By Alice Fisher and Prof. Dr. Thomas Grützner
Recent developments include updated DOJ compliance guidance, a continued rise in FCPA proceedings and penalties, and new investigatory approaches in light of the pandemic.
2020 saw many important developments in US white collar enforcement, driven by Administration priorities, business trends and practices, and the realities of COVID-19. The legal and business communities paid particular attention to the US Department of Justice’s (DOJ’s) updated guidance on “Evaluation of Corporate Compliance Programs,” the growing number of contentious Foreign Corrupt Practices Act (FCPA) proceedings (matched by significant penalties), and the impact of the COVID-19 pandemic on investigative strategies by regulators and corporate compliance programs. Now, with the United States transitioning to a new administration, it is yet to be seen whether these trends will continue and what other changes may be in store.
DOJ’s Updated Guidance on Evaluation of Corporate Compliance Programs
The DOJ issued a number of updates to its guidance in recent years, providing companies and the defense bar with additional transparency into the US government’s priorities and expectations. In 2020, the DOJ and US Securities and Exchange Commission (SEC) issued an updated FCPA Resource Guide (which largely codified well-established policy, case law, and enforcement updates); and in June 2020 the DOJ issued updated guidance for prosecutors evaluating corporate compliance programs. The updated guidance includes the following key enhancements and clarifications. For more information, see this Latham Client Alert.
Effective Implementation: This update indicates that the DOJ continues to expect that companies effectively implement their compliance programs. In particular, these programs will need to be adequately resourced. The DOJ stresses that it will scrutinize a company’s compliance program effectiveness, and it encourages companies to conduct their own self-assessments.
Use of Technology and Data Analytics: The updated guidance specifically identifies leveraging technology and data analytics as a best practice for companies seeking to have a best-in-class corporate compliance program. In this way, the guidance encourages companies to evaluate and monitor their compliance programs in real time to detect red flags, patterns, outliers, or trends that could be indicative of improper conduct— with a particular focus on risks related to third parties. Separate from the DOJ’s update guidance, SEC officials have stated that companies of all sizes should be looking for ways to introduce data analytics into their compliance programs to help ensure their effectiveness.
Targeted Training: The DOJ’s new guidance recommends focused and targeted trainings that are more digestible to employees. Such programs should provide opportunities for real-time questions and answers, and they should also take into account prior compliance issues impacting the company or the company’s industry.
Post-M&A Diligence and Integration: The DOJ update underscores the importance of M&A pre acquisition and post acquisition diligence and investigation in the anti-corruption area. Although this has long been a best practice and government expectation, the new guidance discussed how acquirers should consider risk-based, post-merger audits to assess whether the target company has underlying corruption issues — in which case, they should work to ensure that such issues are remediated as soon as possible.
Anti-Corruption Cooperation: For several years, the DOJ has increased its cooperation with foreign law enforcement in anti-corruption matters. Concurrently, the DOJ has further developed its understanding of the impact of foreign laws on FCPA compliance programs and has increasingly acknowledged the need to consider foreign law.
Developments in FCPA Litigation
FCPA enforcement continues to be a priority for the SEC and DOJ, and we continue to see extremely high financial penalties for corporate bad actors – a trend we expect will only continue.
In recent years, the DOJ and the SECSEC have also increased their focus on bad acting individuals, and have brought an increased number of cases against individuals for FCPA infringements. In comparison to FCPA enforcement involving companies, these cases are more frequently tried in federal court and – as a result –more frequently provide a forum for the actual testing of legal issues.
For several years, the DOJ and SEC have increased their cooperation with foreign law enforcement in anti-corruption matters, with nearly all recent anti-corruption cases involving cooperation between several law enforcement bodies across the globe. Concurrently, the DOJ has further developed its understanding of the impact of foreign laws on FCPA compliance programs and has increasingly acknowledged the need to consider foreign law.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has in no way diminished US regulators’ interest in or ability to pursue white collar actions, including FCPA cases. The regulators continue to issue subpoenas, demand witness interviews and testimony, and negotiate resolutions. However, the pandemic has certainly impacted how such investigations are conducted. For example, the DOJ and SEC are carrying out interviews, testimonies, and oral arguments using remote telecommunications software. And, despite these adaptations, investigations often take longer due to complications accessing data or interviewing witnesses — a fact that the SEC and the DOJ have generally come to understand.
We believe that white collar enforcement against corporations will continue to be active in the new Biden Administration. The DOJ has prioritized FCPA enforcement for over 15 years, and it will likely remain a continued area of focus. The DOJ is resourced to continue pursuing these cases, with specific task forces, experienced line prosecutors, and the support of agents in the FBI and other law enforcement agencies. And as discussed, the DOJ will also further collaborate with counterparts at non-US regulatory agencies on complex, multijurisdictional matters.
We can anticipate certain trends are likely to continue and some new ones will undoubtedly emerge under the new Administration. For example, it is expected that enforcement in the life sciences space will remain a focus are — both in the context of the FCPA (which has long focused on life sciences), as well as general healthcare fraud and other regulatory areas. But other focus areas such as fraud relating to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided financial relief during the early days of the pandemic and Anti Money Laundering investigations will likely experience an uptick. Sanctions enforcement, intellectual property, financial crimes, crypto currency, and securities all appear ripe for enforcement in 2021 and beyond – and companies and the defense bar should closely monitor developments in the white collar space under the new Administration.
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