Key Points

• The U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued a policy memo stating that it will now treat the deliberate nondisclosure of "significant" violations of the Export Administration Regulations (EAR) as an "Aggravating Factor" under its settlement guidelines. Companies that have violated the EAR should factor this into their decisions whether or not to disclose, as nondisclosure of matters with "significant" violations will carry an increased risk of a harsher penalty if the underlying violations are discovered by BIS.
• The policy memo also encourages parties to disclose EAR violations committed by third parties and observes that such disclosure could level the competitive playing field and qualify the disclosing party for favorable treatment in concurrent or future enforcement actions, including potential financial awards, through the Financial Crimes Enforcement Network (FinCEN), if the underlying conduct also relates to U.S. sanctions violations or Bank Secrecy Act violations.
• Companies should be aware that third parties may be motivated to disclose violations of others, even where the third party has no violations. This policy memo underscores that those who disclose any significant violations—their own or others'—may receive financial incentives and mitigation credit in related or unrelated future enforcement actions. Additionally, the failure to disclosure may be treated as an aggravating factor. In other words, companies who...

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