Self disclosure and cooperation in the investigation of export regulation violations by an entity’s acquiror has led to a waiver of prosecution against the acquiring company (White Deer Management LLC). The Department of Justice’s National Security Division and the Southern District of Texas’s United States Attorney’s Office have also decided to decline prosecution of the acquired company Unicat Catalyst Technologies LLC.
Federal agencies have instead opted to file criminal prosecution against Unicat’s former CEO and co-founder, Mani Erfan. Efran has pled guilty to conspiring to violate sanctions, concealment, and money laundering. According to Department of Justice (DOJ) records Erfan sold controlled catalysts used in petroleum refining and steel production to entities in Cuba, Syria, Venezuela, and Iran in violation of US sanctions.
US Export Sanctions
U.S. export sanctions are legal restrictions imposed by the government to control the export of goods, services, and technology to certain countries or entities, primarily for national security and foreign policy reasons. These sanctions can prohibit all transactions or target specific items and require exporters to obtain licenses for compliance. Targeted areas for sanctions include bans on the export of arms and controls over items classified as dual use.
The International Traffic in Arms Regulations (ITAR) proscribe prohibited and denied countries in Section 126.1 of the regulations. The Bureau of Industry and Security (BIS) maintains a list of embargoed countries under Supplement 1 Part 740 of the Export Administration Regulations (EAR). The BIS also maintains lists for Military End Use (MEU) items, General Embargoed Countries List, and a list of countries sanctioned in conjunction with UN embargoes.
Mergers, Acquisitions, and Export Compliance
Export compliance assessment is crucial during mergers and acquisitions (M&A) to avoid inheriting liabilities from the acquired company, such as violations of export regulations. It is essential therefore, that acquirers conduct thorough audits of entities they intend on purchasing before finalizing agreements. Failure to detect previous violations can result in penalties, increased scrutiny from regulatory agencies, loss of business reputation, and restriction from future exports. If irregularities are suspected self disclosure and cooperation with appropriate agencies should take place.
Voluntary Self-Disclosure
A Voluntary Self-Disclosure (VSD) is conducted when an organization recognizes that violations or suspected violations of export regulations of the United States have occurred. Voluntary self-disclosure to the Bureau of Industry and Security (BIS) is encouraged for parties who believe they may have violated export control regulations. Submitting a VSD in good faith can be a mitigating factor in determining administrative sanctions. These actions should include full cooperation and remediation with all applicable agencies.
Federal enforcement agencies consider cases where self disclosure and cooperation have not occurred as aggravating circumstances when considering criminal and civil prosecution. Examples of a failure of complete disclosure include not voluntarily self disclosing misconduct of employees, suppliers, and members of the leadership, and witholding relevant documents.
CVG Strategy Export Compliance Expertise
The DDTC, the BIS, and the OFAC, along with international partners have greatly increased their activities in the generation and enforcement of regulations. This increases the likelihood of a non-egregious violation occurring even in a company with an effective compliance program. CVG Strategy can assist organizations through the Voluntary Self Disclosure process and guide you through these difficult procedures.
If you are part of a large corporation or a small company with a part-time compliance person, CVG Strategy has the compliance and training programs to help you meet International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) rules and requirements. As the BIS place controls on a growing number of technologies it becomes increasing difficult for smaller businesses to stay abreast of regulatory developments. Because of this, we provide Export Compliance Management Programs (ECMP) for businesses of all sizes.
CVG Strategy, LLC is recognized the world over as the premier provider of Export Compliance Consulting and Export Compliance Programs for businesses involved in export in the U.S. and Canada. We also provide the essential training that ensures that your team is up to date on governmental regulations, including the Export Administration Regulations (EAR), the International Traffic in Arms Regulations (ITAR), the Canadian Controlled Goods Program, and Office of Foreign Asset Controls (OFAC) and other regulatory agencies and more.