New Voluntary Self-Disclosure Process for OFAC Violations

February 9, 2026 by Leave a comment

OFAC has new standards for filing a voluntary self disclosure!

My law firm has strongly recommended to many clients that there is value in voluntary reporting of export violations to the government, in order to work with the government to solve the immediate issue but also to help the government track trends and provide better compliance support to the industry.

Most voluntary self disclosure (VSD) provisions offer an incentive in the form of a mitigation of penalties. This mitigation is not guaranteed, but we’ve had very good luck in cooperation with the government through VSDs. When we file a VSD on behalf of a client, we typically work with the company on root cause analysis, and corrective actions that are targeted to the root cause. This helps to improve the chances of the corrective action being successful in preventing future recurrence of the underlying issue. It is also important to make sure you are filing your VSD with the right agency, and to recognize that there may be more than one office that needs to receive your VSD (for example some filing issues may also benefit from a Census VSD).

The processes for VSDs are typically ensconced in the regulations, and it is important to pay attention to the regulatory requirements for the VSD processes.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is launching a new online Voluntary Self-Disclosure Portal. This portal provides a streamlined, secure method for submitting voluntary self-disclosures of potential violations of OFAC-administered sanctions programs. By transitioning to this online system, OFAC aims to increase efficiency and transparency for persons submitting information, enabling faster acknowledgment of submissions, clearer communication throughout the review process, and a more user-friendly experience overall. OFAC strongly encourages parties to begin submitting voluntary self-disclosures through the new online portal.

Typically, the initial report needs to be followed by a full narrative that meets the regulatory requirements for final report. If you make an initial report and are not sure what you need in a final report, then you can review the relevant regulations in the Economic Sanctions Enforcement Guideline or contact our office for assistance. The Framework for OFAC Compliance Commitments is also a useful piece of guidance.

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Export Enforcement: BIS Emphasizes Self-Disclosure

October 16, 2024 by Leave a comment

In a recent change to the BIS rules, BIS has strongly emphasized the importance of self-disclosure by (1) making failure to self-disclose an aggravating factor in enforcement actions and (2) making it easier to self-disclose minor or technical violations.

The new rule was published as a direct-final rule without a Notice of Proposed Rulemaking.

Aircraft parts distributors who are exporting parts will want to seriously consider reporting both technical violations and significant violations in order to protect the company.

Penalty for Failure to make a Self-Disclosure

BIS has modified 15 C.F.R. § 764.5 to state that the government will consider a deliberate decision by a firm not to disclose a significant apparent violation to be an aggravating factor when determining what administrative sanctions, if any, will be sought. This means that if you identify an apparent violation and choose not to make a voluntary self-report, then the government penalties can be increased in an enforcement action (the rules already applied a mitigating factor when a voluntary self-disclosure has been made).

This has the appearance of a potential legal problem in the long term. The information-collection associated with self-disclosure was originally approved by OMB as a voluntary action that expected about 150 responses per year. The number of responses has been increased to 180 but the approval has been otherwise unchanged. By applying a penalty to failure to report (the aggravating factor to the civil penalty), the Commerce Department has changed the fundamental nature of this voluntary report. This change may invalidate the OMB approval, which does not appear to be updated to reflect the rule change. Thus, the aggravating factor could be a violation of the Paperwork Reduction Act’s public protection provision (which prevents the government from imposing a penalty for failing to comply with an information collection if it does not display a valid control number).

Exporting in violation of any US regulations is a criminal offense under 18 U.S.C. § 554. Thus, the new “mandatory” nature of self-reported exported violations appears to reflect a compulsion to self-incriminate. Despite common views of the Constitution as portrayed on television, this sort self-incrimination may not be prohibited. Corporations do not enjoy the privilege against self-incrimination. E.g. Curcio v. United States, 354 U.S. 118, 122 (1957). Corporate records “cannot be insulated from reasonable demands of governmental authorities by a claim of personal privilege on the part of their custodian.” Id. at 122-23. Early cases like Curcio distinguished this from compelled testimony, but later cases allowed compulsion of testimony (even testimony against the interests of the testifying person) from persons deemed to be “custodians.” Baltimore City Department of Social Services v. Bouknight, 488 U.S. 1301, 1304 (1988) (explaining that the “tension between the State’s demand for disclosures and the protection of the right against self-incrimination’ must inevitably . . . be resolved in terms of balancing the public need on the one hand, and the individual claim of constitutional protections on the other” and upholding a state disclosure requirement).

