Every matter arising as a result of economic sanctions administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) is different, because every set of circumstances surrounding transactions prohibited by those sanctions is different. Despite the variance between these cases, there are some common considerations that can and should be taken into account when filing a voluntary self-disclosure for an apparent violation of OFAC regulations.
First, there needs to be a determination made as to the egregiousness of the violation. How bad was conduct that is being disclosed? Does it involve something as simple as the sale of property in Iran? Or is it something more harmful to U.S. national security interests, such as, for example, exporting sensitive technology to Sudan? The determination to be made here is whether or not the self-disclosure of the violation will lead to a civil penalty or a criminal prosecution. If it is the latter, then you may want to rethink your self-disclosure and make a determination. If it is the former, seek to make a determination as to the penalty amount. Will any potential penalty be in an amount which you or the company can afford to pay? Strategy hinges greatly upon the determination as to the egregiousness of the apparent violation so it should be carefully thought out.
Second, those who were engaged in the prohibited transactions should work closely with counsel. This is not only to protect attorney-client privilege, it is also to develop a deep and meaningful understanding of the circumstances surround the sanctions violation. Legal counsel can only glean so much information from documents and emails related to the prohibited transactions; therefore, it is important that the actual people involved in those transactions are reviewing the information going into the self-disclosure and providing input into that self-disclosure.
Third, and related to the point above, is that there are two primary sources of information in preparing a voluntary self-disclosure to OFAC: 1) interviews, and 2) documents. These really go hand in hand. If you rely too heavily on what the parties involved in the transactions say about what occurred, then you may find yourself self-disclosing facts which are not supported by the documentation. On the other hand, if you only rely on documentation, then you may have only a very sterile recitation of facts that does not provide all of the circumstances surrounding the violations.
In my opinion, more often than not, it is a good idea to file an OFAC voluntary self-disclosure. There are tremendous benefits from a penalty calculation standpoint for doing so and OFAC does seem to treat parties who self-disclose their potential violations favorably. One final note, if you are reading this as an individual or company employee with no OFAC experience, I would caution against filing your own self-disclosure. I have seen one too many cases where people have tried to file their own OFAC self-disclosures and ended up getting themselves into even more trouble. As always, when dealing with OFAC proceed with caution.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.