Criminal enforcement in Belgium was robust in 2021, focusing on complex fraud and money laundering involving financial intermediaries, corruption, cybercrime, and environmental pollution. The Belgian legislator continues to develop a Business and Human Rights framework as an additional tool to sanction breaches of fundamental rights.
Private companies are increasingly sensitive to criminal law risks, including in the field of M&A, where compliance in the broad sense of the word has become a focal point. Looking forward to 2022, we expect these trends to intensify. The implementation of the EU Whistleblowing Directive will result in increased disclosures, fuelling new investigations and criminal prosecution. Also under EU influence, the operationalisation of the European Public Prosecutors Office will elevate financial crime on the enforcement agenda, strengthen cross border enforcement, and favour contentious litigation over out-of-court settlements.
- Investigations trends/developments
- Significant law reforms impacting corporate criminal liability
- Internal investigation – key developments
- Sectors targeted by law reforms or enforcement action
- Cross border coordinated enforcement activity
- Financial crime predictions for 2022
EU Whistleblowing Directive will fuel more investigations
The new EU Directive on the protection of persons who report breaches of Union law (the EU Whistleblowing Directive) aims to protect whistleblowers when making an extensive range of disclosures on breaches of EU law, including in areas related to public procurement, financial services, the protection of the environment and public health.
In view of political calls in Belgium for an extensive scope of implementation (expanding it to all possible breaches of law at both the national and European level), and that protection is granted to a wide range of reporting persons, we expect an increasing number of disclosures and investigations by the Belgian authorities as a result.
Investigations by the Belgian authorities will also be fuelled by the fact that: (i) the EU Whistleblowing Directive obliges Belgium to install external whistleblowing reporting processes enabling the whistleblower to contact a competent authority directly; and (ii) protection under the EU Whistleblowing Directive is not conditional on the whistle-blower first reporting any breaches internally.
We also anticipate an increase in cases of improper use of whistleblowing procedures.
The deadline for transposing the EU Whistleblowing Directive was 17 December 2021. However, Belgium (together with several other EU member states) has not met this deadline. At this stage, it is still unclear what the Belgian legislation transposing the EU Whistleblowing Directive will contain, especially in view of the advice issued by the Belgian National Labour Council on 30 November 2021 suggesting a number of material changes to the draft proposal of such legislation.
The governmental negotiations began in January 2022, but voting in the parliament is only scheduled for July 2022. Nonetheless, the European Court of Justice and Belgian courts and tribunals may rule that the EU Whistleblowing Directive has some direct effect. Belgian companies are therefore encouraged to assess how they will react to the EU Whistleblowing Directive prior to its Belgian implementation.
Impact of new European Public Prosecutor’s Office
The European Public Prosecutor's Office (the EPPO) went live on 1 June 2021. Since then, more than 300 investigations have been opened into alleged crimes contravening the EU's financial interests, including different types of fraud (notably VAT fraud, customs fraud, and fraud involving EU subsidies), money laundering, passive and active corruption, and the misappropriation of funds.
We expect that the EPPO's operationalisation will cause these types of crime to rise on the enforcement agenda in 2022. It will be interesting to see if the EPPO adopts a favourable approach to settlements (a preferred resolution mechanism in the Belgian enforcement practice toolkit), or whether more cases will be submitted to the courts. The potential to reach settlements in EPPO investigations relating to customs matters is however limited, and an EPPO case cannot be dismissed solely at the authorities' discretion. The question of whether or not to settle will now be decided in Luxembourg instead of at the national level, and it is expected that larger cases involving higher damages will not be settled but submitted to the courts instead.
More information on the EPPO and its impact can be found in our first eAlert in a series on the subject.
Business and Human Rights (BHR)-related liability throughout value chains
Further to calls for the EU to adopt mandatory corporate due diligence legislation, the European Commission and European Parliament have undertaken some preliminary steps in response. In line with the developments at EU level, the Belgian legislator introduced a legislative proposal on corporate vigilance and corporate accountability (the Belgian Vigilance Proposal) in April 2021, which is currently being discussed before the Belgian Parliament.
Three new legal instruments aim to establish a duty of vigilance requiring companies to: (i) respect human rights, labour rights and the environment; and (ii) identify, prevent, mitigate and cease environmental harm, human rights and labour rights violations, or any risks thereof, throughout their value chain.
The Belgian Vigilance Proposal envisages an extensive liability regime for breaching the duty of vigilance, including criminal sanctions, as described in our article of 4 May 2021. Non-compliance may give rise to fines of up to EUR1,600,000 for companies. While this proposal has not yet been adopted, it has been given considerable attention by the Belgian legislator, which is expected to follow the example of its French and German counterparts, thereby giving rise to enhanced liability risks for companies throughout their value chain.
Continued proliferation of sanctions as a tool of public policy, further increasing the compliance burden for private entities
Sanctions continue being used as a geopolitical tool, further increasing the compliance burden on companies (including in the face of conflicting policies adopted by the world's major blocs, including the EU and the U.S.). Notable examples include:
- additional listings under country-specific sanctions regimes (including Myanmar and Belarus) as well as under the standalone EU cyber sanctions regime (targeting individuals and entities suspected of involvement in cyberattacks; see our earlier eAlert here);
- the introduction of the EU's own human rights sanctions regime (targeting individuals and entities suspected of involvement in serious human rights violations or abuses), with the first designation and calls for more to follow; and
- a Belgian legislative proposal to introduce individual sanctions for serious human rights violations at the Belgian level, which would enable Belgium to act where the required unanimity rule acts as a brake at the European level.
