What Companies Need to Know About the DOJ's New Self-Disclosure Policy
The revised policy, a reboot of guidance from 2016, now applies to financial institutions and offers companies a clearer incentive to self-report violations.
December 19, 2019 at 03:36 PM
3 minute read
The Justice Department has updated its policy for taking enforcement action against companies that voluntarily disclose violations of U.S. export control and sanctions laws and there are some important takeaways for businesses.
The revised policy, a reboot of guidance from 2016, now applies to financial institutions and offers companies a clearer incentive to self-report violations.
"This is designed, it seems, to try to increase the participation of companies in the voluntary disclosure program of the DOJ," said former Justice Department prosecutor Jonathan Poling, a partner in Akin Gump Strauss Hauer & Feld's international trade practice in Washington.
Arguably the most noteworthy change in the new policy is a provision that gives companies the presumption of being entitled to a non-prosecution agreement and no fine if they meet certain criteria, which includes reporting a violation "within a reasonably prompt time after becoming aware of the offense."
"There will be challenges in different cases, but it's apparent under this policy that waiting until a thorough internal investigation is fully completed may well be too late in the eyes of the government," said New York-based Hogan Lovells senior associate Matthew Sullivan, also a former prosecutor. He defends individual and corporate clients facing government investigations.
To qualify for a non-prosecution agreement, companies also must report violations to the Justice Department, even if the firm has notified the Treasury Department's Office of Foreign Assets Control or another regulatory agency.
Finally, the company must show that it has acted "timely and appropriately" to remedy the underlying cause of the misconduct by, for instance, enacting a compliance program or disciplining employees responsible for the violation.
The updated policy also states that certain aggravating factors, such as repeated violations and upper management being knowingly involved in criminal conduct, affect a firm's eligibility for self-reporting benefits.
"A lot of times, disclosures will include at least one type of aggravating factor. It's uncertain yet how the DOJ is going to treat aggravating factors under this program as a way of excluding you from the benefit of getting a non-prosecution agreement," Poling said.
"And if you do have one or more aggravating factors, companies may be wondering where there's a real upside to going into the disclosure program," he added.
Meanwhile, for the first time, financial institutions are included in the policy and can take advantage of the benefits of self-disclosure, "but there's an open question about how enforcement is going to align between the [DOJ's] National Security Division and financial institutions," Poling said.
"There has been a rather long-standing, well-developed relationship between the Treasury Department, for example, and financial institutions where financial institutions understood the enforcement risk a lot better," he added. "Now there's a new program that will apply to them and there's uncertainty about that going forward."
Sullivan of Hogan Lovells noted, "This will be an interesting space to watch and see whether there is an uptick in voluntary self-disclosures by financial institutions."
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