Publications

On December 13, 2019, the National Security Division (NSD) of the Department of Justice (DOJ)

• “When requested and appropriate, de-confliction of witness interviews and other investigative steps that a company intends to take as part of its internal investigation with steps that [DOJ] intends to take as part of its investigation.”

The new guidance recognizes that “not all companies will satisfy all of the components of full cooperation, whether because they decide to cooperate only later in an investigation or they timely decide to cooperate but fail to meet all of the criteria.” DOJ states that “such companies should be eligible for some [i.e., at least partial] cooperation credit if they provide all relevant information related to individual accountability…..” However, the benefits available in that circumstance “generally will be markedly less than full cooperation as defined….” 

Companies will not be disadvantaged by making a preliminary disclosure to NSD before they have completed an internal investigation. The new guidance recognizes that “a company may not be in a position to know all of the relevant facts at the time of a voluntary self-disclosure, especially where only preliminary investigative efforts have been possible.” It explains that “[i]n such circumstances, a company should make clear that it is making its disclosure based on a preliminary investigation of assessment of information, but it should nonetheless provide a fulsome disclosure of the relevant facts known to it at that time.”

Consistent with more broadly applicable DOJ policy as set forth in the Justice Manual at § 9-28.720, the new guidance affirms that a company’s eligibility for cooperation credit is not dependent upon a waiver of the attorney-client privilege or work-product protection.

Timely and Appropriate Remediation

To receive full credit for timely and appropriate remediation, a company must satisfy the following requirements:

• “Demonstration of thorough analysis of causes of underlying conduct (i.e., a root cause analysis) and, when appropriate, remediation to address the root causes”;
• “Implementation of an effective compliance program, the criteria for which will be periodically updated and which may vary based on the size and resources of the organization, but may include:
  • The company’s culture of compliance, including awareness among employees that any criminal conduct, including the conduct underlying the investigation, will not be tolerated;
  • The resources the company has dedicated to compliance;
  • The quality and experience of the personnel involved in compliance, such that they can understand and identify the transactions and activities that pose a potential risk;
  • The authority and independence of the compliance function and the availability of compliance expertise to the board;
  • The effectiveness of the company’s compliance function and the availability of compliance expertise to the board;
  • The effectiveness of the company’s risk assessment and the manner in which the company’s compliance program has been tailored based on that risk assessment;
  • The compensation and promotion of the personnel involved in compliance, in view of their role, responsibilities, performance, and other appropriate factors;
  • The auditing of the compliance program to ensure its effectiveness; and
  • The reporting structure of any compliance personnel employed or contracted by the company.”
• “Appropriate discipline of employees, including those identified by the company as responsible for the misconduct, either through direct participation or failure in oversight, as well as those with supervisory authority over the area in which the criminal conduct occurred;
• Appropriate retention of business records, and prohibition of the improper destruction or deletion of business records, including implementing appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company’s ability to appropriately retain business records or communications or otherwise comply with the company’s document retention policies or legal obligations; and
• Any additional steps that demonstrate recognition of the seriousness of the company’s misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct, including messages to identify future risks.”

DOJ also will confer with its law enforcement partners to assess whether a company merits full credit for timely and appropriate remediation. The guidance notes that NSD “will also coordinate with the appropriate regulatory agency (e.g., BIS) in assessing a corporation’s remediation efforts and compliance program.”

Willfulness

As noted above, the new DOJ policy guidance applies only to VSDs concerning potentially willful (and therefore criminal) violations of export control and sanctions law. Willfulness is an element of the offense that the government must prove beyond a reasonable doubt in any criminal prosecution of export control or sanctions violations. The new policy guidance reiterates that NSD uses the definition of willfulness set forth by the Supreme Court in Bryan v. United States, 524 U.S. 184 (1998), which provides that an act is willful if it was committed with the knowledge that it is illegal. As later courts of appeal have ruled, however, the government is not required to prove that a defendant was aware of the specific law, rule, or regulation that the defendant’s conduct may have violated.

The new DOJ guidance does not elaborate on the degree of belief or certainty regarding a possible criminal violation that a company must possess in order to warrant a VSD. The fact that the guidance expressly concerns the disclosure of only “potentially willful” violations, however, indicates that companies need not have reached a conclusive determination that a potential violation was willful, and that credible evidence of such a violation (or a reasonable belief) may suffice to come within the scope of the guidance.

New Applicability to Financial Institutions

The new guidance directs that all VSDs concerning potentially willful export control and sanctions violations be sent to CES, which has primary jurisdiction and approval authority within DOJ for the criminal enforcement of export control and sanctions laws. The previous guidance, which by its terms expressly did not apply to financial institutions, directed financial institutions to submit VSDs to the Asset Forfeiture and Money Laundering Section in the Criminal Division (now the Money Laundering and Asset Recovery Section) or the relevant U.S. Attorney’s Office.

Implications

DOJ continues to assign high priority to holding companies accountable for violations of export control and sanctions laws, and to punishing wrongdoing by individual company officials. The original VSD guidance apparently did not result in a significant volume of disclosures, as many companies were wary of informing the government of potential criminal violations without the prospect of more tangible, meaningful, and predictable benefits. Not every company will be able to meet all the requirements to qualify for the maximum benefits available under the new guidance. That such benefits have now been clearly delineated, however, makes the submission of a VSD a more attractive option for companies that have discovered evidence of willful violations. Whether the new policy guidance results in a significantly greater number of more VSDs, however, may depend on the extent to which companies considering a VSD can see public evidence of favorable resolutions in other cases.

For more information on the new DOJ guidance on voluntary self-disclosures in export control and sanctions matters, please contact David Ring or International Trade Compliance practice.