Summary
The U.S. Attorney’s Office for the Southern District of New York (the SDNY) recently announced a novel voluntary self-disclosure program (the Program) for companies to report misconduct involving financial crimes. The Program enhances the incentives for a company to report misconduct to the SDNY by promptly promising the company that the SDNY will provisionally decline prosecution. At the same time, the Program makes clear that companies who do not self-report potential misconduct are far likelier to face harsh consequences—such as guilty pleas, deferred prosecution agreements, non-prosecution agreements, and hefty financial penalties—if the government determines that criminal conduct occurred.
The Upshot
- The Program—which is directed at a broad range of financial frauds—provides a “clear, agreed-upon path” for a company to receive a declination of prosecution. The Program entices a company to self-report by promising a conditional declination letter within two or three weeks after a qualifying self-disclosure. That conditional declination will become final if the company complies with the terms of the Program, which include continued cooperation, remediation, and restitution to victims. A company that receives a declination will also not be required to pay criminal fines or be subject to corporate monitorships.
- To make a qualifying self-disclosure, the company must report the misconduct before it learns about a government investigation. Importantly, a company is not disqualified from a declination if a government investigation is already underway at the time of the self-disclosure, so long as the company is not aware of that investigation when the disclosure is made.
- For those companies that do not self-report, the Program promises harsh consequences: a guilty plea, a deferred prosecution agreement with a monetary penalty, or a non-prosecution agreement with a statement of facts that likely involves an admission of misconduct.
The Bottom Line
The SDNY Program offers new incentives for companies to provide self-disclosures to the SDNY by providing a clear path toward a lenient outcome, all while promising harsh consequences for those who do not self-report. Making such disclosures, however, remains an extremely complicated and difficult decision and often carries significant risks. Companies that learn of potential misconduct are advised to consult with counsel as early as possible and conduct a thorough investigation to determine whether disclosure to the government is appropriate.
The U.S. Attorney’s Office for the Southern District of New York recently unveiled its Corporate Enforcement and Voluntary Self-Disclosure Program for Financial Crimes (the Program). While the Program is generally consistent with the DOJ’s Corporate Enforcement Voluntary Self-Disclosure Policy (CEP) announced in 2025—including the CEP’s promise of declination for certain companies that voluntarily self-report misconduct—the SDNY’s Program breaks new ground in several important ways.
What kinds of misconduct does the Program apply to? The Program applies to a broad range of financial frauds, a term the Program uses “expansively” to include “all manner of intentionally deceptive conduct.” The Program applies to, for example, corporate fraud, securities and commodities fraud, and fraud in connection with digital asset offerings. The Program does not, for example, apply to violations of the Foreign Corrupt Practices Act, public corruption offenses, national security crimes, or violent crimes.
What does a company need to do to be eligible for a declination? While, as discussed below, eligibility is in certain ways broader than traditional self-disclosure programs, the SDNY will expect a great deal from a company seeking a declination.
- Disclosures must be timely and voluntary. Disclosures must be made before receiving a subpoena or information request from a government agency, and before the company learns about a government investigation involving the misconduct.
- The company must continue to provide fulsome cooperation with the SDNY. Full cooperation includes, among other things: identifying individuals involved or responsible for the misconduct; sharing non-privileged factual information from internal investigations; making employees available for interviews, and making best efforts to ensure those employees cooperate fully with the government; and for a period of three years, bringing to the SDNY’s attention “all credible evidence or allegations of criminal conduct by the company or any of its employees that relates to violations of U.S. laws.”
- The company must commit to remediation. Remediation can include making changes to a company’s compliance program and terminating employees or agents involved in the misconduct.
- The company must pay restitution to victims. The Program requires restitution to “all injured parties” that qualify as victims under federal restitution laws.
- There can be no aggravating circumstances. Under the Program, aggravating circumstances consist of “any nexus to terrorism, sanctions evasion, foreign corruption, sex trafficking, human trafficking and smuggling, international drug cartels, slavery, forced labor, or physical violence, including the knowing or reckless financing of these activities or laundering of funds in support of these activities.”
What else does the Program promise aside from a declination? In addition to providing a clear pathway to declination, the Program promises that a company will not be required to pay financial penalties, so long as the company makes full restitution to injured parties. The Program also promises that an eligible company will not be subject to a corporate monitorship.
While the Program only binds the SDNY and not any other federal or state law enforcement agency, the SDNY promises to bring to the attention of those other government agencies a company’s cooperation and self-disclosure. Importantly, the Program does not protect individuals from prosecution. Indeed, the Program encourages companies to identify bad actors who are responsible for criminal conduct, who may well be prosecuted as a result of the company’s cooperation.
What makes the SDNY’s Program different? While it remains to be seen how the Program will work in practice, there are several features of the Program that appear to go farther than the CEP and traditional self-disclosure programs.
- The Program promises a conditional discharge letter at the outset. Under traditional voluntary self-disclosure policies throughout the country, a company that self-discloses misconduct to the government often does not know whether it will receive a declination for months, if not years, after the disclosure is made. For corporate decision makers, that uncertainty often weighs against making self-disclosures. The SDNY Program aims to address that uncertainty by providing companies with a conditional declination letter at the outset of an investigation.
- The SDNY Program expands the circumstances under which a self-report qualifies. Under Main Justice’s CEP, except in circumstances involving a whistleblower, the misconduct must be unknown to the DOJ. The SDNY Program is notably more expansive than the CEP because a company can qualify even if an investigation is underway. Under the Program, a self-disclosure qualifies so long as it is made before the company learns of the existence of a government investigation. Self-disclosures can qualify even if there has been public reporting of the misconduct, so long as that reporting does not discuss the existence of a government investigation. (Note: Under both the CEP and the SDNY Program, timely self-disclosures made after a whistleblower has filed a report with a government agency are not disqualifying).
- The seriousness and pervasiveness of the offense are not disqualifying. Under the Program, if the misconduct is pervasive throughout the company, is severe, or involves senior leadership, the company will not be disqualified from receiving a declination. Traditionally, there would be a presumption against declinations in cases with pervasive fraud or fraud committed at the C-suite level.
What does the SDNY say about companies who do not self-report? Those companies “will face significant corporate consequences,” according to U.S. Attorney Jay Clayton. Companies that do not self-report will face a presumption that a “guilty plea, deferred prosecution with a monetary penalty, or non-prosecution with a statement of facts and monetary penalty would be appropriate to address the company’s conduct.”
What does the SDNY Program—and the DOJ’s focus on self-disclosure more broadly—mean for companies? Companies must continue to invest in their compliance programs and ensure that they remain robust and tailored to risks in their business. When potential misconduct comes to light, companies should promptly consult with counsel, investigate, and begin remediation.
Even with the incentives that the SDNY and the DOJ are promising in return for early self-disclosures, self-disclosure decisions remain fraught with risk and require careful analysis of the facts, and the financial and collateral consequences of the disclosure. Ballard Spahr’s White Collar Defense and Investigations Group has robust experience in advising public and private sector clients in navigating these issues. Please contact us if we can assist you with advice and counsel regarding such matters or in responding to active inquiries, investigations, or proceedings.
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