Expect more FCPA enforcement: Biden administration views corruption as national security interest | Allen & Overy LLP
On December 6, 2021, the Biden administration announced a radical new anti-corruption strategy.
The “United States Anti-Corruption Strategy” (SCC) follows President Biden’s statement this summer, in a June 3, 2021 memorandum, that anti-corruption is a “fundamental security interest. national of the United States ”. This strategy is even more striking in the context of the multiple announcements by the Department of Justice (DOJ) made throughout the fall to “increase resources” for law enforcement by businesses, revise its enforcement policies. criminal laws and adopt a new position on recidivism in the workplace. Along with the CSC, the Biden administration describes its ambitious approach to tackling corruption using multiple parts of the US government. The strategy calls for coordinating intelligence sharing between U.S. government departments and agencies and foreign partners, increasing transparency of U.S. financial laws, and increasing corporate criminal liability. This series of recent political developments – and their integration into the national security agenda – makes it clear that the Biden administration is serious about leading efforts to “prevent and combat corruption at home and abroad.”
It was reported that of the nine investigations initiated under the Foreign Corrupt Practices Act (FCPA) disclosed by state-owned enterprises in 2021, all nine involved companies headquartered outside the states. -United. non-American companies. For our global customers, this underscores the importance of implementing an effective compliance program that can withstand the scrutiny of aggressive FCPA enforcement. In other words: We anticipate an increase in FCPA enforcement actions, so now is the right time to review your compliance programs and make the necessary improvements.
Here, we highlight key elements of SCC and related developments that are likely to affect the company’s operations in the future.
Coordinated information sharing
Under the CPS, the US government will devote additional resources to “synchronizing anti-corruption work as a core domestic and foreign policy priority.” The US government aims to improve its ability to collect, analyze and share corruption-related intelligence among its departments and with foreign governments and non-government partners in order to better “map corruption networks and related products” and develop a more complete understanding of the “image threat.”
To this end, the U.S. government is increasing the resources of established anti-corruption groups, such as the DOJ’s FCPA unit, the Treasury Department’s Anti-Corruption Team, and the Agency’s Anti-Corruption Task Force. United States for International Development (USAID). For example, the DOJ onboarded a new Federal Bureau of Investigation (FBI) team in its Criminal Fraud section and expanded its corporate compliance expertise by hiring new hires with significant compliance experience. in the private sector, including those who have served alongside Department of Justice-appointed Corporate Supervisors. From now on, the Commerce Department will establish a new anti-corruption task force, and the State Department will prioritize anti-corruption measures as part of its diplomatic efforts. CSC further envisions that these groups will support “cross-functional teams” to facilitate information sharing.
The U.S. government will also strengthen its ongoing cooperative efforts with foreign governments and law enforcement authorities to increase the number of advice and referrals received from overseas. The SCC anticipates that, through the DOJ, the Department of State and USAID, the United States government will “deepen cooperation and assistance to countries with the political will to make significant anti-corruption efforts. ”, In particular by partnering with countries in the context of joint investigations and prosecutions. The US government will also link government actors and their counterparts at all levels to “foster greater cooperation in the detection, follow-up and referral of corruption cases.” And it’s not just an aspiration, but it happens in practice as David Last, head of DOJ’s FCPA unit, recently noted, references from foreign governments have been “one of the money changers.” game ”in terms of increasing the FCPA investigation pipeline. Since it is time consuming and difficult to obtain evidence abroad through formal challenges, this informal cooperation facilitates the DOJ’s ability to bring more cases.
The Biden administration’s plan for the coordinated collection and sharing of intelligence, both among U.S. departments and with foreign governments, will inevitably provide U.S. law enforcement authorities with more actionable information and increase the number FCPA enforcement actions.
