Making a Voluntary Self-Disclosure: 3 Questions Exporters Should Ask
With greater U.S. sanctions comes more opportunities for US companies selling goods overseas to find themselves accidentally in violation of an export law.
Take the following scenario. You’ve discovered a shipment has accidentally gone “rogue,” whether in terms of a failure to obtain a license, declaring the wrong license exception on the AES filing, or that a shipment went to a denied party or prohibited destination. You heard that you can either hope to never get caught, or you can disclose this violation to the export authorities in exchange for a more lenient set of repercussions (potentially anyway…). But how do you go about doing it? Here are three questions to consider when evaluating the overall strategy for making such a disclosure.
1. Who do We Make it To? Exports and their controls are overseen by the U.S. Dept. of Commerce’s Bureau of Industry and Security, or BIS. Their regulations govern what commodities need a license and how to go about obtaining one, among other activities. The filing of electronic export information, or EEI, is done through the electronic system knows as the Automated Export System, or AES. It is within AES that a license designation is declared, or where there is an exception to a license, it is so indicated. While the data from AES is also governed by the U.S. Dept. of Commerce, it is their Census office which maintains the data and requires its management and submission by an exporter to their agency. Then there is the U.S. Dept. of Treasury’s Office of Foreign Assets Control, or OFAC, which deals with government sanctions, restrictions on financial transactions and other matters, such as restricted or denied parties.
Therefore, deciding which agency a disclosure should be made to will depend on which agency’s law(s) have been violated.
2. When Should I Make It? As soon as possible. Of course, the confusing part to this revolves around the question of ‘when is it actually possible?’ as answering this may turn on how the violations were even discovered. Was it due to an internal self-audit? Was it because of a change discovered by your organization about a law that went into effect awhile ago but was unknown to you? Was it that another company disclosed your involvement in a transaction (or several of them?)?
Another factor to consider regarding the timing of making the disclosure turns on how many transactions there are at issue. You may not know of all of them or are awaiting information from other parties before having a better sense of the totality of transactions.
While there may be several considerations to evaluate regarding the violations, what is critical to remember is that in order to receive the benefit of making a voluntary self-disclosure, which can include a reduction in penalties and other leniencies given where violations are found, such disclosure needs to have been made before an investigation by the agency has been made. Therefore, you may send the agency an initial letter notifying them about the discovery of these potential violations and indicate that a complete narrative account of these apparent violations will be forthcoming. The agencies then give you a period of time within which the submission containing the complete narrative may be submitted.
3. What Should I Include? The voluntary self-disclosure must include not only the full narrative account detailing all of the transactions but also the records associated with it, for example, the bill of lading or airway bill, commercial invoice, etc. In addition, the names, addresses and other contact information about any party involved in the transaction will also need to be disclosed, irrespective of such data being included in the AES filing, where made. Organizing the materials and preparing the facts in a cohesive way can be very time consuming and doing so in an organized manner is critical so that the agency obtains a clear accounting from you about what happened and who was involved. The completed submission should also describe factors to show the agencies that any such wrongdoing was not done willfully and that there were no aggravating factors, among other pieces of information to include.
Think you may have a potential violation in need of disclosing to one or more of the agencies? Send us a message to start a dialogue with us about this today.