In recent days, the U.S. Attorney's Office for the Southern District of New York (SDNY) unveiled a revised Corporate Enforcement and Voluntary Self-Disclosure Program for Financial Crimes (the SDNY VSD Program). Building on the Department of Justice’s (DOJ) recently revised Corporate Enforcement Policy (CEP), the program outlines a pathway for companies to seek declinations through voluntary self‑reporting.
The SDNY VSD Program departs from prior voluntary self-disclosure frameworks—and from the DOJ’s current CEP—by expanding the pool of eligible companies and offering “conditional declination letters” early in an investigation, potentially within weeks of a disclosure, rather than at the conclusion of a months‑ or years‑long investigation. Those potential benefits, however, come with a trade-off: Companies seeking a conditional declination must satisfy detailed and demanding disclosure, cooperation, and remediation requirements that reflect a far more exacting view of corporate cooperation than has historically applied.
The SDNY VSD Program: A Defined Path to Declination
The SDNY VSD Program reflects the DOJ’s broader effort to encourage voluntary corporate self-reporting by offering greater clarity and predictability around the conditions under which a company may avoid prosecution. Framed as a self-disclosure program “for financial crimes,” the SDNY VSD Program encourages self-reporting of a wide variety of corporate crime, including violations of the securities and commodities laws, accounting fraud, market manipulation, embezzlement, misappropriation, and other financial misconduct.
The program also expands eligibility by departing from the DOJ CEP’s approach to “aggravating circumstances.” Although the program is unavailable to companies reporting conduct with “any nexus” to certain areas—including terrorism, sanctions evasion, foreign corruption, drug cartels, and forced labor—other factors that would warrant disqualification under the DOJ’s CEP are not treated as disqualifying “aggravating factors” for the SDNY VSD Program. Specifically, unlike the CEP, the SDNY VSD Program will not treat as a disqualifying circumstance the seriousness of the offense, the pervasiveness of the misconduct within the company, the severity of harm caused by the misconduct, past criminal adjudications, or the involvement of senior leadership.
Conditional Declinations and Disclosure Requirements
At the center of the SDNY VSD Program is the concept of “conditional declination,” which provides eligible companies with an immediate benefit tied to long-term cooperation, remediation, and restitution obligations. To receive a conditional declination letter, a company must self-report qualifying misconduct before receiving a grand jury subpoena or document request from a law enforcement agency or a regulator, or otherwise learning of an existing government investigation.
In a notable departure from other DOJ voluntary self-disclosure programs, knowledge of a whistleblower submission to a government agency, a press report of the misconduct, or self-disclosure to another agency will not disqualify a company from receiving a declination. A qualifying self-disclosure will result in a conditional declination letter from SDNY within two to three weeks.
Cooperation, Remediation, and Final Declinations
To obtain a final declination, a company must fully cooperate with the SDNY’s investigation, reasonably remediate the harm caused by the reported misconduct, and make restitution to all injured parties.
Although these requirements may appear similar to those set out in the CEP and prior VSD programs across U.S. Attorneys’ Offices, the SDNY VSD program sets out more detailed and demanding corporate cooperation obligations.
The program imposes many of the now-familiar cooperation requirements for DOJ voluntary disclosure frameworks. Companies must disclose all relevant non-privileged facts, identify individuals involved in the misconduct, share the factual results of internal investigations, and produce and preserve relevant documents in the United States and abroad.
The policy goes further, however, and effectively mandates proactive policing of employee statements to the government during the investigation. Specifically, the program requires a company to use “its best efforts to ensure” that employees, directors, officers, and agents who provide information to SDNY regarding the misconduct (1) respond completely, candidly, and truthfully to questions in interviews and grand jury appearances and at trial, and (2) make no attempt to falsely protect or falsely implicate any person or entity.
These affirmative obligations raise practical questions about how compliance will be evaluated and how companies can meaningfully manage those obligations as an investigation unfolds, particularly when the expectations apply to a company’s former employees, directors, officers, or agents.
In another departure from prior policies, the SDNY VSD Program also defines full cooperation to include an ongoing reporting obligation. Under the program, companies are required to self-report for a period of three years “all credible evidence or allegations of criminal conduct by the company or any of its employees that relates to violations of U.S. laws.”
This obligation, which is typically included in more punitive DOJ corporate criminal resolutions such as deferred and non-prosecution agreements, will now be applied to self-reporters at the earliest stage of their interaction with the government. Each of these new obligations and any collateral effects should be carefully considered when assessing the pros and cons of self-reporting.
Companies deemed compliant with the program’s obligations will receive several benefits:
- A conditional declination within two to three weeks of self-reporting.
- A final declination of prosecution for the company (though not for individuals).
- No financial penalties beyond disgorgement and restitution.
- No corporate monitors.
Key Takeaways
A More Complex Corporate Criminal Enforcement Landscape
The SDNY VSD program adds another policy initiative to a corporate criminal enforcement landscape already shaped by DOJ's CEP and the Voluntary Self-Disclosure Policy for U.S. Attorneys' Offices (see prior Alston & Bird advisories here and here). How the SDNY program will interact with those frameworks will become clearer over time. As expansive as the SDNY program aims to be, it still excludes certain types of misconduct—including, perhaps most notably, Foreign Corrupt Practices Act violations—from its ambit.
Beware the Fine Print
The headline features of the SDNY VSD Program—a faster and more predictable path to declination, fewer disqualifying aggravating factors, and the absence of monitors or criminal penalties—make the program appealing to potentially eligible companies. Those benefits, however, come with substantial and novel obligations. In addition to incorporating the familiar cooperation and remediation requirements found in prior DOJ self‑disclosure programs, the SDNY VSD Program introduces significant new obligations, including a three-year self-reporting requirement and affirmative duties to police aspects of employee conduct, statements, and testimony in an investigation that may be difficult to observe, assess, or control in practice.
These requirements introduce uncertainty around how compliance will be judged, by whom, and against what benchmarks, and create risk that a company’s eligibility for declination could turn on unilateral prosecutorial judgments and investigative dynamics that are well beyond the company’s control.
Prompt Detection Gives Companies Options
Successfully navigating this evolving corporate criminal enforcement landscape will depend on companies’ ability to quickly detect and investigate potential misconduct. This requires meaningful, risk-tailored compliance and legal investment, including reviewing and enhancing policies, procedures, and controls to ensure they are optimized to identify abnormalities and areas for investigation early, and making sure internal reporting channels are monitored, reviewed, and exploited for maximum informational awareness and response.
More Corporate Criminal Enforcement Is Coming
The SDNY’s announcement of this policy leaves little doubt that corporate criminal enforcement remains a DOJ priority. The program makes clear that SDNY is seeking to increase corporate self-reporting of potential criminal misconduct overall and to encourage more disclosures to SDNY. Companies should expect SDNY to act on credible evidence of corporate misconduct, and the policy portends an uptick in corporate criminal enforcement.
If you have any questions, or would like additional information, please contact one of the attorneys on our White Collar, Government & Internal Investigations team.
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