Voluntary Disclosures For Your Business
It can be a scary time if you find your company violated trade compliance in the past. The truth is that most companies may violate the EAR without even knowing it by simply overlooking a small detail or procedure.
When you’ve made a mistake, it’s best to admit it. But you don’t have to go it alone.
The National Security Division (NSD) of the U.S. Department of Justice (DOJ) has created a formal program that companies can follow if violations occurred knowingly or unintentionally in the past. Voluntary Disclosures can:
- Serve as a mitigating factor to reduce potential fines and penalties
- Show the government that your organization is serious about improving
- Put your company on a solid foundation of compliance in the future
We get it; it’s easy to get lost in the ins and outs of trade compliance regulations. In situations where you find a violation, it’s in your best interest to voluntarily disclose your findings to the BIS.
Not only does voluntary disclosure help protect your company from more considerable penalties and fines if found by the U.S. government, but your disclosure can also help protect U.S. national security.
What Is A Voluntary Disclosure?
Different types of Voluntary Disclosures are filed through the DDTC, BIS, OFAC, and the Bureau of Census. Each agency encourages companies to disclose by incentivizing Voluntary Disclosures whenever a violation is discovered.
If a company provides full cooperation and takes appropriate steps to rectify the situation, the DOJ offers several potential incentives like:
- Significantly reduced penalties for each violation.
- The possibility for non-prosecution agreements.
- A reduced period of required supervised compliance.
- Reduced fines and other monetary penalties.
- Lack o requirement for a Special Compliance Official.
The Voluntary Disclosure Program is an excellent way for companies to avoid harsh penalties in the future for past mistakes.
It’s important to do everything you can to streamline the process, and here are avoid common errors with Self-Disclosure:
- Do not inundate the government with separate disclosures every time you encounter a problem. Instead, conduct a thorough investigation of past violations and then coordinate comprehensive disclosure(s) to the appropriate agencies.
- Do not stall and delay. Time is of the essence.
- Do not ignore government requests for more information or clarity.
- Do not lie! Honesty is always the best policy.
Now How To Spot “Red Flags” Before A Violation
Even the best compliance systems encounter problems. Rather than hiding your mistakes, the U.S. Government encourages companies to submit voluntary disclosure. This can be an essential step to clear-up past issues and get your organization on the right track towards improved trade compliance.
Reporting a violation is the first step to improve the situation and your company’s future success. Trade compliance requires ongoing training to ensure your employees know how to identify “Red Flags” to prevent future violations. BIS has developed a list of “Red Flags” to keep an eye out for.
This list does not cover all “Red Flags” but are used to illustrate the type of signals that you can watch out for to avoid trade violations, including:
- The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS’] list of denied persons.
- The customer or purchasing agent is reluctant to offer information about the end-use of the item.
- The product’s capabilities do not fit the buyer’s business line, such as an order for sophisticated computers for a small bakery.
- The item ordered is incompatible with the country’s technical level to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country with no electronics industry.
- The customer is willing to pay cash for a costly item when the terms of sale would usually call for financing.
- The customer has little or no business background.
- The customer is unfamiliar with the product’s performance characteristics but still wants the product.
- The customer declines standard installation, training, or maintenance services.
- Delivery dates are vague, or deliveries are planned for out of the way destinations.
- A freight forwarding firm is listed as the product’s final destination.
- The shipping route is abnormal for the product and destination.
- The packaging is inconsistent with the stated method of shipment or destination.
- When questioned, the buyer is evasive and mostly unclear about whether the purchased product is for domestic use, for export, or reexport.
As you can see, there are a host of ways your company could unintentionally fall into trade compliance violations. Proactively working to prevent trade violations is the best approach. Our compliance training programs are a great way to ensure your company is doing everything possible to avoid future violations.
We can help with your disclosure by:
- Conducting a thorough examination to identify all of your problems
- Identifying mitigating factors to help reduce penalties
- Working with you to develop and implement corrective actions
- Acting as a liaison with government officials to resolve and close-out your case
When handled correctly, a Voluntary Disclosure can help your company clear-up its compliance issues and create a “clean slate” to move forward. However, when handled poorly, a disclosure can lead to more problems, including potential fines, penalties, and other remedial compliance measures. Let us work with you to ensure the best possible outcome.