DOJ Continues to Incentivize Self-Disclosing Misconduct, But When and Where May Be Complicated: Takeaways From the SDNY’s Corporate Enforcement and Voluntary Self-Disclosure Program

On February 24, 2026, the U.S. Attorney’s Office for the Southern District of New York (SDNY) announced a Corporate Enforcement and Voluntary Self-Disclosure (VSD) Program “for illegal activity involving fraud and financial misconduct affecting market integrity,” aimed at incentivizing companies to quickly report to the SDNY potential wrongdoing and cooperate with law enforcement’s investigation of the conduct.

The SDNY VSD Program marks the first corporate self-disclosure policy promulgated by any of the country’s U.S. Attorney’s Offices. It follows the U.S. Department of Justice (DOJ) Criminal Division’s existing Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), while introducing some significant differences from that program tailored to the SDNY’s financial crimes docket, including a streamlined path to a declination of prosecution. Specifically, the SDNY VSD Program offers a conditional declination letter within two or three weeks after a company makes a qualifying self-disclosure of wrongdoing. This conditional declination becomes final only when a company complies with all terms of the VSD Program, including full cooperation, remedial actions, and making restitution to any victims. The SDNY VSD Program prescribes consequences for those companies that do not make a self-disclosure, including a guilty plea or a deferred prosecution agreement with monetary penalties. In these respects, the SDNY VSD Program reflects some of the enforcement priorities outlined in DOJ leadership’s May 2025 memorandum directing the Criminal Division to revise the CEP to provide stronger incentives for companies who voluntarily self-disclose misconduct and cooperate with government investigations.

Given the SDNY's prominence as one of the leading venues for financial crimes prosecution in the U.S., its newly-announced VSD Program has significant implications for any domestic or foreign company operating in key sectors including securities, commodities, digital assets, and financial services. Its announcement, alongside other DOJ guidance, including the Criminal Division’s CEP, raises questions for companies confronted with allegations of misconduct and decisions regarding whether, when, and to whom to disclose, if appropriate.

Overview of the Program

What conduct is eligible? To be eligible for a declination under the SDNY VSD Program, the self-reported conduct must involve (i) fraud by a company or individual tied that entity; (ii) fraud involving securities, commodities, or digital assets; (iii) false statements to auditors or regulators; or (iv) violations of the Securities Exchange Act of 1934, Commodity Exchange Act, and other investment-related laws. “Fraud” is defined broadly to include “all manner of intentionally deceptive conduct, including false statements, forgery, embezzlement, misappropriation, insider trading, spoofing, and market manipulation.”

In contrast, the DOJ Criminal Division’s CEP applies to all criminal matters handled by the Division. Further, DOJ leadership’s May 2025 memorandum identifies ten priority areas for white collar enforcement, including healthcare fraud and federal program and procurement fraud; conduct that threatens national security; material corporate support to foreign terrorist organizations; bribery and money laundering; violations of the Controlled Substances Act and Food, Drug, and Cosmetic Act; and certain crimes involving digital assets.

What must a company do to qualify? In order to qualify under the SDNY VSD Program, a company must meet four conditions:

1. Timely and voluntarily self-disclose the illegal activity. Significantly, the SDNY VSD Program requires that any self-disclosure by a company must be done before the company receives a grand jury subpoena or document request from a law enforcement agency or regulator, or learns of the existence of a government investigation.
   A company will not be disqualified from the benefits of the SDNY VSD program merely because there is public reporting about the illegal activity (provided that there is no disclosure of a government investigation) or because it has previously self-reported the illegal activity to another agency, as opposed to the company’s knowledge of a government investigation. And although a company is also not disqualified for knowing of a whistleblower submission to the company or a government agency, the separate whistleblower programs of various U.S. Attorney’s Offices, including the Eastern District of New York’s Whistleblower Policy, the Northern District of California’s Whistleblower Pilot Program, and the SDNY’s Whistleblower Pilot Program—which encourage individuals (rather than companies) to disclose financial crimes in exchange for potential non-prosecution agreements—still incentivize companies with such knowledge to act quickly, lest the company fail to reach the SDNY before it learns of a government investigation.
2. Provide full cooperation. Importantly, to qualify for the benefits of the SDNY VSD Program, a company must disclose to the SDNY all relevant, non-privileged information; identify responsible individuals and witnesses; share factual findings from internal investigations; promptly produce all relevant documents; highlight materials relevant to individual culpability; make personnel available for interviews or testimony; provide truthful and candid cooperation; refrain from interfering with the government’s investigation; preserve all relevant records across all platforms, including ephemeral messaging applications; refrain from further crimes; consent to disclosures to other federal authorities as deemed appropriate; and, for three years, report credible evidence or allegations of related misconduct.
3. Remedial actions. In addition, the SDNY VSD Program requires that a company (i) commit to remediate the harm caused by the illegal activity before receiving a conditional declination, and (ii) reasonably remediate the harm before receiving final declination. Remediation efforts may include changes to the company’s compliance program or suspending, terminating, or disciplining an employee, officer, agent, customer, investor, or other individual or entity involved in the misconduct.
4. Pay restitution. Furthermore, the SDNY VSD Program mandates that qualifying companies (i) commit to make restitution to all injured parties before receiving a conditional declination, and (ii) pay such restitution before receiving a final declination. Compensation that a company agrees to pay to injured parties through a resolution with a regulator will be credited against the restitution obligation.

