If aggravating circumstances warrant an enforcement action other than a non-prosecution agreement, but the company satisfies all other criteria, the Policy states that DOJ will recommend a fine that is at least 50 percent lower than what would otherwise be available under the alternative fine provision and will not require the imposition of a monitor. The prior guidance did not provide a presumption of any kind, and did not assign any concrete benefits to companies that met its criteria.

The policy became effective on December 13, 2019. It applies only to export control and sanctions matters before the National Division’s Counterintelligence and Export Control Section. It does not apply to any other section in the National Security Division, any other part of the Department of Justice, or any other agency.

Ryan and I have counseled a substantial number of clients on voluntary disclosures before a number of agencies. The last change – that disclosures of potentially willful conduct made only to regulatory agencies will not qualify for the benefits provided in the policy – is a significant element in this policy.

This new policy may make it beneficial to make a disclosure to the DOJ, in self-disclosure situations. Because it will but it will create additional burdens on the disclosing company, it is important to review the occurrence to assess whether there is a reasonable possibility of criminal prosecution. Where there is no reasonable possibility of criminal prosecution, or where prosecution would likely emanate from another division of the DOJ, disclosure might be unnecessary. Any company considering self-disclosure of any occurrence or issue should consult with a qualified attorney who understands self-disclosure law, to make sure your disclosures are made to the right parties, and made in the right form and with the right information, in order to be effective.