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336 articles for Enforcement Trends and FCPA Resolutions

Latest SEC Sweep of Off‑Channel Communications Both Befuddles and Turns Up the Heat on Investment Advisers

In its ongoing sweep on electronic communications, the SEC’s Division of Enforcement is increasingly scrutinizing recordkeeping obligations under the Investment Advisers Act of 1940. The regulator recently announced settlement orders with total penalties exceeding $81 million against five broker-dealers, seven dually registered broker-dealers and investment advisers, and four affiliated investment advisers. The charges, according to the SEC’s February 9, 2024, press release, were “for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications.” This article summarizes the key features of the orders and provides insights from industry experts on where the enforcement sweep fits in the context of previous efforts to regulate off-channel communications, the risk that excessive enforcement efforts will dilute the SEC’s message, the questionable impact of self-reporting and how firms should proceed next. See “SEC Charges 11 More Wall Street Firms With Widespread Records Failures” (Sep. 13, 2023).

The DOJ Announces Intention to Launch Whistleblower Program: What Does It Mean for Whistleblowers?

A sweeping whistleblower program, announced by senior DOJ officials in March 2024, means whistleblowers at unlisted U.S. companies may now be eligible for monetary rewards, but what those rewards will look like may leave some whistleblowers unsatisfied. The Anti-Corruption Report spoke to experts in the field – some who represent corporations and some who represent whistleblowers – to understand what this new program will mean for those seeking rewards for blowing the whistle. This second article in a two-part series considers what the program will look like for whistleblowers, including limitations on eligibility and payment amounts. Part one explored what the program will look like at the governmental level. See “SEC and CFTC Received Record Number of Whistleblower Tips and Made a Record Award in 2022” (Feb. 15, 2023).

New Russia Restrictions: International Cooperation and Risk Mitigation

U.S. agencies teamed up to impose new restrictions on hundreds of entities associated with Russia on February 23, 2024. As a result, American companies with possible exposure face rising due-diligence needs. This second article of a two-part series summarizes our discussion with several experts in the field, focusing on how cooperation among jurisdictions increases risks and what compliance steps companies should be taking to mitigate those risks. Part one explored the agencies’ latest measures and collaborative approach, targeted industries, and the U.S.’s focus on other countries. See our three-part sanctions 101 series: “How Sanctions Regimes Work” (Aug. 3, 2022), “Their Impact on Private Fund Investors and Investments” (Aug. 17, 2022), and “How to Comply With Them” (Sep. 14, 2022).

Money Laundering, Bank Secrecy and Sanctions Regulators Expand Remits

U.S. government agencies are expanding their remits, crossing traditional dividing lines, collaborating and even competing as they pursue anti-money laundering, Bank Secrecy Act and sanctions issues, judging by 2023's developments. The year saw executive enforcers turning to Congress for more power, and an executive order that made foreign financial institutions liable for certain transactions related to export-control, even without a U.S. nexus. This article distills those and other related policy and enforcement insights shared during a recent Gibson Dunn webinar. See “Knowing Your Customer’s Customer? Sanctions and Tri-Seal Guidance Heighten Expectations on Companies” (Nov. 8, 2023).

The DOJ Announces Intention to Launch Whistleblower Program: What Will It Look Like?

Unlisted U.S. companies must modify their voluntary self-disclosure calculations in 2024, when a new pilot program to reward whistleblowers increases the likelihood that the DOJ will uncover violations first. Earlier this month, Deputy Attorney General Lisa Monaco revealed the start of a “90-day sprint to develop and implement a pilot program.” Nicole Argentieri, now Principal Deputy Assistant Attorney General, said the program will reward providers of “original, nonpublic, truthful information.” The Anti-Corruption Report spoke with experts at Whistleblower Partners, Miller & Chevalier, Akin, Holland & Knight, Phillips & Cohen and Manatt to understand how the pilot program will change the whistleblowing landscape. This first article of a two-part series examines how the program will work at the governmental level. Part two will discuss what it means for whistleblowers, including who will be eligible to receive awards – and how big they could be. See “SEC and CFTC Received Record Number of Whistleblower Tips and Made a Record Award in 2022” (Feb. 15, 2023). 

