Author Archives: Clarissa Santiago

Financial Reporting in Times of Economic Crisis: Minimizing Risk in Accounting Judgments and Estimates

by  Arthur Greenspan, James Walker, and David Massey, and Jakob Sebrow 

As a result of the COVID-19 pandemic, U.S. public companies face significantly increased challenges, and legal risks, relating to their accounting and financial reporting.[1] This is especially so when company management must make difficult accounting judgments and estimates in the face of great uncertainty. For most enterprises, the economic disruption and downturn caused by the pandemic have created unprecedented levels of uncertainty around their future business and financial prospects. This has led numerous listed companies, including General Electric, FedEx, IBM and Starbucks, to withdraw previously-announced financial guidance for 2020.

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FBI Warns of a Rise in Business Email Compromise Scams — Tips for Preventing and Responding to BECs in Remote Work Environments

by Avi Gesser, Zila Reyes Acosta-Grimes, Christopher S. Ford, Robert Maddox, and Brenna Rae Sooy

On June 9, Calvin A. Shivers, Assistant Director of the Criminal Investigative Division of the FBI, testified before the Senate Judiciary Committee regarding a variety of frauds during COVID-19, including Business Email Compromise (“BEC”) frauds and the FBI’s response.

BECs are among the most successful and persistent forms of cyber attacks. Indeed, the FBI has seen increases in cyber-enabled financial fraud like BECs every year since 2013. In 2019 alone, the FBI reported (PDF: 2.87 MB) 23,775 BECs and email account compromise complaints that led to adjusted losses of over $1.7 billion. For example, on May 13, the Norwegian Investment Fund for developing countries, Norfund, announced it was the victim of a BEC fraud, whereby cyber criminals diverted a $10 million loan intended for a microfinance institution in Cambodia. The fraud took place on March 16, but it was not discovered until April 30 when the hackers attempted a second fraud. Further, on April 6 and April 13, the FBI warned that, due to COVID-19-related disruptions, many businesses have become more vulnerable to BECs.

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European Commission Announces Six-Point Action Plan on Money Laundering and Terrorist Financing

by Jonathan J. Rusch

Over the past two decades, the European Union (EU) has sought to establish a coherent and effective approach to prevent the misuse of the financial system for money laundering and terrorist financing (ML/TF).[1] That approach, which began with the EU’s First Anti-Money Laundering (AML) Directive,[2] gradually expanded into an extensive regulatory framework.

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Designing Corporate Leniency Programs

by Miriam Baer

Much has changed since Donald Trump was elected president in 2016, but the government’s primary method for dealing with corporate offenders remains the same: the government promises some degree of leniency in either charging or punishment in exchange for the corporate offender’s promise to improve the internal structures and systems that ensure its compliance with law.

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Swedish and Estonian Regulatory Actions Against Swedbank for Anti-Money Laundering Compliance Failures

by Jonathan J. Rusch

Since 2018, the Danske Bank money laundering scandal has triggered substantial repercussions across the European banking system. One of the Scandinavian banks that strongly felt those repercussions is leading Swedish bank Swedbank. In 2019, initial reports of suspected money-laundering transactions occurring between Danske Bank and Swedbank [1] led to:

    • The firing of multiple Swedbank senior executives;[2]
    • An internal report that disclosed Swedbank’s Estonian operations had handled €135 billion in “high-risk, non-resident” money flows; and
    • Parallel investigations of Swedbank and its Estonian subsidiary Swedbank AS by the Swedish and Estonian financial supervisory authorities (Finansinspektionen (FI) and Finantsinspektsioon, respectively), as well as separate inquiries by U.S., Swedish, and Estonian authorities.[3]

