Since November 2020, white-collar defense lawyers have faced one question: will the Biden administration change US priorities when it comes to pursuing a range of economic crimes?
Generally, it takes a relatively long time for a new administration to have an impact on white-collar crime enforcement. White-collar matters often take a long time to process: cases that are not already being investigated can take months to appear on the radar, and the decentralised nature of the US system means that changes at the national level are often less consequential than appointments of US Attorneys at key offices throughout the country. In addition, the previous administration did not roll back on its enforcement pursuits to the extent many had anticipated. For example, aggressive FCPA enforcement continued through the last four years, in contrast to many expectations. All that said, we expect the next four years will bring rigorous white collar crime enforcement across a spectrum of white-collar cases.
Early indications of the new administration’s approach can already be seen in the appointments made by various regulatory agencies, with Obama-era alumni returning to senior positions. Given the likelihood of similar appointments at the DOJ, the SEC, and other relevant regulatory bodies, the next four years could be marked by a return to the priorities set in the Obama era, which alone would mean an increase in the volume of white-collar work.
While it is still too early to judge exactly how the legislative and regulatory priorities of the new administration will impact business, existing features of the enforcement landscape will continue to have a big impact on international business.
First, we expect to continue to see a sustained emphasis on anti-money laundering enforcement, and the FCPA will remain one of the most important US federal laws for multinational companies. Second, sanctions and trade controls will similarly continue to exert a substantial influence on enforcement in the US and beyond, largely because – in the United States – there is rare bipartisan consensus on the value of sanctions as an instrument of national policy. One area we expect an uptick in enforcement is securities fraud investigations against both corporations and Wall Street institutions, both civil and criminal, as we expect the new Administration will be highly motivated in this area. Lastly, the aftermath of COVID-19 will likely result in heavy scrutiny of potential fraud related to various COVID relief programs and in their related significant federal investment.
General counsel will need to mitigate these and other emerging risks in the coming months.
Compliance from home
Almost without exception, all major policies and procedures related to compliance presuppose that employees are physically present in an office; that employers know where data and other records are stored; and that compliance teams have the ability to directly monitor staff activity.
For many companies, the global pandemic has introduced new remote working environments where the physical presence of a company’s employees is largely uncertain, data may be stored across a wide range of depositories, and training is limited to formal interactions over webcam. For the past year, corporate compliance has taken on an entirely new identity.
Finding ways to ensure proper oversight of employees in a remote environment is a work in progress, and it remains to be seen how regulators will evaluate the measures taken by employers. Even without worrying about the stance regulators are likely to take, businesses must work out how to build and maintain a strong culture of compliance in a remote working environment. Establishing the right tone and culture is, of course, much more difficult without physical interaction; nevertheless, it is a challenge businesses and GCs must reconcile for the future.
Regulatory cooperation and conflict
For multinational companies, the list of potentially relevant prosecutorial authorities grows with every year. We continue to see increasingly aggressive white-collar enforcement in many countries around the world, accompanied by closer international cooperation among governmental authorities.
At the same time, conflict of laws between jurisdictions is becoming more common, meaning multinationals must navigate a world where they face competing laws in different markets. For example, US authorities have come to recognise that companies are limited in what they can lawfully do to cooperate when an enquiry requires the production of European data. Governmental authorities will be pushed to cooperate ever more closely because US authorities often will only be able to obtain necessary data only from their foreign counterparts. As a result, multijurisdictional investigations will increasingly be coordinated between the different national bodies involved in investigating and prosecuting a case.
The more white-collar crime is viewed as a matter for collaboration among national regulators, the more likely a jurisdiction will expect its laws to play some part in mitigating the alleged misconduct. As any multinational legal or compliance team knows, misconduct often occurs in countries that do not have a well-established judicial system or, in some cases, effective rule of law. This situation makes the resolution of any potential compliance issues in such countries challenging at best.
Additional complexity can result by “blocking statutes” increasingly prevalent in certain jurisdictions, effectively prohibiting compliance with US sanctions. This creates a challenge for GCs of multinationals, who must navigate an increasingly interconnected world while also adhering to sometimes completely incompatible sets of laws and regulations.
General counsel will need to be sophisticated at navigating the relevant laws to avoid trouble. The world is becoming more complicated and risks to businesses are growing. This means their advisers will have to find unique solutions to a host of difficult challenges. The days of rolling out the same playbook for every problem are over.
Above all, GCs should remember the first law of compliance: when problems arise, one cannot ignore them in the hopes that they will disappear. At minimum, GCs will need to identify and act on potential problems as soon as possible. Waiting to see how something evolves is no longer an option in a world where every country has the ability to bring sanctions, and coordination among international regulators is the norm. Pick up the phone and call someone who can help you avoid compliance problems that will prove far more expensive than taking the necessary actions to prevent them. And, when an investigation arises, GC’s will need experienced counsel who can ensure the company cooperates when appropriate, but who can also advocate aggressively, when necessary.
Douglas Greenburg, Global Chair of the White Collar Defense & Investigations Practice, is a partner in the Washington, DC office of Latham & Watkins LLP
Benjamin Naftalis, Global Vice Chair of the White Collar Defense & Investigations Practice, is a partner in the New York office of Latham & Watkins LLP
Nathan Seltzer, Global Vice Chair of the White Collar Defense & Investigations Practice, is a partner in the London office of Latham & Watkins LLP