Increased transparency and risks for custodians
The Biden administration recognizes that in order to effectively fight corruption, the U.S. government must, at home and abroad, “combat money laundering, illicit trafficking, and other forms of criminal activity that fuel corruption and allow criminal actors to launder and secure the proceeds of their illicit activities. . To address this issue, the Biden administration will work with Congress to improve US anti-money laundering laws. As part of the SCC, the US will build a ‘beneficial ownership database’ to collect beneficial ownership information for anonymous shell companies, which are often used to hide the proceeds of crime.The Treasury Department will also consider prescribing minimum reporting standards for investment advisers and other equity funds.
The US government is also seeking to expand laws that hold custodians of the financial system, including lawyers and accountants, responsible for potentially complicit wrongdoing. The Biden administration intends to work with Congress to expand criminal laws and increase penalties, including through professional penalties. If successful, these objectives may result in additional due diligence requirements, such as enhanced anti-money laundering and know-your-customer programs, which allow supervisors to better understand the nature and sources of income of their customers. The emphasis the administration places on the responsibility of the caretaker undoubtedly adds a risk to these professions.
Additionally, the Biden administration intends to “implement newly established tools to investigate and prosecute money laundering offenses.” For example, the DOJ extended its subpoena power for certain financial records kept abroad, and the Treasury Department administered a financial reward program to encourage reporting of bank secrecy violations. which are enforced through the Financial Crimes Enforcement Network (FinCEN). As a result, the rigorous application of US anti-money laundering laws may lead to an increase in the number of parallel DOJ investigations into corruption offenses and collateral money laundering offenses.
Corporate criminal liability
Less than two months before the SCC’s announcement, the Biden administration changed DOJ’s policy regarding corporate criminal liability in several ways that could have a major impact – in FCPA cases as well as other enforcement actions by companies. In October 2021, the DOJ announced three major changes to its law enforcement policies:
- When determining how to resolve allegations against companies, prosecutors must now take into account a company’s entire history, both domestic and foreign, including violations of criminal laws (with the exception of the instant violation) that indicate deficiencies in internal controls. Subsequently, the DOJ clarified somewhat that prosecutors will focus on the recency, seriousness and pervasiveness of the previous misconduct, and whether the misconduct is similar in nature to the case at hand. Classes.
- To qualify for the Cooperation Credit, companies must provide DOJ with all relevant non-privileged facts about all those involved or responsible for the misconduct. This is a small, but – in some cases – potentially important, a throwback to the requirements set out in the 2015 “Yates Memo” and the move away from the more recent requirement to disclose only facts relevant to them. persons “substantially involved or responsible” for the misconduct.
- Prosecutors should carefully assess the need for independent corporate auditors, but auditors are encouraged in cases where, during resolution, a company’s program and compliance controls remain untested, ineffective, resourced. insufficient or not fully implemented. This statement appears intended to result in more resolutions involving the appointment of an independent auditor, a significant change from the previous administration.
The Justice Department said changes to the justice handbook in line with this announcement are coming.
In addition, the DOJ appears to be taking more aggressive action against companies that violate the terms of settled cases. The DOJ has announced that companies that violate their deferral or no-prosecution agreements “should expect serious repercussions” and, since October 2021, the DOJ has sued at least three companies for allegedly breaching compliance obligations. provided for in these agreements. While not unprecedented, the allegation of a breach of a settlement agreement has been fairly rare, so the announcement of three potential breaches in just two months proves the DOJ’s seriousness in this regard.
Key points to remember
With the related political developments of the SCC and the DOJ, the Biden administration makes it very clear that the US government intends to muster the resources and tools necessary to “vigorously enforce” the FCPA and related legislative and regulatory regimes. We anticipate an increase in the number of enforcement actions brought against global companies, which stems from increased transparency in the U.S. government and advice and recommendations from foreign governments. We also anticipate an increase in sanctions, including the imposition of monitors.
There are steps businesses can take now to mitigate investigation and enforcement risk:
- Corruption risk assessments tailored to high risk areas of the business;
- Ensure solid diligence and integration of new acquisitions;
- Test controls in the main areas of corruption risk; and
- Test the company’s internal whistleblower and investigation program.