New Russia Restrictions: Agency Cooperation and Industry Focus

U.S. agencies teamed up to impose new restrictions on hundreds of entities associated with Russia on February 23, 2024. Companies with possible exposure to such entities face rising due-diligence needs following the measures involving the Departments of the Treasury, Commerce and State. Makers of components, technology or software, and financial institutions are among those that need procedures and employees in place to navigate restrictions. With insights from partners at Ropes & Gray, Perkins Coie, Foley & Lardner and Steptoe, this first article of a two-part series on the new restrictions explores the agencies’ latest measures and collaborative approach, targeted industries and the U.S.’s focus on other countries. Part two will discuss international cooperation and suggested compliance steps. See “U.S. Sanctions Against Russia Expand to Target Foreign Financial Institutions” (Feb. 14, 2024).

Understanding and Mitigating Risk of Organizational Conflicts of Interest for Government Vendors

Companies advising the U.S. government on procuring a product or service, and then bidding to be the actual provider, may run afoul of the rules on organizational conflicts of interest. Defense and technology are among the most affected sectors. With a late 2022 law that started an 18‑month clock, rules may get tighter soon. Companies should also remember restrictions on hiring former government employees while seeking public contracts. This article distills insights shared in educational sessions at a recent Society of Corporate Compliance and Ethics conference by experts from Ward & Berry, Seyfarth Shaw and George Washington University. See “Is the Procurement Collusion Strike Force a New Frontier for Cartel Enforcement?” (Apr. 15, 2020).

Navigating the New FinCEN Beneficial Ownership Reporting Regime

On January 1, 2024, a new beneficial ownership reporting rule (Rule) issued by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network took effect. The Rule will affect a broad range of businesses, from startups to established entities, and creates particular challenges for investment management firms, noted Seward & Kissel partner Patricia A. Poglinco in a recent program devoted to the Rule. Poglinco, who moderated the discussion with fellow partners Sophia A. Agathis, Noelle Indelicato and Danielle Lemberg, discussed the key components of the Rule, including which entities are subject to it, who is a “beneficial owner,” what information companies are required to report and the practical implications of the Rule for fund managers. This article synthesizes the key takeaways from the program. See “Progress and Challenges in Implementation of Anti-Money Laundering Act of 2020” (Jun. 21, 2023).

Fewer Individual Charges and More Focus on Third Parties in 2023’s FCPA Enforcements

Individuals being charged in FCPA enforcements have declined in recent years, even as the numbers of corporate enforcements have climbed, but this may change with the recent passage of the Foreign Extortion Prevention Act. Meanwhile, FCPA cases are increasingly focused on third-party intermediaries, Morrison Foerster’s 2023 FCPA Year in Review found. Another recent report, the Year in Review 2023 published by the Fraud Section of the DOJ’s Criminal Division, offered key details on FCPA matters. This article discusses significant trends and findings from both reports, including helpful data on what cooperative or remedial behaviors most often win companies credit when it comes to penalties. See “FCPA Enforcement, Changes in 2023 Foretell a Busy Year Ahead” (Jan. 17, 2024).

SAP’s $220‑Million Settlement Offers Clues on Compliance Expectations

German software company SAP SE recently entered into a three-year deferred prosecution agreement with the DOJ. The case is the DOJ’s second coordinated resolution with South African authorities in just over a year. It is also the second time that SAP has been recognized for its cooperation and remediation, which, according to Acting Assistant AG Nicole M. Argentieri, was incentivized by the DOJ’s coordinated international efforts and its corporate enforcement policies. This article examines the SAP case and offers insight into where regulators are looking next to incentivize companies to be good citizens, with insights from Withersworldwide, Miller & Chevalier, Davis Polk and Compliance Systems Legal Group. See “Gartner’s Settlement for FCPA Violations in South Africa Raises Important Issues” (Jun. 21, 2023).