In the past I have counseled companies to carefully consider self-disclosure upon detecting an apparent export violation, and typically we have decided in favor of self-disclosures. This change will modify the analysis to be even more strongly in favor of self-disclosure.

Reporting Minor or Technical Violations

The new rule provides an abbreviated reporting mechanism for minor and technical violations. Minor and technical violations can be bundled together (as long as they are from the same quarter) and will need to include contact information and a description of the general nature and extent of the violations. The rule retains a more comprehensive reporting requirement for significant violations.

The rule provides examples of minor and technical violations: “immaterial Electronic Export Information (EEI) filing errors, inadvertent record keeping violations resulting from failed file retrieval or retention mechanisms (e.g., physical damage caused by flood or fire and/or electronic corruption due to malware, virus, or outage), incorrect use of one license exception where other license exceptions were available.”

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BIS Increasing Export Enforcement

July 7, 2022 by Leave a comment

On June 30th, the Bureau of Industry and Security (BIS) announced four policy changes that are intended to strengthen BIS’s enforcement tools for matters involving export violations. For people whose business relies on exports, this puts a spotlight on the importance of export compliance programs.

The export enforcement program changes were detailed in a memorandum from Assistant Secretary of
Commerce for Export Enforcement, Matthew S. Axelrod. They were effective immediately upon publication.

  • Penalties are Increasing: New guidance on aggravating and mitigating factors is now in place, and BIS intends to aggressively apply these new BIS guidelines (see 15 C.F.R. Part 766 Supplement 1). This may include a more aggressive view of which cases are deemed “egregious” and therefore warrant higher penalties. Assistance Secretary Axelrod explained, “[b]y imposing stiff penalties, we aim to achieve three things: (1) reaching resolutions that adequately reflect the national security harm caused by violations; (2) creating a strong disincentive for those considering circumvention; and (3) maintaining a level playing field for those that invest in a strong compliance program.”
  • Administrative Disposition for Existing Less-Serious Cases: This new policy applies to pending cases that (1) are not egregious, (2) have not resulted in serious national security harm, but (3) rise above the threshold for a warning letter. BIS is permitted to settle these for non-monetary penalties and rely on a suspended denial order combined with corrective-action-conditions (which could include training, development of a compliance program, etc.). This permits BIS to get some of these pending cases off of its docket so that it can focus its enforcement resources on the more egregious cases, but the new policy will require a bit of negotiation in order to arrive at the appropriate corrective-action-conditions.
  • Elimination of “No Admit, No Deny” Settlements: These were settlements in which no admission of conduct was necessary. Going forward, BIS will require parties to admit to their conduct as part of a settlement.
    • The policy reasons for this is because BIS wants others to be able to look at the settlement agreements to discern the conduct that is unacceptable (major settlements are often announced by BIS).
    • Related to this, in a recent speech, Assistant Secretary Axelrod also announced that BIS is considering making charging letters available when the charges are brought, instead of waiting until the cases are over to publicize them.
  • Dual-Track Processing of Voluntary Self-Disclosures: BIS is changing the way that it handles Voluntary Self-Disclosures (VSDs).
    • For minor and technical infractions, BIS will “fast-track” these and resolve them within 60 days of the final VSD submission. In our experience, these matters are typically resolved with a warning letter or a no-action letter.
    • For more serious violations, an agency attorney will be assigned to follow-up to get more information and to make appropriate decisions concerning the VSD.

In summary, the changes are designed to more quickly process the less serious matters, so that enforcement resources can be focused on the more serious cases. As BIS is able to focus its enforcement resources on more serious cases, we can expect BIS to seek civil penalties that are higher than they have been in the past.

While every case is unique, we often recommend that our firm’s aviation clients file Voluntary Self-Disclosures (VSDs) when they suspect a non-compliance with the export laws. We have had a lot of good experiences working with the government as a partner in compliance through the VSD process. The VSD process includes a lot of technical details so it is important to read the regulations and also seek competent legal support for your VSD, to make sure that you are eligible for the benefits of the BIS’ VSD program. The new policies concerning corrective-action-conditions should be quite familiar to aviation industry businesses, because they are the sorts of things that we already recommend to the aviation industry in order to foster future compliance. Things like training and compliance programs can reflect a good way to help prevent the sort of non-compliances that necessitate VSDs.

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