Federal Agencies Highlight Benefits of Self-Disclosure, Emphasize Enforcement of Trade Violations in Tri-Seal Compliance Note

In a coordinated announcement, federal agencies stress the benefits of voluntarily disclosing potential trade violations while emphasizing increased enforcement.

On July 26, the federal agencies responsible for administering and enforcing many of the U.S. government's national security laws, including sanctions and export controls, issued a Tri-Seal Compliance Note ("the Note") emphasizing increased enforcement efforts and noting the potential incentives companies may receive for submitting voluntary disclosures of potential trade violations. The U.S. Department of Justice's National Security Division ("NSD"), U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), and U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") each gave a high-level summary of the procedures for, and potential benefits of, voluntarily self-disclosing violations of U.S. sanctions and export control laws. Against the backdrop of multiple announcements regarding the U.S. government increasing its investigation resources, the Note highlighted that incentives for such disclosures may include eligibility for a non-prosecution agreement ("NPA") with NSD and a reduction of up to 50 percent of any potential monetary penalty imposed by OFAC or BIS.

This marks the second collective effort by these agencies to provide guidance to the private sector and encourage voluntary self-disclosures on a greater scale. The Note also highlights the Financial Crime Enforcement Network's Anti-Money Laundering and Sanctions Whistleblower Program, which incentivizes individuals to provide information to the government about violations of U.S. trade and economic sanctions, as well as violations of the Bank Secrecy Act.

Although the Note does not purport to modify existing self-disclosure policies respectively administered by the issuing agencies, the agencies describe key developments in these policies that have evolved over the past few years. These developments have generally bundled increased incentives with additional discretion on behalf of the agencies in evaluating voluntary self-disclosures and determining appropriate mitigation measures. For instance, the Note references an April 2023 BIS memorandum that lists the reporting of information that leads to an enforcement action regarding another company's potential export control violations as a mitigating factor in a future enforcement action, even if that future action involves unrelated subject matter. The NSD also issued an updated voluntary self-disclosure policy in March 2023 conveying that where a company voluntarily self-discloses potentially criminal violations, fully cooperates, and timely remediates the violations, there will be a presumption that the company will receive an NPA. However, this presumption will not apply where certain aggravating factors exist. The Note clarifies that these voluntary disclosure principles apply to "other corporate criminal matters" within the NSD's purview, including the Foreign Agents Registration Act, or FARA; and matters involving the Committee on Foreign Investment in the United States, or CFIUS.

Companies should evaluate recent changes in enforcement postures relating to trade laws and coordination between the agencies in the context of the self-disclosure guidance offered by the agencies. Importantly, the Note emphasizes that disclosure to one agency will not automatically suffice as disclosure to other agencies. As such, companies must carefully review the circumstances of any potential violations they discover and make an informed decision regarding whether and how to disclose. This decision can carry significant weight and should be made with the assistance of counsel experienced in such matters.


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