On July 26, 2023, the US Departments of Treasury, Commerce, and Justice jointly published a Compliance Note on the voluntary self-disclosure (VSD) of potential violations related to US sanctions, export controls, and national security laws. This note, the second in a series, underscores the importance of compliance with sanctions and export control measures, particularly concerning Russia and broader national security concerns.
The VSD Note provides an overview of the VSD policies of each agency, highlighting recent updates to certain policies. It emphasizes the agencies’ encouragement for companies to promptly disclose and remediate potential violations to benefit from VSD policies. The key agency-specific points covered in the note include:
1. Department of Commerce Bureau of Industry and Security (BIS):
- Updated VSD policies include a dual-track system for handling VSDs. Minor or technical infractions are resolved on a fast-track basis with a warning or no-action letter within 60 days.
- Failure to disclose significant possible violations of export control laws is now considered an aggravating factor, potentially leading to increased penalties.
2. Department of the Treasury Office of Foreign Assets Control (OFAC):
- OFAC’s VSD policies incentivize the submission of VSDs by treating them as mitigating factors when determining enforcement actions. It allows for up to a 50% reduction in base civil penalties.
3. Department of Justice National Security Division (DOJ NSD):
- DOJ NSD’s VSD policies for potential criminal violations of export controls and sanctions laws have been updated. Companies that fully cooperate, remediate violations, and submit VSDs may receive non-prosecution agreements and avoid fines.
- Notably, VSDs submitted to BIS or OFAC that are not simultaneously disclosed to the NSD will not be credited as VSDs by the NSD.
The note highlights challenges companies face when coordinating VSDs with different agencies, especially in cases that could involve criminal intent. It discusses the role of aggravating factors in DOJ NSD’s VSD policy and their potential impact on prosecution decisions.
Furthermore, the BIS Assistant Secretary for Export Enforcement, Matthew Axelrod, emphasized the VSD policy updates and increased enforcement efforts by BIS. He mentioned the formalized coordination and partnership between BIS and OFAC, indicating closer collaboration and more coordinated enforcement actions in the future.
The VSD Note also raises awareness of the whistleblower program run by the Financial Crimes Enforcement Network (FinCEN), which incentivizes individuals to report violations of US sanctions. Whistleblowers who provide valuable information leading to successful enforcement actions may receive awards ranging from 10% to 30% of collected monetary penalties.
In conclusion, this Compliance Note underscores the complexities faced by corporations in dealing with VSDs and resolving sanctions and export control cases involving multiple US enforcement agencies. Coordination with international counterparts and the increasing routine of information-sharing further contribute to the intricacies of compliance in today’s global landscape.
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