It is well known that the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) will mitigate the penalties associated with a violations of an OFAC administered sanctions program if the party who committed the violation voluntarily self discloses such violation. Generally, OFAC does significantly reduce the penalty imposed as a result of these voluntary self disclosures and it was once safe to say that the Department of Justice would not prosecute a case that was referred to OFAC by voluntary self disclosure. Well, it is not longer safe to say that.

Clif Burns at exportlawblog.com wrote about the criminal information concerning Innospec, Inc.’s violations of the Cuban Assets Control Regulations (“CACR”) and the Foreign Corrupt Practices Act (“FCPA”). You can read about it here. Since the general topic has already been discussed by Mr. Burns, I will just write about the effect is has not only on attorneys handling sanctions related matters, but also on those individuals and entities who are making voluntary self disclosures to OFAC.

As a self-described OFAC attorney, I have to lead clients through the murky waters of OFAC compliance and/or investigations; a job made even more difficult by the opaque nature of the sanctions regulations. The one thing I was sure about in advising clients was that it is always best to be upfront with OFAC. That way you can mitigate any potential future penalties that might be imposed. This sometimes involved making voluntary self disclosures to OFAC. Clients would often ask if any criminal charges would be forthcoming as a result of their voluntary self disclosure and I (as well as most sanctions/export lawyers) would feel comfortable telling them that it would be highly unlikely for that to happen. With this latest action, I won’t feel comfortable advising clients in that manner anymore.

Most clients are already wary of willingly turning over their information to a federal agency, particularly one which can turn a matter over for prosecution. Throw in the fact that the penalties for violations of the International Emergency Economic Powers Act (“IEEPA”)–the underlying legal authority for the sanctions programs–can lead to up 20 years of imprisonment per violation, and clients are down right spooked when it comes to making these voluntary self disclosures. With the prosecution of Innospec it is going to be even more of a tight rope walk when filing a voluntary self disclosure to OFAC. What these means for individuals and entities dealing with OFAC is that now, more than ever, you need counsel to assist you in preparing a voluntary self-disclosure, because you just can’t be sure what it will lead to.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.