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The Return of the Czar

This week, the FT reported that the Department of Justice (DOJ) is preparing to launch a crackdown on corporate crime with the first cases, involving “some of the largest corporations operating in the US,” expected to be announced within weeks. In an interview with the FT, a senior DOJ official stated that there will be “an unprecedented focus by this attorney-general on corporate accountability,” and that “there are going to be serious consequences.” Notably, the official added that “the department would also take ‘significant’ action against companies that were failing to invest in compliance systems that they were required to put in place to ensure they did not fall foul of the law.”

The impending crackdown comes as the number of corporate crime prosecutions brought by the DOJ against individuals and companies dropped to its lowest level in 25 years in the past year. All the while, according to Politico, “data from across the federal government indicated that financial fraud and corporate misconduct were at all-time highs when Biden took office.”

Speaking at a recent industry conference, Deputy AG Lisa Monaco outlined a host of changes institutions should consider to make compliance a top-of-mind issue now “or else it’s going to cost them down the line.” According to the ACFCS, institutions facing federal prosecutions for financial crime compliance failures could now “find themselves facing more stringent resolutions, more pressure to name and shame individuals and less leeway or leniency – particularly if they have had prior high-profile enforcement actions.” The tougher posture, according to the deputy AG, comes as “corporate crime has an increasing national security dimension — from the new role of sanctions and export control cases to cyber vulnerabilities that open companies up to foreign attacks,” reflecting recent trends in national security considerations and enforcement that has complicated compliance.

For corporates, the “hardest part of an enforcement action is often not the fines and legal fees, but managing the additional program remediation work while trying to keep up with BAU activities,” according to Alma Angotti, a renowned industry expert. With respect to trends on the corporate enforcement side worth noting, 2020 was “the first year in a decade in which U.S. authorities did not impose an independent compliance monitor in a corporate settlement,” despite being an increasingly important tool in the arsenal of law enforcement authorities for decades. So, it comes as no surprise that Deputy AG Monaco specifically highlighted that her department is “rigorously rescinding prior guidance on any real or perceived negative proclivities to assigning monitors in major enforcement actions,” likely in reference to the Benczkowski memo.

With monitorships often costing more than $30 million, and “in one case, a company reportedly spent more than $130 million in monitor-related costs,” the remarks serve as an ominous reminder to the industry to make compliance a priority with a new czar in town. And with estimates of enforcement-related remediation costs being 12-times greater than the fine itself, the alternative might be costlier, underscoring the age-old adage that the best defense is a good offense.

AML Compliance Regulations Financial Crime Anti-Bribery & Corruption
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