U.S. Department of Justice Antitrust Division Releases Updates to Criminal Leniency Program Frequently Asked Questions (FAQs)

by John Terzaken, Abram Ellis, and Elizabeth French

On April 4, 2022, the U.S. Department of Justice Antitrust Division (the “Division”) announced important clarifications and modifications to its Corporate and Individual Leniency Policies (the “Leniency Program”) in the form of revised Frequently Asked Questions about the Antitrust Division’s Leniency Program (“FAQs”).[1] The Leniency Program is unique to the Division and provides for immunity for companies and individuals who are first to self-report criminal antitrust violations—price-fixing, bid-rigging and market/customer allocation agreements among competing companies (so called “antitrust cartels”). For the last thirty years, the Leniency Program has remained a mainstay of the Division’s anti-cartel enforcement efforts, touted by the Division as its most effective tool for destabilizing and rooting out otherwise clandestine antitrust cartels. The success of the Division’s Leniency Program has led countries around the world to adopt similar programs to combat antitrust cartels within their jurisdictions.

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SEC Brings its First Corporate Anti-Corruption Action of 2022

by Kara Brockmeyer, Andrew M. Levine, Karolos Seeger, and Konstantin Bureiko

On February 17, 2022, the SEC brought a settled FCPA administrative proceeding against KT Corporation (“KT” or the “Company”), a South Korean telecom operator with American depository shares trading on the New York Stock Exchange.[1] In its Cease-and-Desist Order (the “Order”), the SEC found that KT engaged in multiple schemes to make improper payments in Korea and Vietnam, including through purported charitable donations and third-party payments. The SEC also found that KT paid executives inflated bonuses in order to generate slush funds to pay for gifts and illegal political contributions. As a result of the settlement, the Company agreed to pay $6.3 million in disgorgement and civil penalties, and to a two-year reporting obligation.[2] The settlement with the SEC came several months after the Company and fourteen executives were indicted in South Korea for the political contribution scheme.

Of particular note, the KT settlement is the SEC’s most recent action involving charitable contributions, and it goes somewhat beyond earlier cases in that the Order does not find that the donations were made as part of any quid pro quo. It is also a cautionary tale demonstrating various ways that slush funds can be created.

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DOJ Announces Compliance Certifications to Be Considered as Part of Corporate Criminal Resolutions

by Gre g D. An dres, Uzo Asonye, Martine M. Beamon, Angela T. Burgess, Robert A. Cohen, Daniel S. Kahn, Tatiana R. Martins, Fiona R. Moran, Paul J. Nath anson, and Patrick S. Sinclair

In a pair of speeches, the Assistant Attorney General of DOJ’s Criminal Division emphasized its focus on compliance and announced that he has instructed his prosecutors to consider requiring chief executive officers and chief compliance officers to certify to (1) the accuracy of annual reports submitted pursuant to corporate resolutions, and (2) the effectiveness of their company’s compliance program prior to releasing the company from its obligations under a resolution agreement.

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Why Ethical AI Initiatives Need Help from Corporate Compliance

by Avi Gesser, Bruce E. Yannett, Douglas S. Zolkind, Anna R. Gressel, and Adele Stichel

Artificial intelligence (AI) is becoming part of the core business operations at many companies. This widespread adoption of AI has led to a proliferation of corporate “ethical AI” principles and programs, as companies seek to ensure that they are using AI fairly and responsibly, and in a manner consistent with the growing expectations of customers, employees, investors, regulators, and the public.

But ethical AI programs at many companies are struggling. Recent reports of AI ethics leaders being fired, resigning, or bringing whistleblower claims illustrate the friction that is common between ethical AI teams and executives who are trying to gain efficiencies and competitive advantages through the adoption of AI.

