On December 13, 2019, the National Security Division (“NSD”) of the U.S. Department of Justice (“DOJ”) released a revised enforcement policy (“the Policy”) meant to encourage companies to voluntarily self-disclose potentially willful export control and economic sanctions violations. The Policy – which applies only to matters brought by the NSD’s Counterintelligence and Export Control Section – builds on guidance issued in October 2016. It now offers companies concrete incentives to self-disclose directly to the NSD and proactively cooperate, including a presumption that they will receive a non-prosecution agreement and will not have to pay a fine or be appointed a monitor. Crucially, disclosure must be directly to the NSD; a company cannot obtain benefits under the Policy through disclosure solely to regulatory agencies.
The new Policy endeavors to set clear expectations for cooperators who voluntarily self-disclose.
Under the Policy, a company that makes a voluntary self-disclosure of a potentially willful violation will receive a non-prosecution agreement, will not pay a fine and will not be subject to a monitor, as long as no aggravating factors are present and the disclosure comports with the numerous requirements outlined in the Policy. To qualify, and as discussed in more detail below, a company must:
(1) Voluntarily self-disclose to the NSD,
(2) Fully cooperate with the DOJ’s investigation, and
(3) Timely and appropriately remediate any identified issues.
This is a substantial change from the previous and superseded policy, which merely provided that companies “may be eligible for a significantly reduced penalty” but provided no guarantees.
If aggravating factors are present, but a company has otherwise complied with the above requirements, it would still receive favorable treatment. While a company in this scenario may need to accept a deferred prosecution agreement or guilty plea, it would still receive a 50 percent reduction in the fine amount, and no monitor would be imposed if the company has implemented an effective compliance program – saving the company significant time and expense. Under the Policy, however, even if a company receives a non-prosecution agreement, it may not retain any of the unlawfully obtained gains – it must pay disgorgement, forfeiture and/or restitution.
The updated Policy now applies to financial institutions and successor companies.
The DOJ’s 2016 guidance did not apply to financial institutions. At the time, the NSD reasoned that financial institutions already had extensive reporting obligations and could benefit under the general DOJ voluntary disclosure policy applicable to all businesses. This update allows financial institutions – which are already required to file Suspicious Activity Reports with and report blocked property to the Treasury Department – to receive the same self-disclosure advantages as businesses in other industries if they disclose to the NSD a potentially willful violation. Because the NSD is now offering material benefits to companies that voluntarily disclose, it would be unfair to continue to exclude financial institutions.
The Policy also applies to violations uncovered following a merger or acquisition. This is consistent with the DOJ’s approach to successor companies that discover wrongdoing in the Foreign Corrupt Practices Act (“FCPA”) context. If a company uncovers misconduct by the merged or acquired entity through timely due diligence, post-acquisition audits or compliance integration efforts, and then discloses the violation and takes action consistent with the Policy, it will receive the same benefits as other companies who voluntarily self-disclose potentially willful violations.
Benefiting from the Policy.
To get the full benefits of cooperation, a company must comply with a number of conditions – many of which pose strategic challenges.
These requirements are in addition to meeting the provisions contained in the Justice Manual’s Principles of Federal Prosecution of Business Organizations.
This move corresponds with the DOJ’s broader goals to incentivize self-reporting.
The revised Policy signals the DOJ’s continued emphasis on rewarding corporate voluntary self-disclosure. While there are many benefits to voluntary self-disclosure, the decision to disclose potentially criminal conduct should never be made lightly and, if a company chooses to take this path, the disclosure must be well coordinated to ensure the company is able to take full advantage of available relief.
 A willful violation is an act done with the knowledge that it is illegal. The government is not required to show, however, that the defendant was aware of the specific law, rule or regulation that it violated.
 Aggravating factors include – but are not limited to – exports of particularly sensitive items, exports to end users of heightened concern, repeat violations, the knowing involvement of senior management, or significant profits from the unlawful activity.