This is part 2 of a five-part series with Tom Fox and the FCPA Compliance Report on what to expect concerning regulatory and enforcement issues with the incoming Biden administration.
What can corporations expect to see with regard to the regulatory and enforcement priorities of the Biden administration?
Foreign Corrupt Practices Act Cases
Although the pipeline of Foreign Corrupt Practices Act (FCPA) cases has somewhat lessened, experts believe there will be increased FCPA prosecution and more intense FCPA investigation. While there have been lawyers leaving the Fraud Section and FCPA Unit of the Department of Justice (DOJ), the FCPA Unit has three new hires coming in so there should be plenty of prosecutors to handle any increase in caseload.
Certainly, the time needed to build a case and then bring an action can be lengthy. Yet these cases run in cycles. These cycles often depend upon the focus of the DOJ, whether it is on insider trading, FCPA compliance, or something else. In addition, these cases often spawn spin-offs and provide other kinds of information that allows people to build other cases. The change in administration may result in a bit of a lag, however, as some prosecutors will have a bit of a slow roll with certain investigations that they’re working on because they are concerned about how the current Attorney General or other senior officials might handle those prosecutions.
Unlike in previous years, there were no monitors appointed in any of the record-setting FCPA enforcement actions in 2020. This was partly due to the overall framework of the business-friendly environment under the Trump administration, which was receptive to hearing argument by companies that a monitorship was a huge expense, both in actual dollars and in diversion of resources. However, there has been language in some of the very recent settlements and consent agreements that is almost exactly identical to the language that was in settlements requiring a monitor a few years ago. That’s because monitors serve a purpose: They provide arms and legs on a day-to-day basis to make sure that the promised remediation is actually happening.
Office of the Comptroller of the Currency Enforcement Actions
We next consider some Office of the Comptroller of the Currency (OCC) enforcement actions that involved criticism on the effectiveness of financial institution compliance programs. Based upon these enforcement actions, coupled with the June release of the 2020 update to the Evaluation of Corporate Compliance Programs, it appears that the DOJ is moving towards mandating the effectiveness of corporations’ compliance programs, rather than simply ensuring that entities have a best practices compliance program. Based on this, it’s anticipated that the DOJ is moving toward enforcement actions around effectiveness. This can be viewed as a positive development, especially as a company often does not test the effectiveness of its programs until it runs into trouble.
How should companies react to this proposed change in direction? It might make sense for chief compliance officers or those serving as general counsel to ensure they understand the parameters of their exposure with respect to effectiveness. This involves really understanding exactly what best practice is with respect to a particular institution and what is necessary to make their compliance program effective.
Working with the DOJ
Those guiding institutions through an ongoing investigation and remediation should keep the following in mind:
- Investigate completely any information received. Information coming just out of the heads of local offices or business units in various far-flung locations where the organization might operate should not be relied upon by default. A chief compliance officer (CCO) needs to develop that evidence and make a good evaluation about what it means.
- Confer with counsel about the advantages of self-reporting. While the decision can be very complicated, take into account the newly enhanced capability for DOJ and other regulators to subpoena documents for U.S. companies that are actually held by subsidiaries overseas. This will make a big difference for DOJ enforcement actions.
To listen to the next episode in the series, please click here.