On 2 March 2023, the Deputy Attorney General Lisa Monaco ("DAG") gave a speech at the American Bar Association's 38th National Institute on White Collar Crime and emphasised the U.S. Department of Justice's ("DOJ") focus on combating corporate crime. The overarching theme of the DAG's speech echoed the DOJ's spotlights on compliance and sanctions.In her opening remarks, the DAG referred to the department's policy changes from October 2021 and the launch of the Corporate Crime Advisory Group, which was established to recommend more advances; in fact, based on the Group's input, the DAG announced in September 2022 department-wide policy changes aimed at encouraging corporate compliance. Indicatively, the DAG stated that the department has been turning principles into policies.
Voluntary self-disclosure programme
The first of such transformations is the voluntary self-disclosure programme. For the first time, every U.S. Attorneys’ Offices – and every component that prosecutes corporate crime – has a voluntary self-disclosure programme in place. The unifying factor of these programmes is that, absent aggravating factors, the U.S. government will not seek a guilty verdict where a company has voluntarily self-disclosed, cooperated and remediated the misconduct. Reportedly, even the Criminal Division of the DOJ has revised its pre-existing policy to fall in line with this principle. The enticing example of the DOJ's deferred prosecution agreement with ABB Limited, a Swiss engineering company that self-disclosed for The Foreign Corrupt Practices Act of 1977 ("FCPA") crimes, was also mentioned.
Another interesting announcement was the imminent launch of the DOJ's Pilot Program on Compensation Incentives and Clawbacks. This will aim to shift the financial burden away from suffering shareholders, particularly innocent ones, onto those responsible for the misconduct.
The DAG described the pilot programme as comprising of two initiatives:
- Every corporate resolution involving the Criminal Division will now include a requirement that the company develops compliance-promoting criteria within its compensation and bonus system.
- Under the pilot programme, the Criminal Division will provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers. Interestingly, the DAG pledged that those who pursue clawbacks in good faith but are unsuccessful are still eligible to receive a fine reduction.
After a brief recognition that corporate crime has evolved – the ever popular topic of cryptocurrency – the DAG came to the topic of sanctions – calling them "the new FCPA". Considering that FCPA prohibits the payment to foreign government officials to assist in obtaining or retaining business, the comparison is understandable. The DAG announced that new prosecutors and a newly appointed Chief Counsel for Corporate Enforcement will be joining the National Security Division. The primary target of these additional resources will be to investigate and prosecute sanctions evasion, export control violations and economic crimes. A parallel was drawn between the expanding National Security Division and the Criminal Division, which investigates and prosecutes corporate sanctions breaches.
The DAG's closing remark was an emphasis on individual accountability and its role in corporate compliance – the convictions of Elizabeth Holmes and Sunny Balwani, both convicted of criminal fraud in the infamous Theranos scandal, were given as examples of the department's seriousness.
To further evidence the DOJ's commitment to tackling sanctions evasions and export controls, a Joint Compliance Note on 'Cracking Down on Third-Party Intermediaries Used to Evade Russia-Related Sanctions and Export Controls' (the "Compliance Note") was issued on 2 March 2023, in the first collective effort by the U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), the Department of the Treasury's Office of Foreign Asset Control ("OFAC"), and the DOJ, to raise awareness about enforcement trends, and provide additional guidance to companies on ensuring compliance with U.S. sanctions and export laws.
The Compliance Note highlights the "unprecedented scope and scale" of sanctions and export controls imposed by OFAC and BIS against Russia; efforts which have been matched by the DOJ's own "unprecedented restrictions with equally unprecedented enforcement efforts to aggressively prosecute those who violate U.S. sanctions and export control laws". The DOJ's enforcement efforts are led by Task Force KleptoCapture, an interagency law enforcement task force announced by the Attorney General on 2 March 2022, dedicated to combatting efforts to evade or undermine the U.S. government's response to Russian military aggression.
The Compliance Note focuses on the common tactic being used to evade Russia-related sanctions and export controls, namely the use of third-party intermediaries or transshipment points, and provides helpful warning signs to look out for, recent examples of tactics in use, and guidance to companies on how to ensure an effective, risk-based sanctions and export compliance program.
