EAR Violations and BIS Policy Shift: Incentivized Self-Disclosure; Aggravated Punishments; Third-Party Whistleblowing

Description

The U.S. Department of Commerce's Bureau of Industry and Security (BIS) recently released guidance regarding a policy shift that sharpens the incentives for VSDs by companies, particularly of significant EAR violations, as well as reporting others' violations. This policy shift comes at a time of increased enforcement activity and record fines, such as the $300 million penalty against Seagate Technology L.L.C. in April, the largest standalone administrative penalty in BIS history and an unprecedented extraterritorial enforcement action based on the "foreign direct product" rule.

Prior to the policy shift, companies could receive mitigation of civil penalties if they filed a VSD, yet they were not formally penalized if they did not come forward. Now, however, a party's choice not to file a VSD when they've discovered a significant possible violation of the EAR can be considered an aggravating factor, resulting in increased penalties. In addition to incentivizing self-disclosure, the policy shift also encourages whistleblowing. Reporting others' violations can now be considered a mitigating factor if the reporting party is subsequently under investigation.

Listen as our expert panel discusses the effects of the BIS policy shift on companies, what companies and their counsel should consider when determining whether to file a VSD or blow the whistle on others, and best practices for compliance to limit liability.