Several years ago, the head of the State Department’s Director of Defense Trade Controls (DDTC) explained that, when a company engaged in substantial exporting makes no voluntary disclosures of export control violations, something is wrong. He reasoned that every company is made up of human beings—and human beings make mistakes, so every company doing lots of exporting must have at least some violations. Therefore, a lack of disclosures means either that the exporter is not catching the violations, or that it’s choosing not to disclose them. Last month, the U.S. Department of Justice (DOJ) released a revised Export Control and Sanctions Enforcement Policy for Business Organizations designed to increase voluntary self-disclosures of export controls and sanctions violations (Voluntary Self-Disclosure Policy or VSD Policy).
On December 13, 2019, the DOJ announced its updated Voluntary Self-Disclosure Policy, which builds on the guidance its National Security Division (NSD) issued in October 2016, and will be formally incorporated into the Justice Manual. According to the DOJ, “[t]his revised VSD Policy signals the Department’s continued emphasis on corporate voluntary self-disclosure, rewarding cooperating companies with a presumption in favor of a non-prosecution agreement and significant reductions in penalties.”
The DOJ’s press release emphasizes both the Department’s focus on protecting sensitive technologies and preventing transactions with sanctioned entities and the importance of private sector cooperation and with these efforts. In the DOJ’s ideal scenario, companies would voluntarily self-disclose all potentially willful violations of the statutes implementing the U.S. government’s primary export control and sanctions regimes—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—directly to the DOJ’s NSD.
The Department’s revised VSD Policy is intended to reassure companies that the benefits of reporting violations directly to DOJ “will be concrete and significant.” To that end, the new VSD Policy makes several key changes to the 2016 policy that provide further incentives for corporations to voluntarily self-disclose violations to the DOJ.
- The VSD Policy clarifies the benefits of voluntarily disclosing a violation, fully cooperating with NSD, and timely and appropriately remediating identifying problems. More particularly, the VSD Policy establishes a new presumption that that the company will receive a non-prosecution agreement and not be assessed a fine so long as there are no aggravating factors. Further, if aggravating circumstances warrant an enforcement action but the company satisfies all other criteria, the VSD 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 provide any concrete benefits to companies that met certain criteria.
- The VSD Policy also makes clear that disclosures of potentially willful conduct made to regulatory agencies instead of to DOJ will not qualify for the benefits provided in the VSD Policy.
- Finally, in an attempt to standardize DOJ voluntary disclosure policies to the extent possible, the VSD Policy was modified to more closely resemble existing and analogous guidance from other DOJ components. Specifically, the definitions of “Voluntary Self-Disclosure,” “Full Cooperation,” and “Timely and Appropriate Remediation” now closely mirror those provided in the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy.
The new VSD Policy applies only to export control and sanctions matters brought by the NSD’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.
All companies engaged or likely to become engaged in exporting or doing international business that may implicate U.S. sanctions should familiarize themselves with the VSD Policy and prepare to take advantage of the newly-clarified benefits of making voluntary disclosures. No one should want to be the company making no disclosures—and raising red flags for enforcement agencies, especially now that the upside of coming clean about mistakes is so clear.