DOJ National Security Division Updates Corporate Crime Enforcement Policy and Issues Whistleblower Policy

Executive Summary

• On March 7, 2024, the NSD of the DOJ issued an updated NSD Enforcement Policy to include a new section covering VSDs in connection with mergers and acquisitions.
• These updates follow repeated statements by senior DOJ leadership on the importance of addressing national security threats in the corporate context, and the related commitment to apply significant additional resources to corporate enforcement efforts in the national security realm.
• A clear takeaway from the updated NSD Enforcement Policy is that due diligence prior to a merger or acquisition, as well as post-closing due diligence, audits and investigations that identify potential national security-related violations, need to be considered, planned for and implemented in a manner that affords the acquiring company the benefits of the new VSD policy for mergers and acquisitions.
• Additionally, DAG Lisa Monaco recently outlined plans to pay whistleblowers who inform prosecutors about corporate crime.

Continuing a pattern of strategic changes to corporate compliance and enforcement under the Biden administration, on March 7, 2024, the National Security Division (NSD) issued an updated NSD Enforcement Policy for Business Organizations (NSD Enforcement Policy) that focuses on the intersection between U.S. national security laws, including U.S. export controls and sanctions, and corporate compliance expectations.

The updated NSD Enforcement Policy primarily adjusts and expands the U.S. Department of Justice’s (DOJ or the Department) voluntary self-disclosures (VSD) programs to include additional protections in the context of mergers and acquisitions. As in previous iterations, including as recently as March 1, 2023, the NSD Enforcement Policy continues to set forth the criteria that NSD, in partnership with U.S. Attorneys’ Offices and other Department litigating components, uses in determining an appropriate resolution for organizations that make a VSD in U.S. export control and sanctions matters.

Additionally, recent speeches by senior DOJ officials further highlight the link between U.S. national security and corporate criminal enforcement of violations of U.S. export controls and sanctions laws. Deputy Attorney General (DAG) Monaco and Assistant Attorney General (NSD) Matthew G. Olsen discussed DOJ’s enforcement activities at the American Bar Association’s National Institute on White Collar Crime on March 7, 2024, and announced several updates to the Department’s corporate criminal enforcement policies, including additional incentives for whistleblowers who tell prosecutors about corporate crime. Earlier on October 4, 2023, DAG Monaco, at the Society of Corporate Compliance and Ethics’ 22nd Annual Compliance & Ethics Institute, also announced a new safe harbor policy for VSDs made in connection with mergers and acquisitions. During that speech, she explained that “[m]ore and more of our corporate resolutions implicate our national security,” noting that “the number of major national-security corporate resolutions has doubled compared to last year.” She further emphasized that “[t]o meet this moment, we are adding more than 25 new corporate crime prosecutors in the National Security Division.”

While neither the speeches nor the NSD Enforcement Policy themselves create any privileges, benefits or rights for any parties, together they work to provide guidance to corporate actors in the context of compliance and enforcement of U.S. national security laws. With respect to U.S. export controls and sanctions, it is clear that DOJ expects companies to implement robust compliance controls, voluntarily self-disclose misconduct to NSD in a timely manner, cooperate with NSD and quickly demonstrate appropriate remedial measures.

M&A Policy

The NSD Enforcement Policy includes a new “M&A Policy,” which addresses VSDs and additional protections against corporate criminal enforcement in connection with mergers and acquisitions.

Where an acquiring company makes a qualifying VSD to NSD that meets the requirements outlined below, NSD generally will not seek a guilty plea from the acquiror, and there is a presumption that NSD will decline to prosecute the acquiror. Additionally, the acquiror will not be required to pay a criminal fine or forfeit assets, and the misconduct disclosed to NSD will not affect NSD’s assessment of the acquiror’s history of recidivism in future matters.