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Cyber Insurance Coverage in the Remote Working World

by Una A. Dean, Michael A. Kleinman, and Jasen Fears

The recent mass shift to remote working caused by the global pandemic has provided an ideal breeding ground for both malicious cyber attacks and unintentional data security incidents. Intentional attackers have not only taken advantage of the chaos and fear associated with the pandemic but also capitalized on vulnerabilities newly created by a displaced global workforce. In addition, the use of “home offices” as an employee’s primary, rather than occasional, work environment introduces new technologies and behaviors that can lead to intentional and unintentional network compromises and data losses.
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Is Foreign Bribery Jurisdiction an Element of Economic Sovereignty? Thoughts on Recent Policy Guidance from France and the U.S.

by Michael Huneke and Jan Dunin-Wasowicz 

International economic relations have long been fraught with tensions between sovereign interests and jurisdictional claims. A June 2019 parliamentary report commissioned by the Prime Minister of France epitomizes French concerns regarding U.S. extraterritorial jurisdiction and the allegedly disproportional, targeted U.S. Foreign Corrupt Practices Act (“FCPA”) enforcement actions against European companies. These enforcement actions raised suspicions that the U.S. government was merely serving American business interests and related U.S. foreign policy goals. The report has been widely seen as an important step in framing France’s response. This three-part article puts the report in historical context and outlines its significance for the future of anticorruption policy in the transatlantic region and beyond, including recent, significant coordinated resolutions of international anti-corruption investigations by U.S. and French authorities.
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Remaining Attuned to Internal Whistleblower Reports

by John F. Savarese, Ralph M. Levene, and Wayne M. Carlin 

The SEC’s whistleblower program has long been a centerpiece of its enforcement efforts. Over the past seven weeks alone, the Commission has announced eight whistleblower awards totaling more than $56 million, including a single award on April 16 of $27 million, the largest of the year and the sixth largest award overall since the inception of the program. Because the coronavirus pandemic has understandably dominated the news over that same period, this striking accumulation of whistleblower awards has received little press attention. But we think these recent awards provide a telling and significant reminder of the critical importance, even in the current challenging environment, of keeping employee hotlines open and of responding to internal compliance reports promptly and effectively.
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U.S. Court of Appeals for the D.C. Circuit Denies Petition for Mandamus Seeking to Protect Privilege When Company Shared Information Developed in Internal Investigations with Company Auditors

by Lori A. Martin, Christopher Davies, Jaclyn Moyer, Harry J. Weiss, and Joseph J. Yu

A mandamus petition is an extraordinary remedy that seeks to compel a lower court to take action in extraordinary cases. The U. S. Court of Appeals for the District of Columbia Circuit has twice granted mandamus petitions vacating district court orders compelling disclosure of documents generated during an internal investigation. On May 1, 2020, however, the D.C. Circuit denied a mandamus petition by RPM International Inc. (RPM) and declined to provide additional guidance on the applicability of the attorney client and work product privileges when sharing information with auditors. RPM had asked the Appeals Court to vacate a district court order requiring RPM to produce unredacted interview memoranda that RPM’s counsel prepared during an internal investigation. [1] The provision of information learned in internal investigations to company auditors during regulatory investigations is a recurring fact pattern.  Continue reading →

SEC Charges Company with COVID-19-Related Securities Fraud, Reaffirming Its Focus on Public Statements and Disclosures Relating to COVID-19

by Susanna M. Buergel, Andrew J. Ehrlich, Brad S. Karp, Audra J. Soloway, and Daniel S. Sinnreich

The SEC has, in recent weeks, made highly publicized pronouncements about pursuing enforcement actions arising out of the COVID-19 pandemic. Last week, with remarkable speed, the SEC filed what appears to be its first enforcement action arising out of the COVID-19 pandemic. The complaint alleges that a Florida-based company (Praxsyn Corp.) and its CEO misled investors by falsely stating in various press releases that the company was able to acquire and supply large quantities of N95 or similar masks, when in fact the company never had any masks in its possession, had received no mask orders, and did not have a single contract with any manufacturer or supplier to obtain masks. [1] In its press release, the SEC stated that it “will move swiftly against those who seek to profit off this national emergency by cheating or misleading investors.” [2] Continue reading →