Author Archives: Jason Kelly

2021 AML Trends and Developments (Part II of III)

by Franca Harris Gutierrez, Boyd Johnson, Bruce Newman, Michael Dawson, Zachary Goldman, Rachel Dober, Michael Romais, Alina Lindblom, and Andrew Miller

This is Part II of a three-part post. For Part I, discussing the collection of beneficial ownership information, click here.

Innovation and SAR Reform

Over the past few years, FinCEN and federal banking agencies have expressed general support for more effective, efficient, and innovative AML compliance programs, and both the letter and spirit of the NDAA represent another step in that direction.[1] Recent statutory and regulatory efforts have paved the way for concrete shifts in the compliance regime. In December, the Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”) finalized parallel Notices of Proposed Rulemaking (“NPRMs”) entitled Exemptions to Suspicious Activity Report Requirements. The regulators proposed modified regulations that, if finalized, would enable them to grant financial institutions broader exemptions to the SAR filing requirements in connection with innovative compliance approaches.[2]

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2021 AML Trends and Developments (Part I of III)

by Franca Harris Gutierrez, Boyd Johnson, Bruce Newman, Michael Dawson, Zachary Goldman, Rachel Dober, Michael Romais, Alina Lindblom, and Andrew Miller

Anti-money laundering (“AML”) issues have been a focus of regulators and law enforcement for the past decade and will likely continue to be a priority issue area for the Biden Administration. The AML landscape is shifting considerably as a series of regulatory actions in the last months of 2020 and the January 1, 2021 passage of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”)[1] — adopted with bipartisan support overriding President Trump’s veto—bring real change to the regulatory environment at the start of the new administration. Indeed, the NDAA is the most significant amendment to the AML landscape in a generation, since the adoption of the USA PATRIOT Act, and will require extensive implementation by the Treasury Department. The regulatory and legislative changes together have two principal themes: (i) a conscious effort to evolve AML compliance and the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”) to make the system more efficient and effective; and (ii) adapting the BSA to a new generation of threats.

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ESG: Key Trends in 2020 and Expectations for 2021 (Part III of III)

by Marc S. Gerber, Scott C. Hopkins, Simon Toms, Helena J. Derbyshire, Louise Batty, Adam M. Howard, Greg P. Norman, Damian R. Babic, Zoe Q. Cooper Sutton, Kathryn Gamble, Sym Hunt, Caroline S. Kim, Abigail B. Reeves, Patrick Tsitsaros, and Eleanor F. Williams

This is Part III of a three-part post. For Part I, looking back at important trends and topics in 2020, please click here. For Part II, discussing the first 5 of 10 key trends expected in 2021, please click here.

Below are the final 5 of 10 key environmental, social and governance (ESG) trends and topics that we expect to be prominent in 2021, some of which are continuing trends from 2020, while others may emerge in response to the events of 2020.

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ESG: Key Trends in 2020 and Expectations for 2021 (Part II of III)

by Marc S. Gerber, Scott C. Hopkins, Simon Toms, Helena J. Derbyshire, Louise Batty, Adam M. Howard, Greg P. Norman, Damian R. Babic, Zoe Q. Cooper Sutton, Kathryn Gamble, Sym Hunt, Caroline S. Kim, Abigail B. Reeves, Patrick Tsitsaros, and Eleanor F. Williams

This is Part II of a three-part post. For Part I, looking back at important trends and topics in 2020, please click here. 

Below are the first 5 of 10 key environmental, social and governance (ESG) trends and topics that we expect to be prominent in 2021, some of which are continuing trends from 2020, while others may emerge in response to the events of 2020.

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ESG: Key Trends in 2020 and Expectations for 2021 (Part I of III)

by Marc S. Gerber, Scott C. Hopkins, Simon Toms, Helena J. Derbyshire, Louise Batty, Adam M. Howard, Greg P. Norman, Damian R. Babic, Zoe Q. Cooper Sutton, Kathryn Gamble, Sym Hunt, Caroline S. Kim, Abigail B. Reeves, Patrick Tsitsaros, and Eleanor F. Williams

In a tumultuous year, one of the key clear messages to emerge from 2020 was that environmental, social and governance (ESG) concerns are here to stay. As mentioned in our 31 July 2020 article “ESG in 2020: A Half-Year Review,” although many investors feared that the focus on ESG policies would fall away in the face of an economic crisis, the opposite appears to have occurred. The pandemic instead has triggered a debate on what societies really value, and at the same time exposed the extent of global interconnectedness and the “tragedy of the horizon” whereby societies fail to plan in the longer term and only address issues when it is too late. This focus continued throughout 2020 and, as a result, many now regard the coming months and years as an opportunity to rebuild economies with ESG matters, corporate purpose and sustainability firmly placed at the fore. In this three-part post, we review the key trends that emerged in 2020 and continued to develop in the second half of the year. We then set out our expectations for the trends that will emerge or continue in the ESG sphere over the coming year.

