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Tri-Seal Compliance Note Encourages Voluntary Self-Disclosure of Potential Violations of Sanctions and Export Control Laws to DOJ, BIS and OFAC

Sanctions, Litigation
August 1, 2023

The ascending importance of rigorous and compliance with U.S. national security laws, including sanctions and export controls, was underscored on July 26, 2023 with the release of a Department of Commerce, Department of the Treasury, and Department of Justice Tri-Seal Compliance Note (the “Compliance Note”) encouraging voluntary self-disclosure of potential violations of sanctions, export controls, and other national security laws.

The Compliance Note is the latest in a string of releases seeking to raise private sector awareness of the importance of compliance with sanctions, export controls, and other national security laws. It follows on the prior Tri-Seal Compliance Note issued on March 2, 2023, highlighting common evasion tactics, including the use of third-party intermediaries or transshipment points seeking to circumvent restrictions or disguise the involvement of sanctioned persons, and urging companies to adopt effective, risk-based compliance programs in order to minimize the risk of evasion.

Ongoing Enforcement Focus

Companies should exercise vigilance in complying with these national security laws, as the U.S. Government’s focus on enforcement is expected to continue. In remarks cited in the Compliance Note, for example, DOJ has announced that its National Security Division would be adding twenty-five new prosecutors to investigate and prosecute sanctions evasion, export control violations, and similar economic crimes. The Compliance Note also provides information on the Financial Crimes Enforcement Network’s (FinCEN) Whistleblower program which provides monetary rewards for reporting violations of U.S. trade and economic sanctions, and notes that FinCEN is “currently accepting whistleblower tips.”

Updated Voluntary Self-Disclosure Policy Guidance

The Compliance Note emphasizes the benefits of voluntary self-disclosure (“VSD”), and each agency involved in the release provides updated and coordinated VSD policy guidance as to the significant benefits that a company can realize in connection with disclosing potential violations of these laws. Specifically:

Department of Justice’s National Security Division (“NSD”): The NSD issued an updated VSD policy on March 1, 2023. In the Compliance Note, NSD states that “where a company voluntarily self-discloses potentially criminal violations, fully cooperates, and timely and appropriately remediates the violations, NSD generally will not seek a guilty plea, and there will be a presumption that the company will receive a non-prosecution agreement and will not pay a fine.” NSD states that full cooperation in this context includes, among other things, timely preservation and collection of relevant documents and information; and remediation in this context includes an analysis of whether a company has implemented an effective and sufficiently resourced compliance and ethics program.

Department of Commerce’s Bureau of Industry and Security (“BIS”): BIS states that “timely and comprehensive” disclosure that involves full cooperation of the disclosing party can substantially reduce the applicable civil penalty under BIS settlement guidelines. BIS also outlines a dual-track system to handle VSDs, noting that minor or technical infractions may be resolved on a “fast-track” basis with the issuance of a warning or no-action letter within 60 days of final submission. Potentially more serious violations will be subject to a “deeper dive,” but will simultaneously adhere to the principle that “companies deserve, and will get, significant credit for coming forward voluntarily.”

Department of the Treasury’s Office of Foreign Assets Control (“OFAC”): OFAC states that VSDs are considered to be a mitigating factor when determining appropriate enforcement action to take in response to a particular case; and qualifying VSDs can result in a 50 percent reduction in the base amount of a proposed civil penalty. Importantly, a qualifying VSD must occur prior to, or simultaneous with, the discovery by OFAC or another government agency of the apparent violation or a substantially similar apparent violation, a determination made on a case-by-case basis. 

We will continue to closely monitor developments in this space. 

If you have any questions regarding the matters covered in this e-mail, please contact Bruce Paulsen (212) 574-1533, Brian Maloney (212) 574-1448, or your primary Seward & Kissel attorney.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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