U.S. Sanctions Against Russia Expand to Target Foreign Financial Institutions

The U.S. crackdown on Russia’s purchases of military materials entered a more comprehensive phase in December 2023 with Executive Order 14114 (EO). Under the EO, effective exclusion from the U.S. financial system is now the penalty for financial institutions, in whatever country, that facilitate such transactions or otherwise continue to host accounts for entities and individuals sanctioned for those purchases. Expected to be enforced in a considered, inter-agency manner, the EO will make life harder for third-country institutions hoping to maintain relations both with the U.S. and its global foes. This article explores the EO’s impact with insights from Perkins Coie, Akin and Morgan Lewis. See “Measures Against Russia Pose Serious Compliance Challenges” (Sep. 27, 2023).

Evolving Anti-Corruption Laws in Latin America

Companies operating in Latin America have faced evolving anti-corruption laws in the last few years, with Chile, at the dawn of 2023, implementing an update to legislation that was the first in the region. International companies are often required to deal with the intersection of global regulations. Sometimes actual enforcement by Latin American national governments has trailed behind corporations’ own activity in audits and investigations. This article distills insights offered by Guillermo Jorge, a partner at Bruchou & Funes De Rioja, in a webinar hosted by TRACE, on the current state of anti-corruption regulation and enforcement in several Latin American countries, and how multinational corporations working there can navigate anti-corruption risk exposure. See “Conducting Effective Third-Party Due Diligence in Latin America” (Mar. 1, 2023).

The Foreign Extortion Prevention Act: Key Changes to U.S. Anti-Corruption Regime Reverberate Well Beyond America’s Borders

The signing into law of the Foreign Extortion Prevention Act (FEPA) on December 23, 2023, means that, for the first time, American law directly criminalizes a foreign government official’s acceptance of a bribe. While the FEPA focuses on the official’s conduct, it may significantly affect individuals and entities that do business with foreign governments. In this guest article, MoloLamken partners Eric R. Nitz and Walter H Hawes IV look at the new law’s scope, jurisdictional challenges and application to foreign officials, and discuss corporate compliance and practical enforcement issues. See “FCPA Enforcement, Changes in 2023 Foretell a Busy Year Ahead” (Jan. 17, 2024).

U.K. Penalizes Morgan Stanley for Lax Electronic Communications Practices

In a proceeding in late 2023, the U.K.’s Office of Gas and Electricity Markets determined that Morgan Stanley & Co. International plc (MSIP) had violated recordkeeping regulations applicable to trading in the energy markets by failing to record and retain employees’ WhatsApp messages. To resolve the matter, MSIP agreed to pay a penalty of £5.41 million. This settlement is the first time a fine has been issued in the U.K. for failure to record and retain electronic communications relating to trading in wholesale energy products. This article details the relevant regulatory regime and MSIP’s violations. See “Messaging Apps Come Under Increasing Regulatory Scrutiny” (Jun. 7, 2023).

FCPA Enforcement, Changes in 2023 Foretell a Busy Year Ahead

Data analytics, cross-border cooperation, extensive new guidance, a notable change in leadership and increased enforcer activity headlined the year in FCPA enforcement. Expectations for 2024 include an increased use of data to kick off new investigations, first-time prosecutorial applications of new legislation on foreign extortion, and a “material” increase in corporate resolutions. Such were some of the insights offered by Davis Polk partner Daniel S. Kahn in a year-in-review discussion hosted by TRACE. See “Reading the Regulators: Shifts in FCPA Enforcement” (Aug. 16, 2023).

Navigating SEC Cybersecurity Enforcement in a Post-SolarWinds World

The SEC has been transparent about how to avoid getting on the wrong side of its cybersecurity-related regulations since wading into the cybersecurity enforcement fray. Its enforcement approach became yet clearer on October 30, 2023, when it sued IT vendor SolarWinds Corporation (SolarWinds) and its chief information security officer Timothy G. Brown for making materially false and misleading statements to SolarWinds’ investors about the company’s cybersecurity protocols. In this guest article, Crowell & Moring partner Jennie Wang VonCannon examines the SEC’s complaint against SolarWinds and the company’s blog post in response, and discusses five principles that govern the agency’s enforcement decisions, providing practical insights to help public and private companies navigate the increasingly fraught regulatory landscape around cybersecurity. See “Former SEC Officials Discuss Aggressive Enforcement Climate” (Oct. 25, 2023).

