OFAC Voluntary Self-Disclosures - Securities Litigation & Compliance Services
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OFAC Voluntary Self-Disclosures

Under the Right Circumstances, Submitting a Voluntary Self-Disclosure Can Significantly Mitigate the Consequences of Violating OFAC Sanctions

John W. Sellers
Attorney John W. Sellers
SEC Defense Team Lead
Former DOJ Trial Attorney

For companies and individuals, violating Office of Foreign Assets Control (OFAC) sanctions can have severe consequences. These violations can implicate several federal statutes; and, depending on the circumstances involved, they can lead to either civil or criminal prosecution by the U.S. Department of Justice (DOJ). In some cases, however, it will be possible to avoid prosecution by making a voluntary self-disclosure to OFAC.

While making a voluntary self-disclosure to OFAC can be beneficial, it can also be dangerous. Making a voluntary self-disclosure necessarily involves informing OFAC of a violation of which it is not yet aware (and of which it might not otherwise become aware). If a company or individual makes an unsuccessful attempt at voluntary self-disclosure, this can lead to an investigation that might not have happened otherwise. Additionally, if a party thinks it is making a voluntary self-disclosure but OFAC is already aware of the transaction or conduct at issue, then the attempted self-disclosure won’t qualify for protection, and OFAC and the DOJ may use the submitted information in support of charges to be filed.

With all of that said, the risks of facing an unmitigated OFAC investigation will typically outweigh the risks involved in making an appropriate and qualifying voluntary self-disclosure. For companies and individuals that are concerned about possible OFAC sanction violations, we strongly advise consulting with an experienced OFAC lawyer regarding your options.

When Should a Company or Individual Consider a Voluntary Self-Disclosure to OFAC?

Violations of OFAC sanctions carry steep penalties. Companies and individuals accused of violations can face charges under federal laws including the Trading with the Enemy Act (TWEA), International Emergency Economic Powers Act (IEEPA), and Foreign Narcotics Kingpin Designation Act, and these charges can potentially carry millions of dollars in fines and decades of federal imprisonment.

With this in mind, submitting a voluntary self-disclosure to avoid the risks of civil or criminal prosecution can make sense in a wide variety of circumstances. Some of the most common examples include:

  • A company or individual inadvertently violated an OFAC sanction
  • A company’s OFAC compliance program failed to prevent a sanction violation
  • A company’s employee violated an OFAC sanction in clear violation of the company’s policies and procedures
  • A transaction arguably or unexpectedly came within the purview of an OFAC sanction
  • An OFAC sanction violation resulted from a company’s or individual’s reliance on a third party

It is important to be clear, however, that submitting a voluntary self-disclosure does not guarantee immunity from prosecution. As the U.S. Department of the Treasury explains:

“OFAC does not have an ‘amnesty’ program. OFAC does, however, review the totality of the circumstances surrounding any apparent violation, including whether a matter was voluntarily self-disclosed to OFAC. OFAC will also consider the existence, nature, and adequacy of a subject person’s risk-based OFAC compliance program at the time of the apparent violation, where relevant, among other factors.”

As a result, the decision to make a voluntary self-disclosure to OFAC is not one to be taken lightly. Oftentimes, deciding whether a voluntary self-disclosure is not an easy process. It will require an internal audit, interviews with employees, and a review of voluminous records pertaining to a particular transaction or occurrence. If the decision is made to move forward with a voluntary self-disclosure, then the information collected through these efforts can be used to assemble the self-disclosure. If it is ultimately determined that no voluntary self-disclosure is necessary, then this information can be kept on hand and used to deal with OFAC if necessary.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

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Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney

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Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

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Joe Brown
Joe Brown

Former U.S. Attorney

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John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

The Process for Making a Voluntary Self-Disclosure to OFAC

The process for making a voluntary self-disclosure to OFAC begins with an internal assessment as we just discussed. Working with OFAC counsel, the company or individual will need to determine how best to approach OFAC with the initial disclosure. In most cases, this involves not disclosing the violation in its entirety, but rather discussing the issue in a much more general manner. A voluntary self-disclosure may state that it is possible that a violation has occurred, and that the disclosing party is continuing to pursue an internal investigation.

When targeting a self-disclosure, it is important to open a dialogue with OFAC. Making a voluntary self-disclosure is an iterative process, and the goal is ultimately to reach an agreement that OFAC will not prosecute to the fullest extent of the law. With this in mind, the company’s or individual’s OFAC counsel should engage with agents as early in the process as possible, keep the agents informed as the process progresses, and begin negotiations regarding possible outcomes when warranted.

