On April 18, 2023, the U.S. Department of Commerce Bureau of Industry and Security ("BIS") released a memorandum entitled, "Clarifying Our Policy Regarding Voluntary Self-Disclosures and Disclosures Concerning Others" (the "April Memo"). The April Memo highlights additional penalties and incentives to encourage exporters – and whistleblowers – to disclose potential violations of the Export Administration Regulations ("EAR"). In a change of policy, BIS will now consistently treat a decision not to voluntary self-disclose significant violations of the EAR as an aggravating factor in the calculation of penalties. The April Memo additionally reminds the regulated community that reporting another exporter's violative conduct can act as a mitigating factor in future enforcement actions against the reporting party (even if the reported potential violations are unrelated to the future enforcement action). Finally, the April Memo calls out to the academic community (as opposed to just private sector exporters), as sharing a key role in identifying, preventing, and mitigating export control violations, in line with BIS's initiative to encourage university compliance, namely through its Academic Outreach Initiative.
Minor Violations Still Get a Quick Response
Last June, BIS implemented a dual-track system to handle voluntary self-disclosures (VSDs), in which most minor violations are now fast-tracked and resolved within 60 days of final submission. More serious cases are assigned a field agent, an Office of Chief Counsel Attorney, and occasionally, an attorney from the Counterintelligence and Export Control section of the Department of Justice ("DOJ"). The April Memo confirmed this practice is still in effect, and actively encouraged submissions of a single VSD to report multiple minor technical violations that occurred close in time.
Not Submitting a VSD for "Significant" Violations is an Aggravating Factor
Prior to the April Memo, BIS has consistently treated the filing of a VSD as a mitigating factor. Under the existing BIS settlement guidelines, it results in an automatic 50% reduction of any penalty, and, in some cases, even a full suspension of any penalty. The April Memo clarifies that going forward, OEE will also "consistently apply [the submission of a VSD] as an aggravating factor when a significant possible violation has been uncovered by a party's export compliance program but no VSD has been submitted." While this policy change only applies to "significant" violations, the April Memo does not define significant, nor provide examples.
Disclosing Potential Violations of Others is a Mitigating Factor
The April Memo also encourages disclosures of potential violations by others. BIS urges anyone to come forward and report potential EAR violations by others, including competitors and points to its confidential reporting form on the website as a mechanism by which to do so. BIS will consider the provision of information that leads to an enforcement action against others to qualify as a mitigating factor of "exceptional cooperation," meaning, for example, that if Company A reports potential violative conduct of Company B, and that tip results in enforcement action, BIS will consider that report to be a mitigating factor if a future enforcement action, even for unrelated conduct, is brought against Company A.
To further encourage this reporting behavior, BIS notes the existence of whistleblower programs at Financial Crimes Enforcement Network ("FinCEN") and DOJ that offer monetary rewards for information that leads to successful enforcement actions. Although these programs were designed to encourage reporting of violations of sanctions programs and the Bank Secrecy Act, the April Memo notes that FinCEN has discretion to pay monetary awards if the reported information leads to successful enforcement of "related actions," which could include violations of the EAR.
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