Resurgence of Monitorships Among New Year’s Challenges for AML Enforcement and Compliance

As 2024 begins, the resurgence of the monitorship model in enforcement practices is among the evolving challenges for professionals dealing with Bank Secrecy Act and anti-money laundering compliance. Fresh regulatory hurdles include scrutiny of broker-dealers, a possible rule on financial institutions’ sharing of suspicious activity reports with foreign affiliates and the growing prominence of whistleblowers. The Corporate Transparency Act, effective as of January 1, 2024, and new developments in artificial intelligence are also introducing questions. This article distills insights that King & Spalding partners Olivia Radin and Matthew Biben shared in a recent webinar regarding AML developments, risks and enforcement activity from 2023 and what to expect in the coming year. See “Progress and Challenges in Implementation of Anti-Money Laundering Act of 2020” (Jun. 21, 2023).

Newly Signed Foreign Extortion Prevention Act Complements FCPA

The Foreign Extortion Prevention Act (FEPA), which took effect upon being signed by President Joe Biden on December 22, 2023, brings new challenges and opportunities in anti-corruption compliance and enforcement. It makes it a federal crime for foreign officials to request or receive bribes from American businesses in exchange for favors while doing business in the foreign country. It provides a complement to the FCPA, which outlaws U.S. companies bribing foreign officials. This article examines the changes that the FEPA will introduce, with insights from partners at Davis Polk, Ropes & Gray and Morrison Foerster. See “Reading the Regulators: Shifts in FCPA Enforcement” (Aug. 16, 2023).

Lifecore Biomedical Declination Exemplifies 2023’s Self-Disclosure Trend

Toward the end of an eventful year in FCPA enforcement, November saw the DOJ issue a Declination Letter to Lifecore Biomedical, Inc. The DOJ said it would not prosecute Lifecore for FCPA violations committed by Yucatan Foods L.P., a company it acquired, because Lifecore satisfied multiple factors under the Corporate Enforcement Program, the updated Corporate Enforcement and Voluntary Self-Disclosure Policy, and the Safe Harbor Policy. Multiple times this year, DOJ officials have encouraged companies to self-disclose misconduct to earn benefits under revised policies. Against that backdrop, this article draws lessons from the Lifecore declination and two other 2023 declinations, with insights from Withersworldwide, Steptoe & Johnson, Hughes Hubbard & Reed, Womble Bond Dickinson and Mololamken. See “Reading the Regulators: Shifts in FCPA Enforcement” (Aug. 16, 2023).

Coming Year’s FCPA Enforcement Developments Build on Eventful 2023

Anti-corruption regulators are boosting international cooperation, intensifying the use of data analytics, and treating issuers and non-issuers more evenly. These are some stand-out enforcement trends highlighted from the government and advisory side at the turn of the year. Acting Assistant AG Nicole M. Argentieri said a new International Corporate Anti-Bribery initiative team will expand partnerships, and she emphasized fast and proactive self-disclosure and cooperation as factors leading to discounted penalties. The DOJ will step up its use of data analytics in FCPA matters and expects companies to do so too. Reviewing 2023’s developments and what to expect in 2024, this article distills insights from Hughes Hubbard & Reed, Miller & Chevalier, Davis Polk and Kona AI while summarizing Argentieri’s points. See “Assistant AG Polite Discusses Declinations in Cases With Aggravating Circumstances and Revised ECCP” (Apr. 12, 2023).

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Spotlight on Trailblazing Women

To mark International Women’s Day 2024, women editors and reporters of ION Analytics interviewed outstanding women in the industries and jurisdictions we cover. In this part, Jill Abitbol, Managing Editor of the Cybersecurity Law Report and Anti-Corruption Report, features notable women in data privacy, cybersecurity, white collar defense, compliance and anti-corruption law, including Christina Montgomery, Leslie Shanklin, Palmina Fava, Alexandra Ross and Lucinda Low. Enjoy reading their inspiring remarks here.