What Is Voluntary Self-Disclosure (VSD)?
Voluntary-self disclosure through the DOJ is a way for individuals or organizations to report known or suspected OFAC violations or violations of BIS import and export trade regulations.
An OFAC or BIS voluntary self-disclosure proactively addresses a potential violation. VSD mitigates the potential damage, bringing benefits that include:
- Reduction of fines and penalties
- Establishment of good faith
- Illustrates to the government the desire to improve practices
- Increased chance of avoiding future violations
The Bureau of Census and the DDTC strongly advise VSD when a violation of the Federal Trade Regulations (FTR) is known or suspected to have occurred.
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Treasury & OFAC VSD Sanctions and Penalties
OFAC violations are accompanied by serious penalties determined according to the OFAC enforcement guidelines.
A confirmed violation of OFAC sanctions can lead to:
- Fines of up to $1,000,000
- Prison sentencing of up to 20 years
- Criminal charges
- Additional fines and penalties for each violation
The best step an individual or organization can take toward penalty mitigation is the completion of a VSD. This will not automatically result in penalties – an investigation may find no violation or simply issue a warning letter.
If a VSD is finalized and submitted before the violation is discovered and reported by another entity, it’s possible for the maximum penalty to be reduced by 50 percent. Since the full benefit of VSD depends on prompt submission, it’s advisable to contact a lawyer and begin the process as soon as a violation is suspected.
OFAC Voluntary Self-Disclosure Process
Legal counsel should oversee the completion of a VSD. An attorney will help confirm whether a violation actually occurred. If it did, the attorney will file an OFAC initial voluntary self-disclosure.
The steps of the VSD process typically involve:
- Addressing violation concerns within the company
- Contacting a VSD attorney
- Completion of initial VSD
- Internal investigation and audits
- Follow-up submissions to OFAC
Third-party reporting does not constitute a VSD and eliminates the chance of penalty mitigation.
If you or your company suspect an OFAC violation has occurred, you should immediately contact our Denver VSD law firm. Failure to do so puts you at serious risk of significant fines and penalties.
OFAC Voluntary Disclosure Filing Requirements
An OFAC VSD consists of the initial disclosure and follow-up reporting. Initial reporting occurs after legal counsel has reviewed statutory authorities and general licenses for regulation exemptions.
What should you include in a VSD? A report must include:
- Type of violation
- Explanation of all reporting errors, discrepancies, or omissions
- Account of how the violation occurred
- Names and addresses of all parties involved in the violation
- Explanation of any extenuating circumstances
- Steps were taken thus far to rectify the error
- Internal transaction numbers of involved shipments
Once the initial report is filed, the follow-up report for a VSD involves:
- Internal investigation
- Audit
- Analysis of sanctions and business application
Review and application of the international trade regulations that dictate import and export practices in the context of a violation require extensive effort by a VSD attorney.
Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
Violation of the Export Administration Regulations (EAR) should be reported to the Bureau of Industry and Security (BIS). BIS regards voluntary self-disclosure as a sign of good faith, and submission of a VSD before discovery or reporting by another party can significantly help with penalty mitigation.
An individual or business submitting a voluntary self-disclosure to BIS should:
- Consult with a VSD attorney
- Submit initial VSD
- Complete internal investigation and audit
- Submit follow-up documentation to BIS
Violations of export compliance regulations, even non-criminal administrative violations, bring steep penalties. Fines for administrative cases can reach $25,000 or twice the transaction value and may also lead to a loss of export privileges.
It should be clear that administrative errors are no less serious than criminal violations, as they can result in the loss of business and livelihood.
Criminal violations of the EAR can result in fines of up to $1,000,000 per violation and a sentence of up to 20 years.
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