On February 24, the Southern District of New York ("SDNY") announced significant changes to its approach to encouraging self-reporting of corporate misconduct. The update, released as part of the SDNY Corporate Enforcement and Voluntary Self‑Disclosure Program for Financial Crimes, builds on principles U.S. Attorney Jay Clayton has previewed in recent remarks, emphasizing cooperation credit for companies that voluntarily self‑disclose wrongdoing.
A central feature of the updated policy is the incentive structure for voluntary self‑reporting. Companies that disclose potential financial misconduct may receive a conditional declination from prosecution from the SDNY if: (i) the conduct qualifies as a financial crime—which the SDNY defines broadly to include digital asset activity and virtually any form of fraud; (ii) the disclosure is timely and truly voluntary; (iii) the company provides full cooperation; (iv) restitution commitments are made; and (v) no aggravating circumstances are present.
Notably, the SDNY has significantly narrowed what qualifies as an aggravating circumstance, focusing exclusively on the nature of the underlying conduct. Factors such as the seriousness or scope of the offense, recidivism, or involvement of senior management in the misconduct are no longer going to be considered. Instead, aggravating circumstances now center on financial crimes tied to terrorism, cartel activity, sanctions evasion, foreign corruption, and other high risk areas. The explicit inclusion of foreign corruption is especially notable given the Department of Justice’s recent shifts in Foreign Corrupt Practices Act enforcement policy.
While not quite the “corporate get-out-of-jail free card” some media outlets have suggested, the policy marks a meaningful shift in how the country’s preeminent prosecutor’s office for white collar criminal enforcement intends to incentivize self-disclosure in financial crime matters. Accordingly, it still behooves companies to maintain robust internal controls and compliance programs in order to forestall criminal conduct in the first instance.
Companies are well advised to consider the following steps:
- Re-evaluate their existing compliance programs and internal controls to deter misconduct, so as not to have to take advantage of this updated policy. Although specific to the SDNY, it would seem likely that the policy will broaden to the rest of the Department over time. Questions to ask your team: How have we been treating foreign corruption since the enforcement pause by DOJ in March of 2025? Is our compliance program focusing sufficiently on the areas outlined in the policy (e.g., cartel, terrorism, and sanctions evasion activity)? In the event our compliance program detects problems, should we plan to self-report in light of the updated policy?
- Do not ignore signs of potential financial misconduct in hopes that they will never surface, but rather undertake a thorough, timely investigation of potential financial crime issues, with an eye toward voluntarily self‑reporting to the SDNY in exchange for a potential declination. Securities fraud, false statements to regulators or outside auditors, revenue manipulation, and other misconduct that does not fall within the updated aggravating circumstances categories may qualify for conditional declination—provided the underlying investigation is comprehensive, prompt, and accompanied by full cooperation. Work with your external counsel and investigators experienced in dealing with fast-moving, regulator-facing investigations to quickly vet facts and help you assess both the pros and cons of taking advantage of the SDNY’s updated voluntary disclosure program.
After self-reporting, the only thing companies need to worry about is making victims whole and being maximally cooperative, including providing information about who did what,” Nicolas Roos, chief of the SDNY’s Securities and Commodities Fraud Task Force
https://www.semafor.com/article/02/26/2026/sdny-chief-jay-clayton-encourages-companies-to-name-names
