July 2023 Joint Compliance Notice: Agencies Clarify Voluntary Self-Disclosure Policies for National Security Violations

The joint compliance notice issued by the Department of Commerce, the Department of the Treasury, and the Department of Justice on July 26, 2023, addresses voluntary self-disclosure by businesses of potential violations of sanctions, export controls, and other national security laws. The compliance notice provides insights into the positions of each agency regarding voluntary self-disclosure and its potential benefits, which can include non-prosecution agreements or a 50 percent reduction in “base penalties.”

Here is a summary of the positions outlined in the compliance notice:

Department of Justice (DOJ):

• The DOJ’s voluntary self-disclosure policy, updated on March 1, 2023, covers potential criminal violations of export control and sanctions laws.
• Under this policy, companies that voluntarily self-disclose potentially criminal violations, fully cooperate, and appropriately remediate violations will generally not face a guilty plea.
• There is a presumption that the company will receive a non-prosecution agreement and will not be fined.
• Factors such as the nature of the misconduct and the company’s response can affect the outcome. Aggravating factors may lead to deferred prosecution agreements, guilty pleas, or indictments.
• Timeliness, full disclosure, and cooperation are essential for companies seeking protection under this policy.
• Disclosures made solely to regulatory agencies like OFAC or BIS do not qualify for the DOJ’s policy.

Department of Commerce:

• The Bureau of Industry and Security’s Office of Export Enforcement (OEE) has implemented a dual-track system for voluntary self-disclosures.
• Minor infractions may result in warnings or no-action letters, while more serious violations may lead to enforcement actions.
• Companies that voluntarily self-disclose can receive significant credit and relief from potential penalties.
• Previous reporting of third-party violations to OEE can serve as a mitigating factor, while nondisclosure may be considered an aggravating factor.
• The compliance notice emphasizes the importance of internal investigations in evaluating a company’s compliance program.

Office of Foreign Assets Control (OFAC):

• OFAC considers voluntary self-disclosure as a mitigating factor, allowing for a potential 50 percent reduction in civil penalties.
• OFAC reviews the nature and adequacy of a company’s compliance program at the time of the violation and the corrective actions taken in response.
• Failure to disclose promptly, third-party reporting, false or misleading disclosures, or incomplete disclosures can disqualify a voluntary self-disclosure.

BSA Whistleblower Program:

• The Anti-Money Laundering Act of 2020 (AMLA) expanded whistleblower incentives and protections under the Bank Secrecy Act (BSA).
• The “Anti-Money Laundering Whistleblower Improvement Act” signed into law in December 2022 added a 10% floor for whistleblower awards and expanded BSA whistleblower provisions to cover violations of laws related to U.S. economic sanctions.
• FinCEN, a part of the Department of the Treasury, may pay awards to whistleblowers whose information leads to successful enforcement of related actions, including those under the Export Control Reform Act. However, this will apply only in certain circumstances.

The compliance notice underscores the potential benefits of voluntary self-disclosure while emphasizing the need for timely, full, and accurate disclosures, as well as cooperation and internal investigations to assess compliance programs. Companies should be aware of these positions and their implications when considering self-disclosure of potential violations.