Tri-Seal Compliance Note: Voluntary Self-Disclosure Policies

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Jul. 27, 2023
By: Marvin E. McPherson

As previous noted in Don't Be an Export Violation Statistic, voluntary self-disclosure is an integral step in the event of an export or sanctions violation. Disclosing potential violations promptly can lead to significant mitigation of civil or criminal liability.

The U.S. Department of Justice in an effort to encourage self- disclosure published the NSD Enforcement Policy for Business Organizations. Along with the National Security Division (NSD), the Department of Commerce’s Bureau of Industry and Security (BIS), and the Department of the Treasury’s Office of Foreign Assets Control (OFAC), has published a new Tri-Seal Compliance Note which reviews voluntary self-disclosure policies for criminal conduct. The note encourages businesses to self-disclose criminal sanctions and export violations in order to help safeguard national security.

All three agencies encourage companies to invest in effective and sufficiently resourced compliance and ethics programs. Implementing measures to self-identify and rectify compliance gaps can be considered a mitigating factor in enforcement actions.

The Compliance Note emphasizes that a timely and comprehensive self-disclosure must be made to both the regulatory agency (OFAC or BIS) and to NSD for the benefit of the NSD policy. Companies that disclose potentially criminal violations in a comprehensive and timely fashion are likely to benefit from a presumption that the company will receive a non-prosecution agreement and will not pay a fine.

However, where there are aggravating factors, the presumption in favor of a non-prosecution agreement does not apply. Aggravating factors include:

1.     Egregious or pervasive criminal misconduct within the company;

2.     Concealment or involvement by upper management;

3.     Repeated administrative and/or criminal violations of national security laws;

4.     The export of items that are particularly sensitive or to end users of heightened concern; and

5.     A significant profit to the company from the misconduct.

The presence of aggravating factors may lead to NSD seeking a guilty plea.

Export and sanctions violations are generally civil in nature, however, each set of laws encompass criminal statutes in which persons can be held criminally liable for conduct undergone in contrary to U.S laws. It’s important to remain up to date with U.S export and sanctions laws as well as conducting regular reviews and audits of your compliance program.  If you suspect an export or sanctions violation, a violation has occurred, or you need help with compliance reviews, please contact any attorney at Barnes Richardson and Colburn.