The voluntary disclosure policy

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1. The policy in one paragraph

The regulations set out how the Department of State treats a company that reports its own possible violation. "The Department may consider a voluntary disclosure as a mitigating factor in determining the administrative penalties, if any, that should be imposed" (22 CFR 127.12(a)). The Department states that it strongly encourages such disclosures by persons who believe they may have violated the export control provisions of the Arms Export Control Act or anything issued under it.

The policy also states the other side. Failure to report a violation may harm United States national security and foreign policy interests, and "will be an adverse factor in determining the appropriate disposition of such violations" (22 CFR 127.12(a)). The penalties and debarment rules that disclosure can mitigate are described in penalties, debarment and the presumption of denial.

2. When a disclosure counts as voluntary

The section applies only in the context of administrative action. It covers information given to the Directorate of Defense Trade Controls for its review in deciding whether to take administrative action under part 128 (22 CFR 127.12(b)(1)).

Timing is decisive. The section applies only where the Directorate receives the information first. It stops applying once the Department of State or another agency has learned of the same or substantially similar information from another source and opened an inquiry into a possible violation (22 CFR 127.12(b)(2)). A report made after an investigation has begun on the same facts falls outside it.

Management must be behind it. One factor the Directorate considers is whether the disclosure was made with the full knowledge and authorization of senior management. If it was not, the Directorate will not deem the disclosure voluntary under this section (22 CFR 127.12(b)(3)(v)).

3. What disclosure does not guarantee

The regulation is explicit about the limits. Despite the voluntary nature of a disclosure, the violations may still merit penalties, administrative actions, sanctions, or referral to the Department of Justice for possible prosecution (22 CFR 127.12(b)(3)). The Directorate tells the Department of Justice that the disclosure was voluntary, but that department is not required to give the fact any weight.

The Directorate alone decides how much the disclosure matters, weighing it with other information in the case. Other factors it may consider include whether the transaction would have been authorized had a license been sought, why the violation occurred, and the degree of cooperation with the investigation (22 CFR 127.12(b)(3)). Another is "Whether the person has instituted or improved an internal compliance program to reduce the likelihood of future violation" (22 CFR 127.12(b)(3)(iv)).

The section creates no rights. It does not confer any right, benefit, privilege or protection enforceable in any civil, criminal, administrative or other matter (22 CFR 127.12(b)(4)). It also does not lessen the separate duty to inform the Directorate of any sale or transfer involving the proscribed countries listed in part 126 (22 CFR 127.12(b)(5)).

4. Initial notice, then a full disclosure

The process has two stages. A person wanting to make a voluntary disclosure should notify the Directorate immediately after a violation is discovered, and then conduct a thorough review of all defense trade transactions where a violation is suspected (22 CFR 127.12(c)(1)).

If the first notice is incomplete, the full disclosure must follow within 60 calendar days, or the notice will not qualify as a voluntary disclosure (22 CFR 127.12(c)(1)(i)). An empowered official or senior officer may ask in writing for more time, saying what information is missing and why. The Directorate may require a written certification that the full disclosure will arrive within a set period (22 CFR 127.12(c)(1)(ii) and 22 CFR 127.12(c)(1)(iii)). Failure to provide it within a reasonable time may lead the Directorate to disregard the notice as a mitigating factor.

5. What the disclosure contains

The written notification should cover seven matters (22 CFR 127.12(c)(2)).

• A precise description of the nature and extent of the violation.
• The exact circumstances: why, when, where and how it occurred.
• The identities and addresses of everyone known or suspected to be involved.
• Any license numbers, exemption citations or other authorizations.
• The list category and subcategory, description, quantity and capability of what was involved.
• The corrective actions taken, the new compliance measures and any internal discipline.
• The name and address of the person disclosing and a point of contact.

The regulation also lists factors a disclosure should address. They include whether the violation was intentional or inadvertent, how familiar the responsible person was with the rules, and whether there was earlier administrative or criminal action. They also include whether the violations are systemic, and what compliance processes and training were in place (22 CFR 127.12(c)(3)).

6. Documents and certification

Supporting documents should accompany the disclosure. They include licensing documents and end-user statements, and shipping documents such as the export filing with its Internal Transaction Number, air waybills, bills of lading and invoices. Other relevant documents must be kept until the Directorate asks for them or makes a final decision (22 CFR 127.12(d)).

A certification must state that the representations are true and correct to the best of the person’s knowledge and belief. It should be signed by an empowered official or a senior officer. For a major violation, a systemic pattern, or the absence of an effective compliance program, the Directorate may require a senior officer to sign (22 CFR 127.12(e)). An oral presentation is generally unnecessary, though a meeting can be requested with the written submission (22 CFR 127.12(f)).

7. Where the disclosure goes

Disclosures are sent to the Office of Defense Trade Controls Compliance within the Directorate, with the street address given on the Directorate’s website (22 CFR 127.12(g)). The whole process is written, from the first notice to the certification, and the regulation expects the review behind it to extend beyond the single transaction that prompted it.

Key terms

Voluntary disclosure	A report of a possible violation made before any agency opens an inquiry into the same facts.
Initial notification	The first notice, made immediately after discovery, followed by a full disclosure within 60 days.
Mitigating factor	A consideration that may reduce administrative penalties, at the Directorate’s sole discretion.
Empowered official	The officer who may certify the disclosure, unless the Directorate requires a senior officer.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Compliance reviews often reach into how equipment was shipped, stored and handed over in the field. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.