BIS Announces Enforcement Changes, Including Higher Penalties for 'Serious' Violations
The Bureau of Industry and Security on June 30 announced several policy changes designed to strengthen its administrative enforcement tools and penalties. Under the changes, outlined at the agency’s annual update conference by Matthew Axelrod, the agency’s top enforcement official, BIS will raise penalties for more serious violations; revise its policies surrounding its no-admit, no-deny settlements; begin offering settlement agreements that don’t include fines; and revise how the agency processes voluntary disclosures.
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Axelrod said the agency will ensure its more “serious” violations trigger “commensurately serious penalties,” allowing BIS to impose higher fines for egregious export control violations. BIS will also make sure its aggravating penalty factors are applied “more uniformly to escalate penalty amounts where appropriate.”
“In short, if you invest in an export compliance program while your competitor flouts the rules to gain an economic advantage, we are going to aggressively impose penalties on your competitor to create a level playing field,” Axelrod said. “In addition, by imposing stiff penalties, we want to create a strong disincentive for those considering circumvention -- one that hurts both the pocketbook and reputation of violators.”
BIS also will no longer use no-admit, no-deny clauses in settlements -- which have allowed companies to avoid admitting explicit wrongdoing in certain cases -- to give companies the “opportunity to learn from others and avoid making the same mistakes,” Axelrod said. He said companies need to “earn” the reduced penalty that usually accompanies a settlement by admitting some level of guilt. “That way,” Axelrod said, “others will have a clear sense of what the company or individual did that got them into trouble and can modify their own behavior accordingly.”
BI also will start offering settlement agreements that don’t include monetary penalties to help the agency “clear through pending administrative cases,” Axelrod said. These settlement agreements will be used in cases that rise just above a case that would normally warrant a warning letter or no-action letter. This will help BIS resolve cases by focusing more on “remediation,” Axelrod said, adding that the settlement agreements may include a temporary export denial order with certain conditions, such as compliance training requirements.
Another change will revise how the agency processes voluntary self-disclosures. Axelrod said BIS will “fast track” disclosures of “minor” infractions with a warning letter or no-action letter, and will instead do a “deeper dive” for more serious disclosures. Companies that disclose minor violations will receive a warning or no-action letter within 60 days, Axelrod said, while more-serious VSDs will be assigned to a special agent, a Commerce Department attorney -- and in the most serious cases -- an attorney from DOJ’s Counterintelligence and Export Controls Section.
Axelrod said the changes are meant to make BIS’s enforcement program “as effective as possible” and could lead to more. “Depending on how these collective changes play out, we may consider further ones as well,” Axelrod said. “We are committed to making whatever changes are necessary to maximize the effectiveness of our administrative enforcement of export violations.”
The changes, which were previewed by Axelrod in May (see 2205160062), were announced about three weeks after BIS said it would begin publishing charging letters before cases are resolved (see 2206030012). “We need to make sure we are using those tools to their fullest potential,” Axelrod said. “That way, we can ensure that we use our finite resources to maximum effect.”