Category Archives: Enforcement

The Financial Action Task Force Evaluation of Russia: An Opportunity

By Joshua Kirschenbaum and Jennifer DeNardis

Introduction     

Russia in recent years has been the most conspicuous source of illicit flows into European banks and the Western financial system. The Russian government weaponizes these opaque channels to export corruption, facilitate influence operations, and prop up the domestic patronage system. Despite a money laundering crackdown by the Central Bank of Russia (CBR), the country’s main financial supervisor, recent history poses serious questions about the effectiveness of the central bank, law enforcement agencies, and prosecutors in combating illicit financial activity.

The Financial Action Task Force (FATF) sets international anti-money laundering (AML) standards (PDF 6.37 MB)  and evaluates its member states for compliance. It was created in 1989 and is housed at the Organization for Economic Co-operation and Development.  Russia joined in 2003. FATF last evaluated Russia over a decade ago under the old “technical compliance” review process, which largely focused on the country’s legal framework. FATF now evaluates (PDF 1.51 MB) jurisdictions on the basis of the effectiveness of their AML regimes. The new method focuses on enforcement and outcomes. That makes this year’s FATF evaluation of Russia a unique opportunity to protect democratic countries from corrosive financial flows.

Should FATF conclude that Russia falls short, it could “greylist” the jurisdiction, which would have immediate reputational effects. It could ultimately lead to a process by which other FATF members, would require their financial institutions to take special steps in dealing with Russian banks. This would raise the cost of international business and banking in Russia. Such a decision against an FATF member state would be unprecedented but not necessarily unjustified. Continue reading

The Slow Introduction of Pre-Trial Diversion Mechanisms in the Italian System of Corporate Liability

by Simone Lonati

The Common Law-inspired decision to enlist corporations as precious, proactive allies in the essential activities of detection and combat of crime, and particularly of bribery, has often been looked at with the typical skepticism of civil law systems, which – a long way from accepting the idea of equal cooperation in the fact-finding mission – require a neat distinction of roles in proceedings. Nonetheless, it is by now undeniable that the perception of corporate compliance in the Italian legal system has undergone a significant transformation in recent years.

The structure of Legislative Decree n. 231/2001, which established for the first time in the Italian legal system an administrative liability of legal persons and entities without legal personality for the crimes committed by employees and executives, outlines a correction model that views the conduct held by the accused legal entity during an investigation and the related criminal proceedings as one of the cornerstones triggering the virtuous path towards compliance monitoring, which should bring the entity back on the tracks of profitable compliance. Continue reading

French Anti-Corruption Authority Raises Alarm About M&A Transactions

by Antoine F. Kirry, Frederick T. Davis, and Alexandre Bisch

The French Anti-Corruption Authority (AFA) is zeroing in on corruption risks hidden in acquisition targets of French companies, in France and overseas.

In a statement reported yesterday, AFA representatives alerted would-be acquirers to the need to conduct in depth pre-acquisition anti-corruption due-diligences.  The AFA observed that most companies and investment bankers seem insufficiently aware of this need, and urged them not to underestimate the reputational damage that may result from potential corruption issues in target companies, in addition to potential sanctions. Continue reading

U.S. v. Connolly: “Outsourcing” a Government Investigation — And How to Avoid It

by David B. Massey, James Q. Walker, Lee S. Richards III, Shari A. Brandt, Audrey L. Ingram, Daniel C. Zinman, Arthur Greenspan, and Rachel S. Mechanic

Summary

On May 2, in a widely-watched case, the U.S. District Court for the Southern District of New York found that the government “outsourced” a criminal LIBOR investigation to Deutsche Bank and its outside counsel, and thereby violated defendant Gavin Black’s Fifth Amendment rights when outside counsel interviewed the defendant under threat of termination from his employment.  United States v. Connolly, 16 Cr. 370 (CM), Memorandum Decision and Order Denying Defendant Gavin Black’s Motion for Kastigar Relief, ECF Document 432, slip op. at 19, 29 (May 2, 2019).  But because the DOJ did not use the defendant’s compelled statements at trial and the investigation was not otherwise tainted, the Court found no Kastigar violation and held that, even if there was, any error was harmless.  Connolly, slip op. at 40-41, 43-44.  

