Remarks as Prepared for Delivery
Thank you for that introduction, and thank you for the opportunity to briefly address you here today to announce the Department’s new Export Controls and Sanctions Enforcement Policy for Business Organizations.
As you know, in 2016 the Department published its guidelines Regarding VSDs in Export Controls and Sanctions Investigations. That Policy, at bottom, provided that
“[w]here a company voluntarily self discloses criminal violations of export controls and sanctions, fully cooperates, and appropriately remediates . . . the company may be eligible for a significantly reduced penalty, to include the possibility of a non-prosecution agreement, a reduced period of supervised compliance, a reduced fine and forfeiture, and no requirement for a monitor.”
The 2016 Policy further provided that
“The ultimate resolution will depend on an evaluation of the totality of the circumstances in a particular case. . . [And that] Nevertheless, the company would still find itself in a better position than if it had not submitted a VSD, cooperated, and remediated.”
The new Policy we are announcing today, contains a number of significant revisions to the prior policy that, among other things, provide more clarity concerning the benefits of reporting and the consequences of not reporting when you are advising your clients and when decision-makers in C-Suites and in Board Rooms are weighing whether to make a self-disclosure and to whom.
First, and most importantly, it is now the Department’s policy that “ when a company (1) voluntarily self-discloses export control or sanctions violations to CES, (2) fully cooperates, and (3) timely and appropriately remediates . . . there is a presumption that the company will receive a non-prosecution agreement and will not pay a fine, absent aggravating factors.”
The Policy further provides that “If, due to aggravating factors, a different criminal resolution – i.e., a deferred prosecution agreement or guilty plea – is warranted for a company that has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated, the Department:
- will accord, or recommend to a sentencing court, a fine that is, at least, 50 percent less than the amount that otherwise would be available under the alternative fine provision [, 18 U.S.C. § 3571(d). In other words, the Department will cap the recommended fine at an amount equal to the gross gain or gross loss]; and
- will not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.”
“At a minimum, however, even in cases in which the company is receiving a non-prosecution agreement, the company will not be permitted to retain any of the unlawfully obtained gain. The company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.”
Second, the Policy makes it clear that a VSD must be made to CES in order to receive its benefits; reporting to a regulatory agency – such as DDTC, BIS, or OFAC – will not suffice. In the language of the Policy:
“It is important to note that when a company identifies potentially willful conduct, but 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.”
Of course, companies should continue to make voluntary self-disclosures to appropriate regulatory agencies under existing procedures, but to benefit from the Department’s Policy, companies must report to CES.
The Policy is also more streamlined than the 2016 Policy – indeed it is almost half the length – and among other things removes the Hypothetical Examples that the prior policy had.
Further, where the new Policy includes definitions of “voluntariness,” “full cooperation,” and “timely and appropriate remediation,” we conformed the language to the fullest extent possible to language used in other VSDs, in particular the Criminal Division’s FCPA Policy.
We thought it was important that when similar VSD concepts were being considered by the defense bar and industry, different components of the Department were using similar language. For example, the “voluntariness” of a self-disclosure should not have one meaning when dealing with the Criminal Division, and another when interfacing with NSD.
You may have noticed that the Criminal Division recently made some tweaks to its FCPA policy; those tweaks in several instances reflect coordination between NSD and the Criminal Division in anticipation of this Policy rollout.
Of course, there remain key differences between the FCPA policy and NSD’s Policy. Most notably, the primary benefit of the FCPA policy is a presumption of a declination, rather than an NPA. Given the threats to national security posed by violations of our export control and sanctions laws, we determined that a presumption of an NPA without a fine was appropriate.
Finally, our new Export Controls and Sanctions Policy does not include the carve-out for Financial Institutions that the 2016 Policy did. As a result, going forward, all business organizations, including FIs, can take advantage of the Policy.
As the new Policy states, “Business organizations and their employees are at the forefront of the effort to combat export control and sanctions violations. As the gatekeepers of our export-controlled technologies, business organizations play a vital role in protecting our national security.”
We hope our new Policy will provide greater clarity for companies faced with a voluntary disclosure decision, and that the Policy will encourage more organizations to report to us.