Due Diligence in the Age of Coronavirus

by Jodi L. Avergun, James A. Treanor, Christian N. Larson, William N. Simpson, and Tammy Tran

In the context of COVID-19, there are significant challenges involved in conducting due diligence: hard-copy documents are inaccessible, in-person meetings have moved online, and on-site visits may be impossible. Companies nonetheless can and should continue to comply with the law by adjusting policies and procedures, mitigating new risks that arise through the use of alternative diligence methods, and by staying abreast of changing regulatory expectations.

For compliance professionals, applying “enhanced” reviews to higher-risk scenarios necessarily requires direct human involvement: an experienced hand to assess the universe of available information and make sometimes difficult judgment calls. Certain aspects of this work can, with varying degrees of difficulty, be completed from the (in)convenience of the myriad home offices that have sprouted in response to the COVID-19 pandemic—assuming that the compliance professional is in possession of all required information. However, compliance teams face a major challenge in gathering the detailed information upon which compliance decisions are based. Physical documents are not accessible, travel is impossible, and in many cases, key information must be obtained from third parties who are themselves struggling to navigate the pandemic. Below, we propose strategies that corporations and financial institutions can adopt to remain in compliance with the law during the pandemic. Continue reading →

NYDFS Issues Enforcement Action Against Industrial Bank of Korea

by Matthew Levine

The New York State Department of Financial Services (“NYDFS”) recently issued an enforcement action against the Industrial Bank of Korea (“IBK”) for violations of New York’s anti-money laundering and recordkeeping obligations. It is the first of either of these types of BSA/AML enforcement actions issued by the Department in some time; this is not surprising, given that NYDFS, like other regulators, has been consumed with responding to the COVID-19 pandemic. Continue reading →

FINMA Annual Report Indicates Decline in Enforcement, Highlights Money Laundering Risk Factors

by Jonathan J. Rusch

In the world of global financial crimes compliance, one national regulator that has become increasingly visible and assertive is the Swiss Financial Market Supervisory Authority (FINMA). FINMA’s supervisory and regulatory mandate extends across the Swiss financial sector to banks, insurance companies, financial institutions, collective investment schemes, and their asset managers and fund management companies.[1]

In carrying out that mandate, FINMA has been active on a variety of fronts relating to financial crimes. These include issuance of a revised Anti-Money Laundering (AML) Ordinance, sanctioning of leading Swiss bank Julius Baer for serious AML failings, and continuing cooperation with U.S. and other financial regulators and enforcement authorities.[2]

On April 2, FINMA published its 2019 Annual Report, which for the first time integrates FINMA’s Enforcement Report.[3] While the Report covered all aspects of FINMA’s supervisory and regulatory activity, it included three topics that are of particular interest from a risk and compliance perspective. Continue reading →

CMA Prohibits Merger That DOJ Tried – But Failed – To Block

by Juan Rodriguez and Marielena Doeding

SUMMARY

On 9 April 2020, the UK Competition and Market’s Authority (“CMA”) issued its final report prohibiting the proposed acquisition of Farelogix, Inc. (“Farelogix”) by Sabre Corporation (“Sabre”) (the “Transaction”). The CMA’s decision comes only two days after Judge Leonard Stark of the U.S. District Court in Delaware dismissed a lawsuit brought by the Antitrust Division of the U.S. Department of Justice (“DOJ”) seeking to block the Transaction.

The CMA’s decision is notable because it demonstrates the CMA’s willingness to take a bold stance even when reviewing a merger that lacks an obvious jurisdictional link to the UK, and in the face of a conflicting litigated outcome in a U.S. court. Sabre/Farelogix also serves as a stark reminder of the increased focus by antitrust regulators on the importance of innovation in the technology sector, and on the protection of “nascent competition”, as well as the practical impact of the antitrust conceptions of “two-sided markets” in the UK and in the U.S. Continue reading →

BSA/AML and KYC in a Crisis: Supervisors Provide Guidance as Financial Institutions Respond to the COVID-19 Pandemic

by Satish M. Kini, David G. Sewell, Zila Reyes Acosta-Grimes, Isabel Espinosa de los Reyes, Robert T. Dura, and Jonathan R. Wong

As the COVID-19 pandemic continues to unfold, the U.S. Congress, Treasury Department and Federal Reserve have taken extraordinary measures that would have been unimaginable just weeks ago in an attempt to stabilize the U.S. economy. Financial institutions are on the front lines of many of the new programs and are otherwise taking steps to support customers and communities affected by the crisis—while also protecting their employees through remote work arrangements and other measures.

Meeting obligations under the Bank Secrecy Act (the “BSA”) and associated anti-money laundering (“AML”) regulations—as well as supervisory know your customer (“KYC”) expectations—is challenging under ordinary circumstances and even more so in these conditions. Regulators have begun to offer guidance regarding their BSA expectations in these challenging circumstances. We highlight and summarize relevant developments below. Continue reading →

The German Corporate Sanctions Act—Heralding a New Era for Enforcement in Germany

by Ralf van Ermingen-Marbach and Finn Zeidler

While corporate criminal liability has become the standard in many countries, as of today, companies in Germany can only be fined under regulatory offense law. German criminal law does not provide for corporate criminal liability.

Now, the coalition parties are seeking to establish a corporate sanctions law addressing corporate criminal conduct. The draft of the Corporate Sanctions Act (“Verbandssanktionengesetz” or the “Act”) introduces a hybrid system of criminal law and regulatory offense law. Companies would be prosecuted and sanctioned under the Act if (i) one of their managers committed a corporate criminal offense (e.g., fraud or bribery) or (ii) if another person committed such an offense while performing duties on behalf of the company when management could have prevented this by taking appropriate compliance measures. After a long and tough debate, the coalition parties have recently agreed on the draft law and are pushing ahead with the legislative process. According to statements from the governing coalition, the German Bundestag could therefore pass the Act even before summer recess. Continue reading →

Federal Banking Agencies Encourage Financial Institutions to Offer Small-Dollar Loans: A Response to COVID-19, and Maybe More?

by Jonathan R. Silverstone

On March 26, the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB) issued an interagency statement encouraging financial institutions to offer small-dollar loans to individuals and businesses impacted by COVID-19 [1]. This statement is one of the latest in a series of releases from the federal banking agencies urging financial institutions to support households and businesses impacted by the outbreak. It is also the most recent development in a larger push by the current administration, predating COVID-19, to get banks back into small-dollar lending. Continue reading →

What the Hoskins Rule 29 Acquittal Reveals About Contesting “Jurisdictional” Issues in American Criminal Justice

by Frederick T. Davis

On February 26, 2020, Judge Janet B. Arterton of the federal district court in Connecticut granted a motion under Rule 29 of the Federal Rules of Criminal Procedure to acquit a defendant of seven counts of which he had been convicted by a jury in November 2019. A post-conviction Rule 29 acquittal is uncommon: A prosecutor armed with a jury verdict only rarely is found not to meet the quite lenient standard that the factual evidence, when viewed “in the light most favorable to the government,” provided a basis for a reasonable jury to convict. Even more unusually, the issue on which Judge Arterton found the prosecution lacking did not go to whether the defendant committed the acts of which he was charged or had the requisite state of mind, but whether the criminal statute applied to him at all—an issue that in much of the world is considered to be a question of “jurisdiction” (or, in Europe, of “competence”). The decision raises troubling questions about how threshold issues in criminal cases are resolved under American criminal procedures. Continue reading →

Compliance and Enforcement