The Court’s exposition of the “outsourcing” issue has broad implications for internal investigations and corporate cooperation, but it need not end internal investigations or corporate cooperation as we know them.  By observing some basic precautions as described below, Government enforcement lawyers and corporate defense counsel can avoid similar rulings in the future.  At every stage of an internal investigation, companies should confirm and document that their major decisions are taken to satisfy their obligations to their shareholders to police and remediate their own activity, rather than to satisfy demands made by government lawyers.  The Government, for its part, should avoid instructing companies on the particulars of their internal investigations and not wait for the results of those investigations before beginning their own.  If both sides proceed in this way, internal investigations and corporate cooperation can continue  substantially in the way that they have for two decades.  Continue reading

How are non-trial enforcement mechanisms facilitating the resolution of foreign bribery cases?

by Sandrine Hannedouche-Leric, Elisabeth Danon, and Brooks Hickman

A new Study on Resolving Foreign Bribery Cases with Non-Trial Resolutions builds a typology of non-trial resolutions available to the Parties to the OECD Anti-Bribery Convention and takes stock of how these resolutions have been used to resolve foreign bribery cases in recent years.

The Study focuses on key legal, procedural and institutional challenges attached to the use of non-trial resolutions to conclude foreign bribery cases. It provides data demonstrating a clear trend to resolve these cases outside the court room. In particular, it shows that nearly 80% of foreign bribery cases concluded since the OECD Anti-Bribery Convention entered into force 20 years ago have been resolved with a non-trial enforcement vehicle. Relying on data and case examples, it analyses how these instruments have driven the enforcement of foreign bribery laws. In some countries, non-trial resolutions have provided the exclusive means for sanctioning legal persons, while other countries have used non-trial resolutions to impose sanctions in their first-ever foreign bribery resolutions. Continue reading

Two Truths and a Lie About Settlements in Bribery Cases

by Pascale Hélène Dubois, Kathleen May Peters, and Roberta Berzero

If we were playing “Two Truths and a Lie,” we would say the following: (a) settlement agreements are used in a variety of jurisdictions as an alternative to litigation; (b) settlement agreements can offer parties the opportunity to save time and resources while securing a predictable outcome; (c) there is a book that will tell you everything you need to know about settlements in bribery cases. The last, of course, is the lie. But only until Spring 2020.

What do settlements within the World Bank Group Sanctions System look like? Why do entities and individuals choose to enter into settlements with the Bank Group? How do settlements support the Bank Group’s mission to further development impact and contribute to safeguarding donor funds in the projects it finances worldwide? These and other questions will be addressed by the chapter “Settlements Within the World Bank Group Sanctions System” to be published in spring 2020 in the forthcoming book from Edward Elgar Publishing, “NEGOTIATED SETTLEMENTS IN BRIBERY CASES – A Principled Approach,” edited by Tina Søreide, Norwegian School of Economics (NHH), Norway and Abiola Makinwa, The Hague University of Applied Sciences, the Netherlands. Continue reading

DOJ Updates FCPA Corporate Enforcement Policy

By Jonathan S. Kolodner, Lisa Vicens, and Lorena Michelen

In a recent speech at the annual ABA White Collar Crime Conference in New Orleans, Assistant Attorney General Brian Benczkowski of the Criminal Division of the Department of Justice (“DOJ”) announced certain changes to the FCPA Corporate Enforcement Policy (“the Enforcement Policy” or “Policy”) to address issues that the DOJ had identified since its implementation.[1]  These and other recent updates have since been codified in a revised Enforcement Policy in the Justice Manual.[2] 

The Enforcement Policy, first announced by the DOJ in November 2017, was initially applicable only to violations of the FCPA, but was subsequently extended to all white collar matters handled by the Criminal Division.[3]  The Policy was designed to encourage companies to voluntary self-disclose misconduct by providing more transparency as to the credit a company could receive for self-reporting and fully cooperating with the DOJ.  Among other things, the Enforcement Policy provides a presumption that the DOJ will decline to prosecute companies that meet the DOJ’s requirement of “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation,” absent “aggravating circumstances” – i.e. relating to the seriousness or frequency of the violation.  For more information on the Enforcement Policy, read our blog post explaining it

The most significant recent changes to the Enforcement Policy include eliminating the prohibition on a company’s usage of ephemeral instant messaging applications to receive full credit for “timely and appropriate remediation.”  Additionally, the modified Enforcement Policy (1) now makes clear that one requirement of cooperation, de-confliction of witness interviews, should not interfere with a company’s internal investigation; (2) confirms based on an earlier announcement, that the Policy applies in the context of a merger and acquisition (“M&A”), if an acquiring company discovers and self-discloses misconduct in a target; and (3) implements a change announced months before by the Deputy Attorney General that a company only needed to provide information about individuals “substantially involved” in the offense.  These changes are discussed in greater detail below. Continue reading

Settlement Agreements under French Sapin II Law: In Search of the ‘Public Interest’

by Luca d’Ambrosio

This post is an abstract of the article forthcoming in the Revue de sciences criminelles et droit comparé (n° 1/2019) under the title L’implication des acteurs privés dans la lutte contre la corruption: un bilan en demi-tente de la loi Sapin 2.