Under the M&A Policy, an acquiror that conducts due diligence and timely submits a VSD after the completion of a transaction may qualify for the additional protections of the M&A Policy if it becomes aware of potential criminal violations of U.S. export controls, sanctions or other laws affecting U.S. national security by the acquired company, and the acquiror meets the following requirements:

• Completes a lawful, bona fide acquisition of another company, as assessed by DOJ against an enumerated list of potential factors included in the M&A Policy.
• Voluntarily and timely (generally, within 180 days after the date the transaction is completed) self-discloses to NSD potentially criminal violations of laws affecting U.S. national security committed by the acquired entity.
• Fully cooperates with NSD’s investigation.
• Timely (generally, within one year after the date the transaction is completed) and appropriately remediates the misconduct.

Importantly, the presence of aggravating factors at the acquiring company or the acquired company—including pervasive criminal misconduct; a history of recidivism; concealment, fraud, corruption or involvement by upper management; significant profit to the company; transactions involving a Foreign Terrorist Organization or Specially Designated Global Terrorist; or exports of items controlled for nuclear nonproliferation or missile technology reasons to a proliferator country, items known to be used in the construction of weapons of mass destruction, or military items to a hostile foreign power—generally will not prevent the acquiror from qualifying for the additional protections of the M&A Policy.

If the acquired entity continues to exist as a distinct legal entity following the transaction, NSD will credit the acquiror’s timely VSD to the acquired entity and will consider whether the acquired entity otherwise satisfies the NSD Enforcement Policy’s requirements to receive credit for VSD, full cooperation, and timely and appropriate remediation, such that the acquired entity may obtain the benefits of the NSD Enforcement Policy.

Whistleblower Incentives and Continued Emphasis on Corporate Enforcement in the National Security Context

In addition to the updated NSD Enforcement Policy, in a recent keynote speech at the American Bar Association’s 39th National Institute on White Collar Crime, DAG Monaco announced that DOJ plans to provide incentives to whistleblowers who inform prosecutors about corporate crime. The program is intended to complement existing whistleblower programs, such as the program overseen by the Financial Crimes Enforcement Network for violations of U.S. sanctions and anti-money laundering violations. Beginning with a pilot program aimed at cases where whistleblowers are not already eligible for payments from other government programs, DOJ plans to pay whistleblowers out of money that defendants forfeit when they settle civil claims or are sentenced after a guilty plea or conviction. DOJ will develop rules for the program over the next 90 days in a “policy sprint,” and plans to launch it later this year, seeking to fill gaps in the current federal whistleblower framework, including payments to people who tell the U.S. government about domestic or overseas violations of the Foreign Corrupt Practices Act by private companies that are not overseen by the U.S. Securities and Exchange Commission.

At the same conference and consistent with DAG Monaco’s October 4, 2023 remarks, Assistant Attorney General Olsen emphasized that the NSD has “more than doubled the number of prosecutors working on violations of sanctions, export control, and foreign agent laws” and “brought on two veteran prosecutors to serve as the division’s first ever chief and deputy chief counsel for corporate enforcement.”

In line with this emphasis, the NSD Enforcement Policy makes clear that, while the focus is on U.S. export controls and sanctions, prosecutors will target potential violations of other criminal statutes that affect national security because they arise out of or relate to the enforcement of U.S. export control and sanctions laws, such as money laundering, bank fraud, smuggling, fraudulent importation and false statement offenses.

In other words, the NSD Enforcement Policy reflects the DOJ’s current “all tools” approach to investigating and prosecuting U.S. national security crimes. In particular, the NSD Enforcement Policy was updated to make explicit reference to such other U.S. national security laws, including the Foreign Agents Registration Act, laws prohibiting material support to and financing of terrorists, and criminal violations in connection with the work of the Committee on Foreign Investment in the United States and the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector.

The increased enforcement resources highlighted by Assistant Attorney General Olsen reflect the NSD’s dedication to this wide-net approach. DAG Monaco similarly stated in her earlier remarks, that “[t]oday corporate crime intersects with our national security – in everything from terrorist financing, sanctions evasion, and the circumvention of export controls, to cyber- and crypto-crime.” She further explained that there are “new national security dimensions in familiar areas of corporate crime – from FCPA violations to intellectual property theft that affects critical supply chains and involves disruptive technologies,” emphasizing “the biggest shift in corporate criminal enforcement that [she has] seen during [her] time in government: the rapid expansion of national security-related corporate crime.”