On December 13, 2019, the National Security Division (NSD) of the U.S. Department of Justice (DOJ) issued a revised policy regarding voluntary disclosure of export control and sanctions violations by business organizations (NSD VSD Policy). Although the NSD VSD Policy does not alter the existing procedures for voluntary self-disclosure to regulatory agencies, it encourages business organizations to voluntarily self-disclose to NSD "all potentially willful violations of the statutes implementing the U.S. government's primary export control and sanctions regimes." Export Control and Sanctions Enforcement Policy for Business Organizations, DEP'T OF JUSTICE (Dec. 13, 2019). There is limited guidance, however, regarding what constitutes a "potentially willful" violation. And, importantly, the NSD VSD Policy states that if a company "chooses to self-report only to a regulatory agency and not to DOJ, the company will not qualify for the benefits of a VSD under this Policy in any subsequent DOJ investigation." Id. This new policy increases the strategic complexity for a company considering voluntary self-disclosure to NSD, a regulatory agency, or both.
I. REGULATORY STANDARDS
There are three 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. § 1701 et seq. As outlined below, each regime provides separate procedures for voluntary self-disclosure.
Arms Export Control Act (AECA)
The AECA controls the export and temporary import of defense articles and services— authority which has been delegated to the U.S. Department of State Directorate of Defense Trade Controls (DDTC). The implementing regulation for the AECA is the International Traffic in Arms Regulations (ITAR). The ITAR provides that "[t]he Department strongly encourages the disclosure of information to the [DDTC] by persons . . . that believe they may have violated any export control provision of the Arms Export Control Act, or any regulation, order, license, or other authorization issued under the authority of the Arms Export Control Act." 22 C.F.R. § 127.12(a). Voluntary disclosure to the DDTC "may" be considered as a mitigating factor in the determination of administrative penalties, while failure to report "will" be an adverse factor. Id.
The timing of a voluntary disclosure under the ITAR is important, because the provision applies only when a company provides information to the DDTC prior to either the State Department or "any other agency, bureau, or department of the United States Government" learning the information from another source. Id. § 127.12(b)(2). The ITAR directs companies to notify DDTC "immediately after a violation is discovered," but provides companies an additional 60 days to conduct a review prior to making a full disclosure. Id. § 127.12(c).
Export Control Reform Act (ECRA)
The ECRA controls the export of so-called "dual-use" items—goods, software, and technology. The implementing regulation for the ECRA is the Export Administration Regulations (EAR), which is administered by the U.S. Department of Commerce Bureau of Industry and Security (BIS). The EAR includes a voluntary self-disclosure policy: "BIS strongly encourages disclosure to OEE [Office of Export Enforcement] if you believe that you may have violated the EAR, or any order, license or authorization issued thereunder." 15 CFR § 764.5. Voluntary disclosure to OEE "is" a mitigating factor in the determination of administrative penalties, and Supplement No. 1 to Part 766 of the BIS Enforcement Guidelines provides additional guidance on how voluntary self-disclosure affects the agency's determination of administrative penalties.
As with the AECA, the EAR's voluntary self-disclosure provision applies only when a company provides information to OEE prior to either OEE or "any other agency of the United States Government" learning the information from another source. Id. § 764.5(b)(3). Similarly, the EAR directs companies to notify OEE "as soon as possible after violations are discovered," but provides an additional 180 days for "a thorough review of all export-related transactions where violations are suspected." Id. §§ 764.5(c)(1)-(2).
International Emergency Economic Powers Act (IEEPA)
Finally, IEEPA provides the President with the authority to implement sanctions to protect U.S. national security and foreign policy interests. The various U.S. sanctions regimes have been implemented primarily by Executive Orders, which are administered and enforced by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC). OFAC has published guidance on its enforcement of all economic sanctions program, including guidance on voluntary self-disclosure. See 31 C.F.R. Pt. 501, App. A. OFAC defines voluntary self-disclosure as "notification to OFAC of an apparent violation by a Subject Person that has committed, or otherwise participated in, an apparent violation" of the sanctions program. Id. at I(I).
Unlike the ITAR and EAR voluntary self-disclosure provisions, the OFAC provision expressly contemplates, in two different ways, the possibility of simultaneous disclosure. First, OFAC considers a voluntary self-disclosure to be one made "prior to or at the same time that OFAC, or any other federal, state, or local government agency or official" learns of the apparent violation. Id. (emphasis added). Second, OFAC may consider a company's voluntary selfdisclosure to another agency as a voluntary self-disclosure for OFAC's purposes as well. Like the ITAR and EAR, the OFAC regulations permit companies to provide an initial notification followed "within a reasonable period of time" by more comprehensive disclosure. Appendix A to Part 501 also provides additional guidance on how voluntary self-disclosure affects the agency's determination of administrative penalties. See id. at V(B).
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