****

Much has been reported about the adoption, on December 2016, of the new French anticorruption framework, Sapin II, which  stands out for the creation of a new set of ex ante and ex post measures aiming to strengthen the prevention of corruption and the enforcement of administrative and criminal sanctions.

Among the ex post measures, Sapin II introduced a procedure permitting a negotiated outcome for legal persons: under the name of “convention judiciaire d’intérêt public” (CJIP), this procedure emulates DPAs as practiced in the United States and in the United Kingdom. The legal transplant of this procedure into the French enforcement system has received far from unanimous consent.   

On the one hand, French scholars were divided among those who considered this procedure as a “gift” to corporations and those who considered it as a milestone of a new and effective corporate enforcement policy based on compliance and cooperation. According to this view, settlement agreements would enhance corporate enforcement policy for three reasons. Firstly, they would help enforcement authorities to resolve quickly and costless complex criminal cases. Secondly, they would enhance specific deterrence of future misconduct through remedial compliance programs. Finally, settlement agreements would trigger anticorruption cooperation and enforcement with US authorities: this argument was particularly sensible in France where important and strategic companies – such as Alstom, Société Générale, Total et Alcatel – have been involved in FCPA investigations and are in the “top ten” of the most important fines settled by the DOJ. Continue reading

Canadian Corporate Criminal Liability

by Lincoln Caylor and Nathan Shaheen

Introduction

In Canada, corporate criminal liability is increasingly becoming an area of focus for regulators, law enforcement officers, and the public. As stories of corporate wrongdoing have generated media and public interest, key stakeholders have been trying to develop various tools and mechanisms to properly apportion fault and determine liability in often complex and highly public scandals. One merely has to read about the SNC-Lavalin matter that has generated controversy and the calls for a public inquiry in the highest echelons of the Canadian executive branch to understand the importance of carefully managing corporate criminal liability. This blog posts reviews Canadian corporate criminal liability, setting out some new developments in the law and highlighting key areas of concern for corporations undertaking either an internal investigation or being investigated by a regulator.

Overview Of Canadian Corporate Liability Doctrine

In Canada, corporate criminal liability is narrow in scope. Unlike in the United States, Canada does not apportion criminal liability under the doctrine of respondeat superior. Rather, corporate liability is generally apportioned to the employees or individuals involved in the wrongdoing, instead of the actual corporations themselves.[1]

Unlike American precedent, Canadian jurisprudence has historically upheld the ‘identification doctrine’, an organizing principle of corporate liability wherein an “identity” is established “between the directing mind and the corporation, which results in the corporation being found guilty for the act or the natural person, the employee”.[2] The identification doctrine will only be used in narrow circumstances to hold the corporation accountable. It will not be engaged if the employee/individual who committed the alleged acts is not a ‘directing mind’ of the corporation, or if there was fraud on the corporation. Additionally, judges retain the residual right to not apply the doctrine depending on the circumstances of the case. Continue reading

National Bank Supervision Manual

by Sullivan & Cromwell LLP

OCC’s New and Revised Sections of Policies and Procedures Manual Relating to Enforcement Actions Suggest Continued Heightened Interest in Actions Against Individuals

Summary

Historically, the Office of the Comptroller of the Currency (the “OCC”) has applied a single set of internal policies and procedures to enforcement actions brought against individuals (institution-affiliated parties (“IAPs”)) and institutions (national banks, federal savings associations, and federal branches and agencies of foreign banks (collectively, “banks”)).  On November 13, the OCC issued a new section to its Policies and Procedures Manual (“PPM”) specific to enforcement actions against IAPs (the “IAP PPM”)[1] and simultaneously updated the existing sections for Bank Enforcement Actions and Related Matters (the “Bank PPM”)[2] and for Civil Money Penalties (“CMPs”) (the “CMP PPM”).[3]  The new IAP PPM generally breaks no new ground, and most changes to the Bank PPM and CMP PPM align those two sections with, and reflect the issuance of, the IAP PPM.  There are, however, several notable additions and modifications to the new and revised sections that serve to improve the clarity and transparency of the OCC’s enforcement action process. 

Beyond those distinctions, the issuance of a standalone IAP PPM suggests a continued, if not increased, focus by the OCC on actions against IAPs going forward, and is consistent with the broader theme, evidenced over the last several years, of regulatory and law enforcement focus on holding individuals accountable in cases of financial institution wrongdoing.[4]  The new OCC IAP PPM suggests a continual focus on holding individuals accountable for corporate misconduct in the financial industry. Continue reading