Regulatory Violations
Regulatory violations can occur for exporters and importers with even the strongest internal compliance policies, operating procedures. They can arise during benign settings, such as a customary periodic compliance review and risk assessment, a diligence request as part of mergers and acquisitions activity, or during consideration of what it may take to service what appears to be a spectacular deal. These events force leaders to confront potential exposure for civil liability, reputational harm, supply chain interruption, and even in some cases criminal liability.
Roles for Voluntary self-disclosures
Best-in-class compliance toolboxes contain many options for managing and mitigating risk. One of the most effective tools that can be considered after internal identification of a possible violation is the voluntary self-disclosure (VSD). Many federal agencies provide some form of incentive when entities within their jurisdiction provide advanced notification of violations. Those incentives often result in a mitigation of the monetary exposure for civil penalties and in some cases can result in a total cancellation of any penalty.
VSDs are a tool for dealing with a wide range of apparent regulatory violations that may from time to time arise. This article explores the use of VSDs while also cautioning that they are not a free pass to avoiding proper compliance leadership, policies, and practices. The identification of any potential violation must be dealt with quickly, efficiently, and compliantly regardless of whether an available VSD option is exercised. The efficacy of immediate actions will serve as the greatest risk mitigation factor by demonstrating to the enforcement agency, if necessary, that the company is a quality operator that implemented root-cause analysis followed by a meaningful corrective action plan.
Jonathan Todd is a Partner in the Transportation & Logistics practice at Benesch, Friedlander, Coplan and Aronoff LLP and a member of the Ohio District Export Council.
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