The federal government’s Export Control efforts are intended to keep specified American technology out of the hands of the wrong actors (who could use it for potentially devastating purposes). The government is aggressively pursuing export control investigations against companies and individuals, and a byzantine collection of regulations further complicate an already complex business environment. Because violations implicate national security, criminal prosecutions are always in play.
On October 2, 2016, the U.S. Department of Justice (DOJ) issued new guidance regarding voluntary self-disclosures and cooperation standards in Export Control enforcement. The guidance explains what is required of companies seeking credit for voluntarily self-disclosing potential criminal conduct.
This DOJ guidance is part of the continuing trend of the DOJ to incentivize companies to “get right” with the government regarding potential criminal violations. This Export Control guidance represents a subject-matter specific implementation of the DOJ’s 2015 Yates Memo, and is strikingly similar to the voluntary self-disclosure guidance supplied by the DOJ’s Foreign Corrupt Practices Act (FCPA) division earlier this year.
Along with the DOJ’s significantly increased reliance on whistleblowers—and the DOJ’s clear expression of intent to pursue criminal charges against individual employees—it is reasonable to expect additional guidance in the near future on voluntary self-disclosure from other areas of government enforcement that possess a criminal component (such as environmental enforcement).
Export Control and Voluntary Self-Disclosure
Under the new Export Control guidance, the most significant cooperation credit will be available only for companies that voluntarily self-disclose potential violations. In order for a company’s disclosure to be deemed voluntary, the disclosure must:
- be made “prior to an imminent threat of disclosure or government investigation;”
- be made “within a reasonably prompt time after becoming aware of the offense;” and
- include all relevant facts known to it, including all relevant facts about the individuals involved in any export or sanctions violation.
Thus, timing and thoroughness are essential. For a company that self-discloses, credit can include a non-prosecution agreement—the most substantial form of credit available—provided that the company fully cooperates and remediates. However, even absent initial voluntary self-disclosure, companies that both cooperate fully and appropriately remediate may still be eligible to receive significant credit, including the possibility of a deferred prosecution agreement.
What Is Full Cooperation?
To receive credit, full cooperation is required… and beauty is in the eye of the beholder (i.e. the federal prosecutor). The Export Control cooperation analysis focuses on the scope, quantity, quality and timing of cooperation based on the unique circumstances of each case. Essential steps to cooperation include: proactive mindset and execution, preservation and disclosure of all relevant documents and information (including the identities of culpable individuals), timely updates to the government regarding company internal investigation findings, and provision of company witnesses to the government upon request (obviously, subject to employee Fifth Amendment rights).
Finally, to receive credit, a company must take appropriate steps to remediate, such as implementing an effective compliance program, disciplining responsible employees and any additional steps necessary to demonstrate the company’s recognition of the seriousness of export control or sanctions violations.
In Conclusion – How Can Companies Protect Themselves?
Companies are wise to employ robust compliance policies and to proactively assess their compliance measures in order to mitigate their risk of becoming the subject of an Export Control or Sanctions investigation. For companies that discover a problem, the proactive implementation of a game plan to properly address such shortcomings will serve the company well.