We reported last year that the Belgian Ministry of Finance and Economy was empowered to impose administrative fines for breaches of EU sanctions, in addition to the already existing possibility of criminal prosecution. In Belgium, cases of actual enforcement of sanctions remain relatively scarce but, as part of an overall focus on financial crime, we expect an increased focus on this by Belgian prosecutors.
Data retention and the encryption debate
In a long-anticipated April 2021 decision that came after earlier decisions by the European Court for Human Rights, the Belgian Constitutional Court annulled the Belgian legal framework requiring telecom operators to store traffic and location data in bulk. Applauded by privacy advocates but widely criticised by law enforcement, the decision may affect evidence already gathered in ongoing criminal investigations, and it is argued that it will make the prosecution's task more difficult in the future.
In response, the Belgian federal government is currently considering new legislation that would continue to require bulk data storage in specific circumstances, and which some argue would undermine the use of end‑to‑end encryption in Belgium by de facto forcing the creation of encryption backdoors. This proposal will no doubt be the subject of intensive political and legal debate in the course of 2022.
Increased focus on "doing the right thing", and "being seen to be doing the right thing"
A number of developments have caused Belgian companies to increasingly consider conducting an internal investigation when compliance issues are reported and the manner in which they should proceed. This trend will accelerate following the adoption of the EU Whistleblowing Directive and its imminent Belgian transposition (see above).
Workplace investigations have become increasingly common due to a shift in society towards encouraging a professional "speak-up" environment, including the #metoo and #BlackLivesMatter movements. Belgian companies are actively introducing ESG principles into their corporate governance practices, and "doing the right thing" and ensuring a healthy workplace are becoming increasingly important from an employer-branding and investor-attraction perspective. Focusing increasingly on compliance, and investigating concerns through internal fact-finding investigations, Belgian companies are tending to turn to external law firms for strategic guidance, in an effort to ensure impartiality, compliance with applicable laws and preservation of legal privilege.
This trend is accelerated further due to the general public's increased expectation of transparency and voluntary disclosure, for example in the case of environmental pollution. Enforcement authorities are increasingly holding companies to account for a lack of transparency, even beyond the strict legal requirements. This, in turn, raises important questions concerning the preservation of legal privilege and the right against self-incrimination.
There are more criminal investigations into environmental pollution, in the broad sense of the word, e.g. noise pollution, chemical spills, and air contamination have recently all given rise to enforcement action. Besides the authorities' own willingness to sanction these issues under criminal law, there has been an increase in the general public's vigilance of environmental pollution, as well as in (criminal) complaints being lodged by private individuals and advocacy groups.
The Belgian football sector has been the specific focus of increased regulation (including by an extension of the Belgian AML Act) and has already been the subject of enforcement action. Specifically, Operation Zero, the widely publicised criminal investigation into various alleged offences, including private corruption and fraud by various first-division clubs and affiliated individuals, is expected to result in criminal prosecutions in 2022. This is the first application of the new Belgian legal framework for cooperating offenders, under which suspects assist the authorities in a criminal investigation in return for a reduced sentence.
Accelerated by the global pandemic, cybercrime continues to increase and is becoming more and more sophisticated, opportunistic and methodical, with threat actors focusing on high-value targets, affecting entire supply chains and using cryptocurrencies to launder criminal proceeds. Against the background of the continued rise in cyber-enabled financial crime (in particular in online fraud, phishing, ransomware, and other means of cyber extortion, including DDoS-for-ransom), the Belgian authorities continue to focus on fighting cybercrime, often in international police operations coordinated by agencies such as Europol and Interpol, and to assist victims of cybercrime in responding to (including through the sharing of threat intelligence) and recovering from cyberattacks (including through the offering of operational support).
Cross-border enforcement activity under the impetus of the EPPO
The last few years have marked a significant increase in cross-border fraud investigations, coordinated at EU level by the European Anti-Fraud Office (OLAF). The introduction of the EPPO (see above) now means that a unique regime applies for cross-border cooperation within the EU. In EPPO investigations, prosecutors handling a case in one participating member state will be able to directly assign specific investigation tasks to prosecutors in other member states, which may increase efficiency. In Belgium, we expect an increase in customs-related cross-border investigations, with a focus on goods coming in through the port of Antwerp and with limited possibilities that such cases will be settled.
Internal investigations with focus on improper workplace conduct
There has been an uptick in internal cross-border investigations in the context of improper workplace conduct occurring in multiple jurisdictions, or that involve employees working in different jurisdictions. We expect this trend to continue, particularly in light of the adoption of the EU Whistleblowing Directive (see above).
Preventing, detecting and responding to corrupt practices, money laundering, improper workplace conduct, and compliance with laws generally will stay high on the agenda of GCs in 2022, accelerated in particular by the imminent legislative protection of whistleblowers and the increased compliance pressure from a broad range of stakeholders. Organisations in all sectors will be expected to set up and implement internal reporting channels in line with prescriptive standards and will be exposed to an increased risk of litigation.
In M&A, we expect a continued focus on compliance as an integral part of any due diligence exercise, with particular focus on matters as diverse as anti-bribery and corruption, sanctions and embargoes, environment and human rights, workplace conduct, and data protection and cybersecurity.
Finally, as was the case previously, because of the opacity of money flows in complex cases and the focus on "deep pockets", we expect a continued focus by Belgian prosecutors on financial intermediaries when investigating and prosecuting fraud.
This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions.
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