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Competitive Health Insurance Reform Act Signed Into Law, Repeals More Than Half-Century-Old Antitrust Exemption for U.S. Health Insurers

by Corey W. Roush, Gorav Jindal, Haidee L. Schwartz, J. Matthew Schmitten, and Mitchell E. Khader

Until recently, the McCarran-Ferguson Act of 1954 made the “business of insurance,” including the business of health insurance, immune from federal antitrust laws. The Competitive Health Insurance Reform Act has amended the McCarran-Ferguson Act such that health insurers will now be subject to the same federal antitrust laws as other industries; other insurers, however, will continue to have federal antitrust immunity. Repeal of the antitrust exemption subjects health insurers to increased scrutiny by federal antitrust authorities (namely the Antitrust Division of the Department of Justice) as well as private parties seeking to bring federal antitrust claims, which may counsel for a re-examination of antitrust compliance policies.

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A Regime Shift in the SEC Enforcement Cooperation Program

by Andrew J. Leone, Edward X. Li, and Michelle Liu

Leniency programs can be powerful enforcement tools. For example, the Department of Justice’s Antitrust Leniency Program has been successful in cracking down on cartel activities since 1993. By encouraging violators’ self-reporting and voluntary remediation, regulators can conserve valuable resources and rectify more misconduct than they otherwise would. However, the Securities and Exchange Commission’s (SEC’s) leniency program, which began with the 2001 Seaboard Report, long illustrated a different reality. Files (2012) finds that cooperating with the SEC can leave firms worse off. The press also harshly criticized the SEC for failing to detect egregious frauds during the Financial Crisis, despite a budget surge since 2001. To address these concerns, the SEC issued a new initiative in 2010 and, for the first time, formalized a multitude of new cooperation policies in the SEC Enforcement Manual. In our forthcoming article in the Journal of Accounting & Economics, we investigate the effects of these policy changes.

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Destruction Emerges as a Powerful Enforcement Measure for AI: FTC Requires Company to Delete Models Trained with Improperly Utilized Consumer Data

by Jeremy Feigelson, Avi Gesser, Jim Pastore, Justin C. Ferrone, Anna R. Gressel, Paul D. Rubin, and Melissa Runsten

For those following emerging artificial intelligence (“AI”) regulations and enforcement closely, one issue of great interest is remedies. In particular: in what circumstances, if any, would regulators or courts find that a flawed machine learning or AI model must be scrapped entirely? A hot-off-the-press decision from the U.S. Federal Trade Commission (the “FTC”) suggests regulators will not shy away from saying “scrap it.”

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DOJ Brings First Criminal Wage-Fixing Prosecution

by Lisa M. Phelan, Eric J. Olson, and Megan E. Gerking

The Antitrust Division of the Department of Justice (“DOJ”) recently announced its first-ever criminal wage-fixing prosecution. The DOJ likely intends this case to be a wake-up call to companies, executives, and HR professionals, reinforcing that competition laws apply equally to wages paid to employees as they do to prices for goods and services. Companies and individuals should take note of this development, update their trainings and compliance programs as appropriate, and recognize that wage fixing could lead to federal criminal prosecution and even jail time.

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SEC Enforcement Highlights the Risks of Not Preserving Text/Chat Messages—Practical Tips for Aligning Policies with Practices to Reduce Risk

by Avi Gesser, Jeff Robins, Chana Zuckier, and Julie M. Riewe

At many companies, employees are increasingly using non-business communication applications (“apps”) such as iMessage, WhatsApp and WeChat for business-related communications. This trend has likely accelerated in the COVID era, as work-from-home arrangements blur traditional lines between “business” and “personal” time and many conversations that were normally held in person are now done virtually. A recent SEC enforcement action highlights the risk that these communications pose for companies subject to strict record retention requirements, such as broker-dealers pursuant to Rule 17a-4 under the Securities Exchange Act, as well as FINRA Rule 3110 and related guidance, as well as and investment advisers subject to Rule 204-2 and related guidance under the Investment Advisers Act of 1940. But it also highlights the risks that these communications pose more broadly for companies, and the need to consider adopting technologies and policies that reduce these risks.

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