Legal Alerts

Voluntary Disclosures of Sanction Violations Can Mitigate Civil and Criminal Penalties

Washington, D.C. (August 10, 2023) – Following up on its Tri-Seal Compliance Note earlier this year cracking down on third-party intermediaries’ evasion of Russia-related sanctions and export controls, the U.S. Departments of Commerce, Treasury and Justice have issued a new Tri-Seal Compliance Note (“Note”) proposing voluntary self-disclosure (“VSD”) of potential violations of sanctions, export controls, and other national security laws. The Note describes VSD policies of each department that can provide significant mitigation of civil or criminal liability that could extend to non-prosecution agreements or a reduction of 50 percent in the base penalty amount for civil or criminal penalties. 

Department of Justice’s National Security Division’s (“NSD”) Updated VSD Policy

NSD has long recognized that the unlawful export of sensitive commodities, technologies, and services poses a serious threat to the national security of the United States. To reduce the potential for criminal violations, the NSD policy is designed to provide incentives for companies to come forward promptly when they identify or otherwise become aware of potential criminal violations of U.S. sanctions and export control laws. A prompt VSD provides a means for a company to reduce—and, in some cases, avoid altogether—the potential for criminal liability.

What’s in it for a company to self-disclose? The new NSD policy incentivizes company self-disclosure by generally agreeing not to seek a guilty plea, offering a non-prosecution agreement, and not imposing  a fine.  To obtain this cooperation from NSD, a company must disclose promptly after becoming aware of a potential violation, and, most importantly, prior to government knowledge of the issue. 

Additionally, to receive the benefits from disclosure, a disclosing company must timely and appropriately remediate any violations to avoid profiting from any financial gains. Furthermore, NSD’s policy now includes examinations as to whether a disclosing company has imposed appropriate disciplinary measures, including compensation claw-backs, for employees who directly participated in or had oversight and/or supervisory authority over the area where the criminal conduct occurred.

Equally important in assessing mitigation factors is evidence that the company has implemented an effective and sufficiently resourced compliance and ethics program.

Department of Commerce’s Bureau of Industry and Security’s (“BIS”) Updated Guidance for Voluntary Self-Disclosures

As with the VSD policies of the NSD, BIS strongly encourages disclosures by companies and other entities that believe they may have violated the Export Administration Regulations (“EAR”), or any order, license, or authorization issued thereunder. And like the other two agencies, if a disclosure is timely and comprehensive and involves the full cooperation of the company, it will substantially reduce or eliminate the applicable civil penalty under BIS settlement guidelines.

Minor infractions can be resolved by BIS on a fast-track basis, which enables BIS to devote its limited resources to more significant cases. BIS warns that a company cannot turn a blind eye to known or suspected violations of the EAR. Non-reporting a violation will be considered an aggravating factor when BIS determines penalties. However, the existence, nature, and adequacy of a company’s compliance program, including its success at self-identifying and rectifying compliance gaps, is itself considered a factor under the settlement guidelines.

Department of Treasury’s Office of Foreign Assets Control’s (“OFAC”) Voluntary Self-Disclosure Policy

If a company voluntarily discloses an apparent OFAC violation, it can result in a 50% reduction in an assessed civil money penalty. However, the disclosure must occur on or before the discovery by OFAC or another government agency of the apparent violation.   

Furthermore, a VSD disclosure will not qualify in certain circumstances, including:

  • Where a disclosure includes false or misleading information;
  • Where the disclosure is not self-initiated—i.e., when it is suggested by a federal or state agency official, or when an employee of the entity discloses the violation by the entity; or
  • Where the disclosure is materially incomplete.

When disclosing potential OFAC sanction violations, OFAC requires that a sufficiently detailed report include a complete understanding of the circumstances of the apparent violations.

Businesses, insurance companies, financial institutions, or other entities that engage in international transactions involving products or services should have a sanctions compliance program. An important component of that program should be a policy that guides its next steps when it becomes aware of sanctions violations, in order to mitigate or eliminate potential civil claims or criminal charges to which it might be exposed.

Lewis Brisbois’ attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. For more information, contact the authors of this alert. Visit our Ukraine Conflict Response Practice page for additional alerts in this area.


Thomas A. Brooks, Partner & Chair of Bank Default Response Team

Justin Carl Pfeiffer, Partner


Jane C. Luxton, Managing Partner & Co-Chair of Government Investigations & White Collar Defense

Andrew Pidgirsky, Partner & Chair of Ukraine Conflict Response Team

Related Practices

Related Attorneys

Find an Attorney

Each of the firm's offices include partners, associates and a professional staff dedicated to meeting the challenge of providing the firm's clients with extraordinary service.