Voluntary Self-disclosure: Is the Value Self-evident?

• Publication year: 2024
• Citation: Vol. 2 No. 1

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Adam Goldberg, Aaron R. Hutman, Richard P. Donoghue, Patrick Hovakimian, and Ronald L. Cheng ^*

In this article, the authors explain how companies should think about voluntary disclosure in the wake of the U.S. Department of Justice's massive investment in sanctions and export control enforcement.

The U.S. Justice Department (DOJ), the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) recently issued their second joint compliance note. ¹ This second "Tri-Seal" note (the Tri-Seal Note) followed a March 2, 2023, note ² on the use of third-party intermediaries or transshipment points to evade Russian—and Belarussian-related sanctions and export controls.

The new Tri-Seal Note describes the voluntary self-disclosure (VSD) policies of the DOJ's National Security Division (NSD), BIS, and OFAC relating to sanctions, export controls, and national security violations. The Tri-Seal Note also covers recent updates to these policies, as well as information about the Financial Crime Enforcement Network's (FinCEN) Anti-Money Laundering and Sanctions Whistleblower Program.

DOJ leadership has emphasized since 2022 that sanctions and trade controls are the "New FCPA" (Foreign Corrupt Practices Act), that is, a key U.S. enforcement priority with global scope and significant compliance expectations. OFAC sanctions programs have played an increasingly key role in U.S. foreign policy and have been used extensively in response to Russia's ongoing invasion of Ukraine. BIS dual-use and commercial export controls have been used to address U.S. concerns with China and Russia, and its expanded use of Entity List and denial order tools, along with policies to assert U.S. jurisdiction over the foreign-manufactured direct product of U.S. technology and software, have increased compliance risk for U.S. and non-U.S. companies alike.

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In this environment, the use of a Tri-Seal note to reiterate existing VSD policies highlights the U.S. commitment to enforcement, an evolving cooperation between the civil agencies and DOJ, and the importance of voluntary disclosure in the eyes of U.S. officials. The announcement comes in the wake of a massive and highly publicized new resource commitment by the DOJ to its National Security Division to enforce corporate violations of sanctions and trade controls.

Given that violations carry a five-year statute of limitations, the prospect of expanding DOJ enforcement with more aggressive "FCPA scale" penalties could begin to impact the risk calculation of companies in considering (1) voluntary disclosures, and (2) DOJ disclosures in addition to civil disclosures to BIS and OFAC in cases where a company sees evidence of willful or knowing conduct. "The benefits of VSD are clear," the Tri-Seal Note states. The agencies now will have to monitor how U.S. and non-U.S. companies respond.

The "New FCPA"

In May 2022, U.S. Deputy Attorney General Lisa O. Monaco referred publicly to U.S. sanctions enforcement as the "New FCPA." In likening sanctions to the FCPA, Monaco indicated that sanctions and trade controls enforcement would receive the resource commitment and focus on large-scale penalties applied to U.S...