"To cement a firm foundation for corporate criminal enforcement and reward investments in corporate compliance". The DAG's message is clear: proactive compliance is not only encouraged, but expected. Falling short of this expectation will be punitive. The DOJ has introduced opportunities for corporations to 'come clean', clawback initiatives to reward those who do and an encouragement towards detecting wrongdoers.
Interestingly, the clawback programme will allow a fine reduction even to those who pursued clawbacks in good faith but were unsuccessful. A genuine attempt to hold individuals accountable, whether that is by litigating locally or internationally, could therefore contribute to a fine reduction.
By way of comparison, voluntary self-reporting has also been encouraged in the UK with regard to suspected corporate crime. The UK's Serious Fraud Office ("SFO") takes into consideration a corporate's decision to self-report, provided this is part of a "genuinely proactive approach" adopted by the corporate entity – however, such a report does not guarantee that a prosecution will not follow. Similarly, the SFO places significant weight on a corporate's internal compliance programme when deciding whether or not to prosecute. The Financial Conduct Authority ("FCA") and the Office of Financial Sanctions Implementation ("OFSI") also actively encourage voluntary reporting of sanctions breaches, and the latter may impose reduced financial penalties in such cases, and are in practice less likely to refer such matters to the National Crime Agency ("NCA") for criminal enforcement in such cases.
The discreet references to "the complex and uncertain geopolitical environment" and the prevalence of sanctions, brought upon by the conflict in Ukraine, were noteworthy. Financial institutions were particularly singled out by reference to increased investment in the DOJ's Bank Integrity Unit (in the Criminal Division’s Money Laundering and Asset Recovery Section) that has prosecuted global financial institutions for sanctions violations in the past.
This amplified focus on sanctions violations and enforcement is similarly prevalent in the UK, with various enforcement agencies becoming increasingly concerned with the same; with inter-agency cooperation on the rise, along with the implementation of the Economic Crime (Transparency and Enforcement Act) 2022, which introduced strict liability for sanctions breaches for the purposes of civil enforcement, and which paved the way for the expansive Russian sanctions regime that followed. OFSI has reiterated that enforcement is becoming a priority and cases requiring criminal investigation will be referred to the NCA, with the agencies repeatedly reinforcing in public statements how closely aligned they are. Additionally, the NCA established its new Combating Kleptocracy Cell in July 2022, explicitly focusing on investigating criminal sanctions evasions, corruption and high-end money laundering, and the agency has demonstrated a real determination to target illicit wealth, including through some high profile raids, and asset seizures. It is evident that the UK's continued approach to tackling economic corporate crime and sanctions breaches is a priority, and the fact that nations seem to be aligning in the battle against the same is significant.
The recent arrest of British businessman Mr. Graham Bonham-Carter is one stark example. Mr. Bonham-Carter is alleged to have provided real estate and artwork services to Mr. Oleg Deripaska – a designated individual both in the UK and the US, as a result of his alleged connections to the Russian government. Mr. Bonham-Carter's arrest was coordinated between the US and UK; the former by unsealing the charges against him which included allegations of unlawful payments associated with the maintenance of properties in New York and Washington DC, and the latter, through the NCA, obtaining freezing orders against corresponding bank accounts, which are alleged to contain the funds laundered for Mr. Deripaska.
In addition, the launch of the Russian Elites, Proxies and Oligarchs ("REPO") Task Force in March 2022 represents the joint effort between the US, Australia, Canada, France, Germany, Italy, Japan, the UK and the European Commission in response to Russia's invasion of Ukraine. Earlier this month, the REPO Task Force confirmed that as a result of "close and extensive national and international coordination, collaboration, and information sharing" they had blocked or frozen more than US$58 billion worth of assets of sanctioned Russians, and tracked sanctioned Russian assets worldwide.
The DAG enigmatically finished her remarks by stating that some significant announcements in some significant cases in the coming weeks will be made. These developments should leave no doubt that companies should be taking sanctions compliance seriously; US and UK law enforcement certainly are.
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