The United States Department of Justice’s new voluntary self-disclosure program could be a significant factor when assessing how to handle export violations that may have occurred within your business.
Your company deals with exports and shipments on a daily basis. You’ve got export controls in place and your staff is trained in compliance procedures. Despite your best efforts to prevent it from happening, something could still slip through the cracks. After all, to err is human. The good news is that the U.S. government has recently implemented measures that might drastically reduce penalties should an export violation inadvertently occur.
On October 2nd, 2016, the National Security Division (NSD) of the U.S. Department of Justice (DOJ) released the specifics of a formal program aimed to lessen the potential fines and penalties associated and export violation for those who voluntarily self-disclose.
The DOJ has a history of leniency for those who self-disclose
While the guidance for export violations is relatively new, the DOJ has long had voluntary self-disclosure measures in place. For example, in 2014, a wealth management firm avoided criminal prosecution for self-reporting tax-related offenses. And in 2015, a hospital in Delaware received similar leniency when they disclosed upon discovering fraudulent conduct.
Included in the new guidance is a list of actions that are required for a company’s disclosure to be deemed voluntary:
- The company discloses the conduct prior to an imminent threat of disclosure or government investigation.
- The company discloses the conduct to Counterintelligence and Export Control Section and the appropriate regulatory agency within a reasonably prompt time after becoming aware of the offense, with the burden on the company to demonstrate timeliness.
- The company discloses all relevant facts known to it, including all relevant facts about the individuals involved in any export control or sanctions violation.
The full details of the Guidance can be found in Guidance Regarding Voluntary Self-Disclosures, Cooperation and Remediation in Export Control and Sanctions Investigations Involving Business Organizations on the Department of Justice’s website.
Also notable in the DOJ Guidance is that these new rules do not apply to financial institutions. This doesn’t mean that financial institutions don’t have an obligation to self-disclose, only that they should continue to make their disclosures to the Office of Foreign Assets Control (OFAC) as they have in the past.
An audit trail can be an exporter’s best friend
Did we mention that documentation will be critical in the event of an export violation? As already stated, the DOJ will expect all relevant facts, including those related to the individuals involved in the export control or sanctions violation, to be presented. This is what makes having an audit and reporting tool within your compliance program invaluable. It will tell you what activity took place, when and by whom, thereby allowing you to pinpoint the source of the violation, be it wholly accidental or perpetrated willfully by someone with your organization.
The consequences of either can hopefully be mitigated by voluntarily going to the authorities rather than them finding out on their own. And given that the DOJ has indicated that uncovering export violations is top priority for them, even accidental breaches may become increasingly difficult to hide.