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Model Destruction – The FTC’s Powerful New AI and Privacy Enforcement Tool

by Avi Gesser, Paul D. Rubin, and Anna R. Gressel

A recent FTC settlement is the latest example of a regulator imposing very significant costs on a company for artificial intelligence (“AI”) or privacy violations by requiring them to destroy algorithms or models. As companies invest millions of dollars in big data and AI projects, and regulators become increasingly concerned about the risks associated with automated decision-making (e.g., privacy, bias, transparency, explainability, etc.), it is important for companies to carefully consider the regulatory risks that are associated with certain data practices. In this Debevoise Data Blog post, we discuss the circumstances in which regulators may require “algorithmic disgorgement” and some best practices for avoiding that outcome.

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Corporate Criminal Enforcement as a Defense to Companies’ Political Influence

by Jennifer Arlen

Countries around the world are reforming their laws governing corporate criminal liability. Jurisdictions and scholars arguing against broad corporate liability, often rely on the claim that corporate civil liability should be as effective as it can impose equally large sanctions on companies. Yet corporate liability is only effective when enforcement officials have the resources and political will to pursue large politically-influential corporations. In the U.S., effective deterrence thus requires that companies be subject to both criminal and civil liability for their organizational misconduct as federal civil enforcement is less effective than criminal enforcement because large companies can more easily leverage their influence with members of Congress or White House officials to blunt civil corporate enforcement. Civil enforcement also tends to be less committed to ensuring that individual wrongdoers are sanctioned. Continue reading →

Prepared Remarks by U.S. Assistant Attorney General Polite at the NYU Law Program on Corporate Compliance and Enforcement

Kenneth A. Polite, Jr.

NYU Law’s Program on Corporate Compliance and Enforcement (PCCE)
March 25, 2022

I have been fortunate in my career to have served as a prosecutor, as a defense attorney, and to work as a chief compliance officer of a Fortune 500 company. The detection and prevention of criminal conduct has been a constant across these three roles. Perhaps the most challenging of the three roles has been serving in compliance.

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Prepared Remarks of FinCEN Acting Director Das at the NYU Law Program on Corporate Compliance and Enforcement

Himamauli Das

NYU Law’s Program on Corporate Compliance and Enforcement (PCCE)
March 25, 2022

Good morning and thank you for inviting me to be a part of your discussions this year. I want to start by thanking Jennifer Arlen and the staff at NYU’s Program on Corporate Compliance and Enforcement for focusing on the effectiveness of corporate compliance programs.

Current events often make clear the importance of compliance programs that are well designed and effective in preventing bad actors from exploiting the financial system. As the pandemic began to unfold in 2020, FinCEN pivoted its efforts to focus on the effects that COVID-19 was having on a range of illicit finance threats around the world. We issued guidance and advisories to advise financial institutions of trends that we were seeing related to COVID-19 medical fraud, imposter scams, cyber-enabled crime, and the defrauding of the unemployment insurance system. And, we assisted law enforcement and financial institutions in the recovery of stolen funds via fraud and other COVID-19 related crimes.

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Treasury Study on Illicit Finance in the High-Value Art Market

by Sharon Cohen Levin, Anthony Lewis, Eric Kadel, Jennifer Sutton, Claudia Kassner, Samantha Rosenthal, and Sheeva Nesva

On February 4, 2022, the U.S. Department of the Treasury (“Treasury”) published a study identifying art market participants and sectors of the U.S. high-value art market that may present money laundering and terrorist finance risks to the U.S. financial system (the “Study”). The Study also examines efforts that U.S. government agencies, regulators, and market participants might explore to further mitigate these risks. The Study found that the high-value art market is susceptible to abuse by illicit financial actors due to, among other characteristics, its historical culture of anonymity, the transferability of high-value items in the art trade, and the inconsistency in due diligence practices among participants. The Study further cautions that the emerging digital art market embodies all of these qualities. Coupled with the untraditional structure of this submarket’s transactions, the risk of money laundering is heightened in this emerging submarket. Treasury’s recommendations include enhanced private sector information sharing, widespread voluntary anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance programs, and consideration of international harmonization of regulation.

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