What does a company get in return? The SDNY VSD Program sets forth that eligible companies will receive the following benefits in exchange for self-disclosure and full cooperation:

1. Conditional Declination. The SDNY will provide a conditional declination letter that is subject to satisfaction of the above-detailed conditions within two to three weeks of a qualifying company’s self-report. This provides corporate stakeholders with unusually early near-certainty, which may be especially valuable for publicly traded companies managing disclosure obligations. This is a unique feature of the SDNY VSD Program and goes further than the present approach articulated in the DOJ Criminal Division’s CEP, which encourages efficient resolution—whether that be a declination or other resolution forms, such as non-prosecution agreements, deferred prosecution agreements, and guilty pleas—without committing to a particular timeline, or a conditional determination of a declination.
2. Final Declination. After a company satisfies its cooperation and remediation obligations and restitutes losses, the SDNY will issue a final declination letter protecting the company and its affiliates (but not any individuals, even if affiliated with the company) from criminal prosecution. Further, the SDNY will bring the company’s self-reporting, cooperation, and remediation to the attention of other prosecuting or federal authorities.
3. No Financial Penalties. Whereas companies that cooperate with DOJ may benefit from fine reductions, the SDNY will not seek or require a criminal fine or forfeiture at all, provided that the company makes “reasonable best efforts” to provide prompt and full restitution.
4. No Monitors. Both the DOJ Criminal Division and SDNY compliance regimes currently disfavor the imposition of monitors in connection with corporate resolutions. But while DOJ leadership has clarified that it will still require independent compliance monitors in certain circumstances—such as when a company cannot be expected to implement an effective compliance program on its own—the SDNY provides that a company with a final declination will not be required to employ or be supervised by a monitor under any circumstance.

What will disqualify a company? The existence of specific aggravating circumstances will render a company ineligible for a declination under the SDNY VSD Program. Such circumstances include any nexus to terrorism, sanctions evasion, foreign corruption, sex trafficking, human trafficking, international drug cartels, slavery, forced labor, or physical violence.

Notably, certain factors that render a company ineligible under the DOJ Criminal Division’s CEP—such as 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 leaders—are explicitly carved out of the SDNY’s aggravating circumstances.

What happens if a company does not self-report? Companies that choose not to self-report illegal activity under the SDNY VSD Program will be subject to presumptions (i) in favor of a guilty plea, deferred prosecution agreement with a monetary penalty, or non-prosecution agreement with a statement of facts and monetary penalty (rather than a declination of prosecution); and (ii) against the issuance of a declination.

Key Takeaways

The SDNY VSD Program represents a departure from the CEP articulated by the DOJ Criminal Division, envisioning faster potential clarity on declination and significant protections for companies facing allegations of financial crimes. However, the benefits are available only to those who move swiftly, cooperate fully, and remediate comprehensively. In all circumstances, decisions around self-disclosure require a careful factual analysis and determinations of the risks and consequences of any disclosure.

Know where to report. The SDNY VSD Program operates in parallel with DOJ’s CEP. The latter suggests a broader array of potential criminal activity—including some of those covered by the SDNY VSD Program—but declination is only one of many forms of resolution that DOJ may elect to pursue. Companies should be aware of these differences in deciding where to self-report.

Act quickly and proactively. The SDNY VSD Program is premised on speed—as noted above, disclosure to the SDNY must come before any government investigation or grand jury subpoena. Companies that discover potential misconduct should engage counsel immediately to assess whether a self-report is appropriate in the circumstances, as well as the appropriate forum to make such a disclosure.

Assess eligibility carefully. The aggravating circumstances that render a company ineligible are specific. Corporate counsel should evaluate at the outset whether any apply, particularly whether there is any nexus to sanctions, terrorism, or trafficking.

Restitution is central. The SDNY’s no-fine outcome is expressly conditioned on “reasonable best efforts” to provide prompt and full restitution. Companies should be prepared to quantify and address harm to injured persons from the outset.

Individual exposure remains. Declinations do not protect employees or officers. Any self-disclosure strategy must account for the implications for individuals involved in the misconduct.

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Goodwin’s Government Investigations, Enforcement & White Collar Defense lawyers will continue to monitor enforcement developments such as those described here and their potential implications. Please contact the Goodwin team with any questions related to these DOJ policies and if we can assist you with counsel in responding to any inquires or investigations.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.