Another important factor to consider is that OFAC has a documented set of preferred practices for the submission of documents for agents’ review. Published in 2019, the Preferred Practices for Productions to OFAC establish detailed standards for document submissions. While compliance is not strictly necessary, providing data to OFAC in its preferred format can greatly improve the odds of a favorable result.

The Possible Outcomes of a Voluntary Self-Disclosure to OFAC

Submitting a voluntary self-disclosure to OFAC can have several possible outcomes. The outcome in any particular case depends entirely on the circumstances involved and the disclosing party’s approach to the process. Assuming that OFAC accepts a voluntary self-disclosure (i.e., the disclosure is not deemed late or invalid), possible outcomes include:

  • No civil or criminal enforcement action
  • A finding of a violation with no penalty
  • Issuance of a cautionary letter
  • Issuance of a cease-and-desist order, suspension, or other administrative action
  • Civil monetary penalties (potentially mitigated based on the voluntary self-disclosure)
  • Referral to the DOJ for criminal prosecution

This list underscores the fact that OFAC has substantial discretionary authority when evaluating voluntary self-disclosures. While a well-drafted voluntary self-disclosure that is appropriately submitted and carefully managed under the right circumstances should generally lead to a mitigated outcome, OFAC can decide to pursue civil or criminal charges if doing so is deemed necessary to prevent recurrence or to protect national sovereignty or security.

FAQs: Submitting a Voluntary Self-Disclosure to OFAC

What Factors Does OFAC Consider When Evaluating Voluntary Self-Disclosures?

 

OFAC considers several factors when evaluating voluntary self-disclosures. Understanding these factors—and taking them into consideration when preparing a voluntary self-disclosure—is vital for achieving a favorable outcome. Some of the key factors OFAC considers in most cases include:

  • Whether the self-disclosing party had an OFAC compliance program
  • Whether the self-disclosing party was aware of the conduct at issue
  • Whether the violation was willful or reckless
  • Whether the violation had a negative impact that the relevant sanction sought to prevent
  • Whether the self-disclosing party has taken (or is taking) corrective action

These are just examples. Each of these factors can carry more or less weight depending on the issue at hand, and myriad other factors may be relevant as well. Ultimately, the key is to build as compelling a case as possible based on the facts that are available.

When Can OFAC Reject a Voluntary Self-Disclosure?

 

There are circumstances in which OFAC can reject a voluntary self-disclosure outright. If OFAC determines that the information provided does not qualify as a voluntary self-disclosure, then the disclosing party will not receive consideration for a mitigated outcome. For example, OFAC may reject an attempted voluntary self-disclosure if:

  • A third party provides OFAC with information about the sanction violation prior to the self-disclosure
  • The self-disclosure is materially incomplete
  • The self-disclosure includes false or misleading information
  • The individual making a self-disclosure on behalf of a company does not have the authority to do so
  • The self-disclosure is not “self-initiated” (i.e., the disclosure is made only after receiving contact from OFAC)

Do I Need a Lawyer to Submit a Voluntary Self-Disclosure to OFAC?

 

While it is possible to submit a voluntary self-disclosure to OFAC via email, simply sending OFAC an email is not a good idea. Evaluating the need to make a voluntary self-disclosure and preparing the disclosure itself are both time-intensive and resource-intensive processes that require an in-depth understanding of the relevant federal laws and regulations. As a result, we strongly recommend that any company or individual that believes it may be necessary to make a voluntary self-disclosure to OFAC consult with an experienced attorney promptly.

How Long Does the OFAC Voluntary Self-Disclosure Process Take?

 

Given the lengthy and complex steps involved in submitting a voluntary self-disclosure and the need to work collaboratively with OFAC after the initial submission, the overall process can easily take several months, if not a year or longer. During this time, it is extremely important that the self-disclosing party continue to take steps to avoid OFAC sanction violations and remedy any violations that may have occurred. It is generally a good idea to re-evaluate the self-disclosing party’s OFAC compliance program during this period as well, and to make any updates or modifications that may be necessary in light of the events that have transpired.


Discuss Filing a Voluntary Self-Disclosure with an OFAC Attorney at Oberheiden P.C.

If you need to know more about submitting a voluntary self-disclosure to OFAC, we invite you to schedule a complimentary initial consultation at Oberheiden P.C. Please call 866-755-0697 or contact us online to schedule an appointment today.

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