Sanction compliance: Is voluntary disclosure really worth it?

​In addition to the 14th package of new EU sanctions against Russia, new EU sanctions have recently been imposed against Belarus. These specify, among other things, the requirements for criminal sanctions that the member states have in place for violations. According to the new regulation^[1]​, these no longer have to be ‘only’ effective, proportionate and dissuasive; rather, a voluntary disclosure of violations of the provisions of the Belarus Sanctions Regulation must be taken into account as a mitigating circumstance in accordance with the respective national legislation.

   

Under German law, a comprehensive ‘punishment-free’ self-disclosure was previously only provided for in the case of tax evasion (Section 371 of the German Fiscal Code). The idea that offences discovered by self-monitoring and voluntarily reported to the state should not be prosecuted is also found in foreign trade law (Section 22 (4) AWG); however, the scope of application there is limited to certain (less serious) administrative offences. For criminal offences, no voluntary disclosure requirements and effects have been regulated – at least explicitly. 

   

​The new version of the Belarus Sanctions Regulation does not change this. As an EU regulation, it applies directly in all member states like a national law. However, the legal consequence of the voluntary disclosure is expressly (only) to be taken into account ‘in accordance with the respective national legal provisions as a mitigating circumstance’. 

  

From a criminal law perspective, this means that a voluntary disclosure in the aforementioned sense is no guarantee of exemption from punishment. Rather, the investigating authorities (customs/public prosecutor's office) will initiate their investigations if there are actual indications of criminal behaviour. In doing so, the investigating authorities are not only required to investigate the circumstances that serve to incriminate, but also those that serve to exonerate. However, as such, the voluntary disclosure does not constitute an obstacle to prosecution according to the aforementioned concept. 

  

In principle, the self-disclosure only has an effect when a decision has actually been made regarding the accusation of guilt. In the context of the guilty verdict, a court would have to take into account, in favour of the accused person, that they voluntarily and fully disclosed the offence themselves. In particular, the fact that they cooperated with the investigating authorities in the interest of maximum transparency and contributed to the clarification of the offence could be rewarded.

  

However, a conviction will by no means be the rule. Due to the typical complexity of business transactions in foreign trade, the question of whether proceedings for sanctions violations can be discontinued before charges are brought regularly arises in preliminary proceedings. In particular, it is difficult for investigating authorities to attribute the violation to a specific person within the context of more complex work processes. In the case of minor offences, a ‘suspension in return for a fine’ (Section 153a of the Code of Criminal Procedure) is a possibility. In this respect, a voluntary disclosure would have to be taken into account in the amount of the fine.

  

​The realisation that compliance in the sense of corporate self-regulation can have a mitigating effect on criminal or administrative fines is of course nothing new. The Federal Court of Justice (BGH) has long recognised an efficient compliance management system and its (subsequent) optimisation as a mitigating circumstance for fines.^[2]​ 

  

Nevertheless, in the event of an emergency, companies and their management members are faced with the question of whether they should, as it were, ‘deliver themselves up to the sword’ by making a voluntary disclosure. In addition to the evaluation of a comprehensive analysis of all economic and legal risks, the decisive factor for such a step will certainly be the assessment of the actual probability of detection with regard to the infringement. However, the latter is likely to increase continuously in view of the increasing density of controls in the enforcement of sanctions. 

  

In addition to the aforementioned reduction in the penalty, another argument in favour of a voluntary disclosure is that it regularly offers the opportunity to retain the power of interpretation over the facts of the case. Nobody knows the processes and procedures within which the specific offence occurred as well as the companies or their managers themselves. A well-prepared description of the facts can provide a comprehensible explanation of how the offence could have occurred in the sense of an accidental error or ‘outlier’ within a fundamentally flawless process.

  

If the investigating authority accepts this explanation, there is usually no longer any question of intentional – and therefore criminal – behaviour, but at most of negligence. This can – at least according to the current version of the law – only be punished as an administrative offence with a fine. In the case of the amount of the fine, voluntary disclosure would then again be taken into account as a mitigating circumstance.

  

In view of the steadily growing number of official investigations into criminal violations of the EU sanctions against Russia and Belarus, a voluntary self-disclosure should not be categorically ruled out in the event of an infringement. Although a voluntary self-disclosure does not usually lead to exemption from any sanctions, it can have a mitigating effect. In addition, there is the opportunity to clarify the facts of the matter independently in advance of uncontrollable official investigations and to bring them to the attention of the investigating authority ‘at your own pace’. Experience shows that this approach allows companies to retain a large degree of control over the interpretation of the facts – an advantage that should not be underestimated and that will become even more significant in the future, given that German lawmakers^[3]  are likely to include gross negligence in the list of criminal offences.